A group of Ethereum developers led by Jerome de Tychey proposed a new mechanism on August 4 to cap the amount of ETH locked in staking. EIP-8361, dubbed 'Tapered Issuance Burn,' would gradually burn validator rewards as staking participation rises, eventually reducing yields to zero when 50% of the supply is staked. The proposal comes as the staking ratio has already passed one-third of the ETH supply and continues climbing by roughly 1.75 million ETH per month.
How the burn mechanism works
The proposal is relatively lightweight in code terms. It requires one new permanent constant and a consensus-layer adjustment. Prysm, a major Ethereum client, already has a draft implementation of around 300 lines. Under the plan, as more ETH gets staked, a portion of validator rewards is burned. At the 50% threshold, all issuance is burned — meaning stakers earn nothing from protocol rewards, only from transaction fees and MEV.
Why cap staking at 50%
The stated goal is to prevent more than half of the ETH supply from being locked by validators. The authors argue that high staking levels create an 'artificial yield floor' that distorts the market. They also warn of security risks: smaller validators could be pushed out, concentrating ETH among large custodians and staking providers. A CryptoQuant report from July noted record staking levels with around 40 million ETH locked, and long-term holders continuing to stake despite weak market sentiment. Supporters say reducing issuance protects ETH holders from dilution and prevents liquid staking tokens from becoming the dominant form of ETH exposure.
Divided reactions from builders
The proposal has drawn sharp criticism from several prominent figures. Lawyer Gabriel Shapiro called it a 'huge distraction.' Aave founder Stani Kulechov said Ethereum should focus on privacy, scaling, security, stablecoins, DeFi, and real-world assets instead. Ether.fi's Mike Silagadze opposed the plan, arguing it could hurt solo stakers and reduce DeFi activity. On the other side, supporters contend that the current trajectory leads to a system where most ETH is staked through liquid staking protocols, which they see as a centralization risk.
The proposal is fresh — just a day old as of this writing. It will need to go through the Ethereum improvement process, including community discussion and potentially a core developers call. No timeline has been set. The key unresolved question is whether the Ethereum community sees staking concentration as a problem worth solving with a hard cap on issuance, or whether the market should be left to find its own equilibrium.
