Ethereum Developers Propose Tapered Staking Rewards to Combat Dilution
Ethereum developers have proposed a mechanism to limit staking rewards as more ETH is staked. The 'Tapered Issuance Burn' proposal would gradually burn validator issuance, reducing net rewards to zero at roughly 50% of supply.
The plan aims to prevent excessive staking, which could make Ethereum less decentralized and concentrate wealth among a few large players. It also seeks to reduce dilution for ETH holders who choose not to stake.
Supporters argue that lower issuance would make ETH supply more predictable and frequently deflationary. However, Aave founder Stani Kulechov warns that the 50% cap could weaken institutional demand and DeFi activity on Ethereum, making it less competitive.
The proposal remains preliminary and would phase in over 18 months, with developers pointing to roughly another six months of lead time before a potential network upgrade.