The developers of Ethereum have suggested a significant modification that will eventually bring fresh issuance to zero when around half of Ethereum’s entire supply is staked. As more ETH is locked on the network, this change will progressively reduce staking incentives. The concept, known as EIP-8361, is meant to increase ETH’s long-term scarcity, but it has already drawn criticism from Aave creator Stani Kulechov and other ecosystem members who warn that it might jeopardize DeFi and discourage staking.
My thoughts on Ethereum staking yield axing https://t.co/J9Taoyiio3
tl;dr Save ETH staking.
— Stani (@StaniKulechov) August 4, 2026
The proposal was made by six Ethereum researchers and developers, including Justin Drake, a researcher for the Ethereum Foundation. It introduces a new method called “Tapered Issuance Burn.” Instead of continuously issuing new ETH as staking rewards, the network would gradually burn an increasing portion of newly created ETH as staking participation rises.
Under the proposal, the burn rate would increase every epoch—roughly every 6.4 minutes. When approximately 60.25 million ETH, or around 50% of the total supply, is staked, all newly issued staking rewards would be burned, effectively reducing Ethereum’s net issuance to zero. Validators would continue performing the same work, earning transaction fees and tips as usual, but the newly created ETH would no longer be paid out.
The developers contend that because payouts never completely vanish, Ethereum’s present reward mechanism promotes limitless staking. Validators would still make about 1.5% a year even if every ETH were staked. The authors of the plan claim that this generates an unending incentive to lock up more ETH, which eventually concentrates staking power among exchanges, custodians, and major staking providers while making it more difficult for individual validators to compete.
Approximately 41 million ETH, or one-third of the total supply, have already been staked as of right now, and a another 2.5 million ETH are in the validator queue. According to the idea, more than 70 million ETH might be staked by early 2028 if the present trend continues. The authors believe that beyond a certain point, additional staking could reduce decentralisation rather than improve network security.
Supporters also argue that reducing issuance would benefit ETH holders by limiting dilution. Instead of expanding supply through continuous staking rewards, Ethereum’s monetary policy would become more predictable and could make ETH increasingly scarce over time.
However, the proposal has divided the Ethereum community. Aave founder and CEO Stani Kulechov believes reducing staking rewards towards zero could create more problems than it solves.
Unfortunately this proposal doesn’t achieve the outcome it tries to achieve and is actually hurtful for Ethereum.
It caps Ethereum staking rewards to 0% when over 50% of supply staked.
What this mean is that Ethereum staking yield becomes unpredictable and even fully… https://t.co/IYUst52Dt3
— Stani (@StaniKulechov) August 4, 2026
He argues that many borrowing strategies on Aave rely on staking yields remaining higher than borrowing costs. If those rewards disappear, borrowing ETH would become far less attractive, leaving short selling as one of the few remaining reasons to borrow the asset.
Kulechov also warned that unpredictable or near-zero staking returns could discourage institutions and solo stakers alike. In his view, investors seeking reliable yield may shift to other blockchain networks or even yield-bearing stablecoins, reducing Ethereum’s appeal as both an investment asset and a foundation for decentralised finance.
Other industry voices have also raised concerns. Ether.fi founder Mike Silagadze criticised both the proposal and the speed with which it was introduced, arguing that such a significant change to Ethereum’s economic model deserves wider discussion.
This is so disappointing on every level.
EIP released with 48 hours notice for comments. Realistically 4 months before it goes live. For a major network economics change with far reaching implications for all of DeFi.
Every builder on Ethereum opposes this. Why is this a focus?… https://t.co/qQbCui8aju
— Mike Silagadze🛡 (@MikeSilagadze) August 4, 2026
He warned the proposal could push smaller independent stakers out of the network while strengthening the position of large, low-cost staking operators.
The proposal arrives just before the deadline for inclusion in Hegotá, Ethereum’s next planned network upgrade. Given the scale of the proposed monetary policy change and the lack of broad consensus within the community, many observers believe EIP-8361 is more likely to be delayed and considered in a future upgrade than adopted in Hegotá itself.
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