Ethereum Devs Float Plan to Cap Staking Rewards at 50%

Ethereum developers are proposing a new mechanism to limit staking rewards as the asset's staked supply approaches 50%. The 'Tapered Issuance Burn' draft proposal would gradually eliminate validator issuance, with a burn rate increasing as staking participation rises. This would peak at around 0.5% of ETH supply annually when about 20% is staked, then fall to zero at 50%. Proponents argue that excessive staking could make Ethereum less decentralized and more concentrated among large staking providers.

Jerome de Tychey, a developer, estimates that over 70 million ETH (around 55% of supply) could be staked by January 2028 if nothing is done. The proposed change would phase in over 18 months, with a potential network upgrade following about six months later.

Aave founder Stani Kulechov strongly opposed the proposal, warning that capping Ethereum staking rewards at 0% could make ETH less attractive to institutions and DeFi users due to unpredictable returns. He argued that lower staking rewards could undermine ETH borrowing strategies across DeFi and restrict its potential as a productive asset.