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New Ethereum proposal would cut issuance to zero if staked ETH reaches $112 billion
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- DeepHorus
New Ethereum proposal would cut issuance to zero if staked ETH reaches $112 billion. The draft EIP-8361, signed by six prominent researchers, would gradually burn an increasing share of validator rewards as staking grows, reaching a full burn at roughly 60.25 million ETH—about half the total supply. This could drive net issuance to zero, strengthening ETH's scarcity and limiting dilution of existing holders. The proposal lands at a critical moment as Ethereum's staking ratio climbs past one-third of supply.
Ethereum secures itself through staking: holders lock up ETH to validate transactions and earn newly created ETH as rewards. Today about 41 million ETH is staked, representing close to 34% of the supply, with another 2.5 million queued to activate—a wait of six weeks or more. No one is queuing to leave. The authors argue that ever-rising yields push ETH into large exchanges and staking providers, undermining decentralization and security.
The proposal would phase in over roughly two years, starting with a six-month shipping period followed by an 18-month gradual increase. Validators would still receive transaction fees and tips; only the newly created ETH used for rewards would be burned. The burn rate would rise linearly, hitting 100% once staked ETH reaches the threshold. Jérôme de Tychey, one of the authors, projects more than 70 million ETH staked by January 2028 without changes, making the cap urgent.
Key technical detail: Every 6.4 minutes, at the close of an Ethereum epoch, a fraction of each validator's rewards is deducted and destroyed. That fraction increases as staking approaches saturation. The mechanism uses existing Ethereum infrastructure and does not alter the validator reward schedule until after the upgrade ships. The queue system, which limits how fast validators can join or leave, remains unchanged, with roughly 57,600 ETH per day allowed to activate.
The implications are significant. Aave Labs CEO Stani Kulechov warned that moving staking rewards to zero would make ETH borrowing strategies mostly unviable, since much of the borrowed ETH is used to buy staked ETH. Over the long term, reduced issuance could make ETH more deflationary and less dependent on centralized staking providers. Small individual stakers would benefit, as the pressure to outsource staking decreases.
Reactions have been mixed. Mike Silagadze, founder of liquid staking protocol ether.fi, criticized the process: “EIP released with 48 hours notice for comments.” He called it a major network economics change with far-reaching consequences. The proposal has split developers and DeFi participants, with some supporting the security rationale and others worried about the economic impact on lending markets.
The proposal landed days before the deadline for smaller changes to Hegotá, Ethereum's next network upgrade. Whether it will be included remains uncertain. Authors are likely to refine the parameters based on feedback. Expect intense debate and possible compromise on the threshold or phase-in period. Either way, the discussion marks a pivotal moment in Ethereum's evolution toward a more sustainable and decentralized staking economy.
