Ethereum Devs Propose Capping Staking Rewards, Spark Backlash
A group of six Ethereum researchers and developers, including Ethereum Foundation researcher Justin Drake, has published a draft proposal to overhaul the network’s issuance policy, according to Cointelegraph. The proposal, called the Tapered Issuance Burn and provisionally numbered EIP-8363, would burn a growing share of validators’ consensus-layer rewards as staked ETH approaches 60.25 million tokens, roughly 50% of current supply. At that threshold, the reward deduction would reach 100%. The changes would phase in over 18 months.
Cointelegraph reported that the proposal has drawn criticism from developers, stakers and DeFi founders who argue the cuts could push out solo validators before large institutions feel the impact, weaken institutional demand for ETH and disrupt DeFi markets built around staking yield.
Proposal co-author Jerome de Tychey said the changes address the rising share of staked Ether, which passed 33% in April. He argued that unchecked issuance dilutes holders and that high staking ratios could let liquid staking tokens and derivatives displace raw ETH as the network’s core asset. Without changes, he said, more than 55% of ETH supply could be staked by 2028.
Under the current issuance curve, staking yield does not fall below 1.5% even if all ETH were staked, the authors said. The new policy would cap issuance at 0.5% of supply annually, tapering to zero at the 60.25 million ETH threshold.
Grayscale head of research Zach Pandl previously said limiting staking incentives could be positive for Ether’s price over time, per Cointelegraph. But Aave founder Stani Kulechov said the proposal would weaken institutional demand and DeFi borrowing activity. Ether.Fi CEO Mike Silagadze warned it would push out solo stakers lacking subsidies, leaving staking dominated by large centralized entities.
Based on reporting by cointelegraph.com.
