Ethereum Researchers Propose Staking Limits as Critics Warn of Risks

EIP-8363 is a newly published draft proposal designed to reduce net consensus-layer rewards as Ethereum’s staking ratio approaches the 50% threshold.

A group of six Ethereum researchers and developers, including Ethereum Foundation researcher Justin Drake, has proposed revising the network’s issuance policy to reduce validator rewards more aggressively as the share of staked ETH continues to increase.

The draft proposal, titled Tapered Issuance Burn and currently assigned the provisional designation EIP-8363, would gradually burn a larger share of validators’ consensus rewards as the amount of staked ETH moves toward a fixed threshold of 60.25 million ETH—roughly 50% of the current ETH supply. At that level, the deduction would reach 100%, with the proposed changes scheduled to be introduced gradually over an 18-month period.

The proposal has sparked criticism from developers, stakers, and DeFi founders, who argue that the planned reward reductions could push solo validators out before larger institutions feel the impact, reduce institutional demand for ETH, and disrupt DeFi markets that rely on staking yields.

One of the proposal’s authors, Jérôme de Tychey, said the changes are necessary to address the growing share of Ether being staked, which surpassed 33% in April. The authors argue that continued growth in staking could concentrate ETH holdings among large custodians and liquid staking providers, while unchecked issuance could weaken Ether’s role as a neutral, trustless store of value.

“Ever-growing issuance is a dilution tax on every holder: stake, or be diluted. At high ratios, LSTs and other staking derivatives displace raw ETH as the ecosystem’s working money, thus swapping the most neutral, trustless asset for intermediated claims on issuers,” he said.

Although EIP-8363 remains in its early draft stage, its publication just two days before the proposal deadline for Ethereum’s Hegotá upgrade has raised concerns about whether enough time remains to fully assess its potential impact on Ethereum’s tokenomics.

EIP-8363 Authors Make the Case for Lower Ethereum Issuance#

The proposal’s authors argue that, under the current issuance curve, staking yields never fall below 1.5%, even if the entire circulating supply of ETH were eventually staked.

“The incentive to stake never switches off. Where does it stop? It doesn’t,” said de Tychey.

He said that, without any changes, a worst-case scenario could result in more than 55% of Ethereum’s total supply being locked in staking by 2028.

“Maximal neutrality and minimal dilution are the two core principles of a store of value. This EIP strengthens both and sets a standard that no other blockchain currently meets.”

Under the proposed policy, annual ETH issuance would peak at 0.5% of the total supply when roughly 20% of ETH is staked, before gradually declining to zero once Ethereum’s staking ratio reaches the 60.25 million ETH threshold.

“ETH supply growth will be bounded and more predictable. Combined with the EIP-1559 and Blob burn, the supply will more often decrease. Ethereum, the most mature of all the protocols, with a sustainable security budget, will also be the least dilutive of all protocols,” said de Tychey.

The proposal’s overall direction has also gained support from Grayscale. In May, Grayscale Head of Research Zach Pandl said that limiting staking incentives would likely be “positive for the price of Ether over time.”

Critics Warn Proposal Could Hurt Ethereum’s Growth#

Aave founder Stani Kulechov said reducing staking rewards would likely weaken institutional demand for ETH and reduce borrowing activity across the DeFi ecosystem. He argued that the proposal “doesn’t achieve the outcome it tries to achieve and is actually hurtful for Ethereum.”

Critics also argue that the proposal would have a greater impact on solo validators, as they typically face higher relative operating costs and are more sensitive to reductions in staking rewards, potentially leading to a more concentrated validator set.

“This will self evidently push out solo stakers who aren’t subsidized by the EF or others,” said Mike Silagadze, CEO of Ether.Fi.

“It would effectively ensure that only large centralized entities with little or no cost of capital continue staking, while users simply hold their ETH through those platforms.”

De Tychey disputed that argument on the Ethereum Magicians forum, saying users of large staking providers still pay service fees, which could make those platforms less appealing as staking rewards decline. However, he acknowledged that the research on the issue remains contested.

Others also raised concerns about what appeared to be a rushed timeline for evaluating the proposal, although the issue seems to stem from confusion surrounding the upcoming Aug. 6 deadline.

“This clearly does not provide enough time for the community to properly review a monetary policy change of this scale,” said Greg Koumoutsos, co-author of EIP-8148 and EIP-8205.

Current Status of the Proposal Explained#

The Tapered Issuance Burn proposal has not been approved, scheduled for implementation, or included in the Hegotá upgrade.

Although an Aug. 6 deadline is associated with the proposal, it applies only to pull requests that suggest additional EIPs for the Hegotá upgrade, not to the final decision on which proposals will be included.

Ethereum community organizer Trent Van Epps said the proposal selection process could continue through Nov. 8 and added that the Hegotá upgrade is expected to reach the Ethereum mainnet in the second quarter of 2027.