Ethereum researchers have put forward a draft improvement proposal designed to reshape how the network handles rewards for those securing it through staking. Known as the Tapered Issuance Burn under EIP-8361, the idea centers on gradually destroying a growing portion of the newly issued tokens that validators receive.
As the total amount of ETH locked in staking rises, this destruction rate increases until, at roughly half the circulating supply, net protocol rewards for consensus duties drop to nothing.
Currently, about one-third of all ETH participates in staking and generates an annual yield near 2.6 percent from the consensus layer.
Under the existing reward formula, even if nearly the entire supply became staked, a modest positive yield would remain, creating an ongoing incentive for more tokens to enter the system.
Authors of the proposal, including Jérôme de Tychey, Justin Drake, and several other contributors, argue that this dynamic risks excessive concentration.
They project that without changes, staked ETH could exceed 70 million by early 2028, representing more than 55 percent of supply and potentially concentrating control among large operators and custodians rather than a broad set of participants.
The proposed mechanism works by calculating an idealized reward for each validator duty—such as attestations, block proposals, or sync committee work—exactly as today.
A fraction of that amount is then deducted and permanently removed from circulation.
The fraction itself is determined by raising the current staking ratio relative to a fixed saturation balance of approximately 60.25 million ETH to the power of 1.5, capped at 100 percent.
Once the saturation point is reached, a perfectly performing validator earns zero net consensus-layer issuance.
Execution-layer income from transaction fees and maximal extractable value remains untouched.
To avoid a sudden shock, the change would phase in over 18 months.
At activation the base reward factor would temporarily double, keeping initial net yields close to present levels before the factor declines and the burn takes fuller effect.
Combined with typical upgrade lead times, participants would have roughly two years to adapt.
Annual issuance under the permanent curve would peak near 0.5 percent of supply around a 20 percent staking ratio and then decline toward zero at 50 percent.
Supporters contend the adjustment would let the staking market find its own equilibrium where yield matches the risk premium demanded by participants, while reducing unnecessary dilution for non-stakers and reinforcing ETH’s scarcity.
Critics counter that sharply lower rewards could disadvantage solo stakers with higher operating costs, pressure liquid staking tokens and related DeFi strategies, and accelerate consolidation among the most efficient operators.
The draft arrived shortly before a deadline for consideration in the Hegotá upgrade, prompting debate over whether sufficient review time exists for such a fundamental monetary adjustment.
The proposal remains a draft and has not been scheduled for any network upgrade. Community discussion continues on forums and among client teams, with an early implementation sketch already prepared for one major client.