Some builders fear lower staking rewards could weaken DeFi activity by making staking-based strategies less attractive.
A group of Ethereum contributors has proposed EIP-8361 as a way to reduce staking incentives to ensure that no more than 50% of the supply is locked up by validators.
That proposal has triggered a heated debate over whether Ethereum should prioritize lower issuance or maintain staking incentives for network participation and DeFi activity.
EIP-8361 Targets Rising Staking Levels
On August 4, Ethereum developer Jerome de Tychey announced the submission of EIP-8361, titled “Tapered Issuance Burn,” alongside contributors including Pintail, Dapplion, Pa7x1, Ladislaus0x, and Justin Drake.
In a series of posts on X, de Tychey argued that Ethereum’s current staking model has no point where incentives naturally slow down. He also noted that the staking ratio passed one-third of the ETH supply in April 2026 and continues to rise.
“The incentive to stake never switches off. Where does it stop? It doesn’t,” he wrote.
According to him, the current reward curve could lead to more than 70 million ETH being staked by January 2028, representing more than 55% of supply. He said the validator entry queue is already operating at maximum churn, adding around 1.75 million ETH per month under current conditions.
The proposal would change the situation by burning part of validator rewards as staking participation rises. The burn rate would gradually increase until it reaches 100% when around half of the ETH supply is staked. Under the proposal, staking yield would eventually fall to zero at a 50% staking ratio.
According to de Tychey, the goal is to eliminate the “artificial yield floor” and let the market decide on staking rewards depending on risk. In his view, staking that is too high may lead to security issues since it will push smaller validators out while concentrating ETH among large custodians and staking providers.
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The proposal would not change validator duties or execution-layer income. De Tychey said the change requires only one new permanent constant and a consensus-layer adjustment, with Prysm already having a draft implementation of around 300 lines of code.
Community Reacts
The reaction from Ethereum users and builders has been divided. Lawyer Gabriel Shapiro criticized the proposal, calling it ‘a huge distraction” from efforts that could increase demand for ETH.
Aave founder Stani Kulechov stated that rather than decreasing staking rewards, Ethereum should concentrate on privacy, scaling, security, stablecoins, decentralized finance, and real-world assets. Ether.fi’s Mike Silagadze, on his part, opposed the proposal on the basis that lowering rewards could hurt solo stakers and reduce activity across DeFi applications that rely on staking-based strategies.
A CryptoQuant report from July pointed to record staking levels, with around 40 million ETH locked by validators. The firm noted that long-term holders were continuing to stake ETH even as market sentiment remained weak.
Supporters of EIP-8361 argue that reducing issuance could protect ETH holders from dilution and prevent liquid tokens from becoming the dominant form of ETH exposure. One of them, MilliΞ wrote that if everyone stakes, the effective yield approaches zero because everyone owns the same share of supply.
