Ethereum proposal would eliminate staking rewards if half of ETH supply is staked

Ethereum developers have proposed a mechanism that would deduct and burn ETH from every validator's assigned duties, with the burn rate rising as the staking ratio increases. Dubbed EIP-8361 or tapered issuance burn, the change sets a saturation point at approximately 60.25 million ETH—roughly half the supply—where the burn reaches 100% and validators earn zero net consensus yield.

Currently, staking yields follow the square root of the staking ratio and maintain a floor near 1.5% regardless of how much ETH is staked. The proposal would remove that floor, allowing the market to discover a yield that matches the risk premium stakers demand, which the authors argue sits strictly below 50%.

According to co-author Jérôme de Tychey, Ethereum's staking ratio surpassed one-third of the supply in April, with the validator entry queue at maximum capacity. Under conservative projections, more than 70 million ETH could be staked by January 2028, exceeding 55% of supply, with each month of delay adding roughly 1.5 percentage points to the staking ratio.

Currently around 33% of ETH is staked at approximately 2.6% yield. If activated immediately, the burn would cut that to 1.2%, so the proposal includes an 18-month phase-in that temporarily doubles the base reward factor before decaying it back. The taper would apply from the first epoch after activation. The change touches only the consensus layer and has a draft implementation in Prysm running to about 300 lines of code.

Proponents argue that staking beyond a certain threshold concentrates supply with custodians and staking providers, weakening network security and the credibility of social slashing mechanisms while pushing out solo stakers.