New Ethereum proposal would cut issuance to zero if staked ETH reaches $112 billion

New Ethereum proposal would cut issuance to zero if staked ETH reaches $112 billion

Tech

New Ethereum proposal would cut issuance to zero if staked ETH reaches $112 billion

The EIP-8361 draft proposal calls for burning a rising share of validator rewards as the staking ratio climbs.

By

Shaurya Malwa

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Edited by

Omkar Godbole

Aug 5, 2026, 5:49 a.m.

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New Ethereum proposal would cut issuance to zero if staked ETH reaches $112 billion. (Ethereum)

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A new proposal from six prominent Ethereum researchers would gradually burn an increasing share of validator rewards as more ETH is staked, reaching a full burn at about 60.25 million ETH, or roughly half the supply.

The change aims to cap staking by making additional stake less profitable, amid concerns that ever-rising yields push ETH into large exchanges and staking providers, undermining decentralization and security.

The plan, which would phase in over about two years and only burn newly issued ETH while leaving transaction fees and tips intact, has split developers and DeFi participants and may miss inclusion in the upcoming Hegotá upgrade.

Ethereum researchers and developers

have proposed

gradually burning more validator rewards as staking rises.

The burn would hit 100% once roughly 60.25 million ETH (about half the total supply) is staked, driving net issuance to zero and potentially strengthening ETH’s long-term scarcity and valuation by limiting further dilution of existing holders.

Staking is how Ethereum secures itself. Holders lock up ETH and run software that validates transactions, and the network pays them for it by creating new ETH. Those participants are validators, and that newly created ETH is the reward. Burning means destroying coins permanently rather than paying them out.

Every 6.4 minutes, at the close of what Ethereum calls an epoch, a fraction of each validator's rewards is deducted and destroyed rather than redirected elsewhere, with that fraction rising linearly to 100% as staking approaches the saturation point.

Validators would still be paid the same way for doing the same work, and they keep all the transaction fees and tips they earn from building blocks. Only the newly created ETH gets burned. The deduction from validator rewards arrives slowly, phasing in over 18 months, with about six months before that while the upgrade ships, so roughly two years to adjust.

The current curve never switches off. The proposed one hits zero at 50%. (Shaurya Malwa/CoinDesk)

Six researchers signed the proposal, including Justin Drake of the Ethereum Foundation. It landed days before the deadline for smaller changes to be considered for Hegotá, Ethereum's next network upgrade.

The problem, as the authors see it, is that staking never stops paying. Even if every ETH were staked, the yield would still sit near 1.5%, so there is always a reason to add more.

Jérôme de Tychey, one of the proposal's authors, projects more than 70 million ETH staked by January 2028 if nothing changes. Past a certain level, the proposal states, extra stake makes Ethereum less secure rather than more, because the ETH ends up held by exchanges and staking providers instead of its owners, while small individual stakers get squeezed out.

About 41 million ETH is staked today, or close to 34% of supply. Another 2.5 million sits in the queue waiting to be activated,

trackers show

, a wait of six weeks or more, and nobody is queuing to leave.

Ethereum is 16 points from the level the proposal treats as a ceiling. (Shaurya Malwa/CoinDesk)

Ethereum limits how fast validators can join or leave, so both directions form a line. The cap exists so a large bloc can't enter or exit fast enough to destabilize the network. Entry queue is ETH waiting to start staking, exit queue is ETH waiting to stop. Currently about 57,600 ETH a day can activate.

The proposal has divided Ethereum market developers and participants.

Aave Labs chief executive Stani Kulechov

said in a blog post

that moving staking rewards toward zero would make ETH borrowing strategies mostly unviable. Much of the ETH borrowed on Aave is used to buy more staked ETH,

data shows

, a trade that only works while staking yields more than the loan costs.

Mike Silagadze, founder of liquid staking protocol ether.fi, objected to the process as much as 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 added 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," and that "seven of the top 10 DeFi protocols" would face a capital exodus.

Silagadze was blunter on the proposal’s impact on prices. "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.

The bigger question is whether this proposal will even make it into the Hegotá upgrade, planned upgrade for the second half of 2026, focusing 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 – is arriving just days before the Aug. 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 one. The authors themselves note that every month of delay lets the staking ratio climb by about another 1.5 percentage points.

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