A group of six developers, including contributors from the Ethereum Foundation, published a draft proposal titled EIP-8363 that limits staking rewards.

Draft mechanism

The proposed Tapered Issuance Burn mechanism would increasingly burn validator rewards as the amount of staked ETH approaches a threshold of 60.25 million coins, roughly 50% of the current supply.

At the threshold the proposal sets, burning would reach 100% of rewards, and the change is planned to roll out over an 18-month period.

Rationale and projections

Authors note that the share of ETH in staking exceeded 33% in April, and current issuance curves keep yields above 1.5% even if the entire supply were staked.

Under the proposal's worst-case projection, more than 55% of total issuance could be staked by 2028, raising concerns about concentration of influence among large validators.

Staked coins are locked and reduce market liquidity, which the authors cite as a factor increasing systemic risk and centralization pressure.

Criticism and timing concerns

Opponents argue that cutting rewards would weaken institutional demand for ETH and reduce borrowing activity in DeFi, potentially reshaping market dynamics.

They warn that solo validators would likely exit first, leaving staking dominated by large centralized entities with low capital costs, the critics say.

Another objection highlights timing: the draft appeared two days before the deadline for submissions to the Hegotá upgrade, leaving minimal time to assess such a substantial monetary-policy change.

Market reaction

Grayscale expressed support for the direction of the idea and previously stated that limiting staking incentives would be, in their view, "positive for the price of Ether in the long term."

«positive for the price of Ether in the long term.»