Draft EIP-8361 Tapers New ETH Issuance to Zero as Staking Ratio Approaches 60.25 Million ETH

A draft proposal from six prominent Ethereum researchers, including Ethereum Foundation's Justin Drake, would gradually burn an increasing share of validator rewards as more ETH is staked, reaching a full burn at approximately 60.25 million ETH — roughly half the total supply. The change would drive net ETH issuance to zero at that threshold, potentially strengthening the cryptocurrency's long-term scarcity by limiting further dilution of existing holders. Ethereum already burns the base fee portion of every transaction under EIP-1559, activated in August 2021, which at times has pushed net ETH issuance negative during periods of high network activity. EIP-8361 would extend that burning mechanism to consensus-layer staking rewards.

The proposal, designated EIP-8361, aims to cap staking by making additional stake progressively less profitable. Its authors argue that ever-rising staking yields push ETH into the hands of large exchanges and staking providers, undermining network decentralization and security. Lido, a liquid staking protocol, currently controls roughly 28% of all staked ETH — the largest single share — illustrating the concentration the authors warn about. Past a certain level, the proposal states, additional stake actually makes Ethereum less secure, because ETH ends up held by intermediaries rather than its owners, while small individual stakers get squeezed out.

The plan would phase in over roughly two years — about 18 months for the deduction to reach full effect, plus approximately six months after the upgrade ships — and would only burn newly issued ETH. Transaction fees and tips earned by validators for building blocks would remain intact. The burn mechanism operates at the close of each epoch (every 6.4 minutes), deducting and permanently destroying a fraction of each validator's newly created rewards. That fraction rises linearly toward 100% as staking approaches the saturation point.

The Problem: Staking Never Stops Paying

Staking is the mechanism by which Ethereum secures its network. Holders lock up ETH and run validator software that processes transactions; the network compensates them by creating new ETH. Burning means destroying those coins permanently rather than paying them out.

As the authors see it, the core problem is that staking never stops paying. Even if every ETH were staked, the yield would still sit near 1.5%, so there is always an incentive to add more. Jérôme de Tychey, one of the proposal's authors, projects that more than 70 million ETH will be staked by January 2028 if no changes are made.

Currently, about 41 million ETH is staked — close to 34% of the total supply. Another 2.5 million ETH sits in the activation queue, representing a wait of six weeks or more, with no corresponding exit queue. Ethereum limits how fast validators can join or leave to prevent large blocs from destabilizing the network; approximately 57,600 ETH can activate per day. According to validator queue trackers, nobody is currently queuing to leave.

Pushback from DeFi Leaders

The proposal has divided Ethereum developers and market participants. Stani Kulechov, chief executive of Aave Labs, said in a blog post that moving staking rewards toward zero would make most ETH borrowing strategies unviable. Data shows that much of the ETH borrowed on Aave is used to purchase additional staked ETH — a trade that only remains profitable while staking yields exceed borrowing costs.

Mike Silagadze, founder of liquid staking protocol ether.fi, objected to both the process and the substance. "EIP released with 48 hours notice for comments," he wrote on X, calling it "a major network economics change with far reaching implications for all of DeFi." He argued the change would "self evidently push out solo stakers who aren't subsidized by the EF or others" and leave staking to "large centralized entities with zero cost of capital," adding that "seven of the top 10 DeFi protocols" would face a capital exodus.

Silagadze was equally blunt about potential price impact. "People who stake ETH don't sell it," he wrote, arguing the proposal "will halt any new ETH getting staked" and could push tens of billions of dollars of ETH back into circulation.

Uncertain Path to Inclusion in Hegotá

The bigger question is whether the proposal will make it into Hegotá, Ethereum's next network upgrade, planned for the second half of 2026 with a focus on structural cleanup, censorship resistance, and state size reduction. The fundamental change to Ethereum's monetary policy — tapering and eventually zeroing consensus-layer staking rewards once 50% of supply is staked — arrived just days before the August 6 inclusion deadline for Hegotá. It comes with only a roughly 300-line draft implementation and no consensus among the validators and stakers whose yields it would cut.

That combination makes it far more likely to miss Hegotá and slip to a later fork than to ship in this cycle. The authors themselves note that every month of delay allows the staking ratio to climb by approximately another 1.5 percentage points.