A proposal to sharply reduce Ethereum staking rewards as participation rises has opened a new fight over ETH issuance, validator economics, and the role of large staking providers in the network.
EIP-8363, titled “Tapered Issuance Burn,” was submitted by Ethereum Foundation researcher Justin Drake, Jérôme de Tychey, and four other Ethereum researchers and developers. The proposal would gradually burn consensus-layer rewards as total ETH staked approaches 60.25 million ETH, roughly 50% of current supply, with an 18-month transition period.
How EIP-8363 would change Ethereum staking rewards
Under the proposal, consensus-layer rewards for validators would be progressively burned, reaching as much as 100% once staked ETH nears 60.25 million ETH. The authors frame the change as a way to limit excessive inflation and curb concentration in staking.
The proposal’s issuance curve sets annual ETH issuance at a peak of 0.5% when the staking ratio is around 20%. After that point, issuance declines, and falls to zero once staked ETH reaches 60.25 million ETH.
De Tychey wrote on X that the ETH staking ratio had already moved above 33% in April. If the issuance mechanism stays unchanged, he said, more than 55% of ETH could be locked in staking by 2028, concentrating liquidity in large custodians and liquid staking providers.
The authors argued that “endless issuance is a dilution tax on every holder: if you do not stake, you are diluted.” In their view, a persistently high staking ratio could push liquid staking tokens, or LSTs, into the role of the ecosystem’s “working currency,” weakening native ETH as a neutral and trustless asset.
Support from Grayscale
Grayscale research head Zach Pandl backed the broader idea earlier in a May report, where he said limiting staking rewards would be a positive signal for ETH’s long-term price. He later shared the proposal’s chart on X and wrote that “ETH supply growth will be constrained and more predictable, and when combined with EIP-1559 and Blob burn mechanisms, ETH supply will decline more often.”
That view rests on a simple argument: a tighter issuance path could make ETH supply behavior easier to forecast over time.
Pushback from Aave and Ether.Fi
The proposal has also drawn immediate criticism from DeFi founders and staking operators.
Aave founder Stani Kulechov said on X that cutting staking rewards would weaken institutional demand for ETH and reduce DeFi lending activity. “This proposal does not achieve what it is trying to achieve, and instead harms Ethereum,” he wrote.
Ether.Fi CEO Mike Silagadze made a similar case on X, but focused on validator economics. He said independent stakers face higher relative costs and are more sensitive to reward changes. In his words, cutting rewards would “explicitly drive out independent stakers not subsidized by EF or others,” leaving only “large centralized entities with zero cost of capital.”
He added: “It essentially guarantees that the only parties staking are large centralized entities, while users simply passively hold ETH.”
De Tychey responded on the Ethereum Magicians forum that large staking providers charge fees, which could make their services less attractive if rewards fall. He also acknowledged that the research around this point remains disputed.
Questions over timing and the Hegotá process
EIP-8363 was published on Aug. 4, two days before the Aug. 6 cutoff for EIP submissions tied to Ethereum’s Hegotá upgrade. That timing raised concerns that the community had not been given enough time to review a monetary policy change of this scale.
Greg Koumoutsos, co-author of EIP-8148 and EIP-8205, said: “This clearly did not leave the community enough time to review a monetary policy change of this magnitude.”
Ethereum community organizer Trent Van Epps later said Aug. 6 was the deadline for submitting additional EIPs, not the final date for deciding which proposals would be included. The screening process could continue until Nov. 8, and Hegotá is expected to go live in the second quarter of 2027.
As of now, Tapered Issuance Burn has not been approved, scheduled, or included in Hegotá.