Ethereum Developers Propose Plan to Cap Validator Rewards at 50% Staked

Ethereum developers are proposing a mechanism to gradually eliminate validator issuance as more ETH is staked, reducing net rewards to zero at roughly 50% of supply.

The proposed 'Tapered Issuance Burn' would deduct and burn part of validators' idealized duty rewards, with the burn rate rising with staking participation until net issuance reaches zero.

This change aims to limit dilution and concentration of Ethereum's supply, which could make it less decentralized rather than more secure. However, proponents argue that lower issuance combined with existing transaction-fee and blob burns would make ETH supply more predictable and deflationary.

Aave founder Stani Kulechov strongly opposes the proposal, warning that unpredictable returns could make ETH less attractive to institutions and DeFi users, potentially undermining institutional staking and DeFi demand.