Preparations Are Underway for a Major Update on Ethereum: Radical Change Is Coming

Ethereum Foundation member Justin Drake and other developers have submitted a new proposal called EIP-8361 aimed at changing Ethereum’s $ETH issuance policy. The proposal suggests a gradual reduction in rewards given to validators as the amount of $ETH staked increases, and zeroing out the net staking yield once the staking rate reaches 50 percent.

Under a mechanism called “Incremental Supply Burning,” a certain portion of validators’ theoretical task rewards will be deducted and burned during each epoch. The percentage of rewards burned will increase from 0% to 100%, in parallel with the amount of $ETH staked.

According to the proposal, staking approximately half of the Ethereum supply would reduce the net staking yield for validators to 0%. Considering the current staking rate, this is expected to roughly halve the yield, bringing it down to around 1%.

Jerome de Tychey, one of the proposal’s developers, stated that Ethereum’s staking rate exceeded one-third of the total supply in April 2026 and continues to increase every month. He noted that under the current reward curve, even if all circulating $ETH were staked, the staking yield would not fall below approximately 1.5%.

De Tychey argued that the current system hasn’t completely eliminated the incentive for staking more $ETH at any point. He noted that the validator login queue has reached its maximum capacity, and at the current rate, approximately 1.75 million more $ETH are being added to the staking system each month.

According to shared estimates, if no changes are made, the amount of $ETH staked could exceed 70 million by January 1, 2028. This figure corresponds to more than 55% of Ethereum’s total supply.

Proponents believe that excessively high staking rates could introduce risks rather than enhance Ethereum’s security. They point out that taxes on nominal staking yields and the resulting thinning of supply could make individual validators the first group to exit the system.

It is argued that this situation could lead to a concentration of staked $ETH in custody companies and large staking providers, which could weaken Ethereum’s decentralized structure. According to developers, the concentration of the validator set under the control of certain institutions could also reduce Ethereum’s social layer’s capacity to intervene in a potential network fork.

Proponents of EIP-8361 also point out that the continuously increasing issuance of $ETH creates a dilution cost for non-staking investors. They argue that liquid staking tokens and other staking derivatives, with their high staking rates, could replace the direct use of $ETH within the ecosystem.

The proposal plans to reduce staking returns linearly by 50% up to the staking level. This aims to eliminate the economic incentive for staking more $ETH after a certain point, limit $ETH issuance, and preserve Ethereum’s monetary neutrality.

*This is not investment advice.