Ethereum Proposal Aims to Burn Validator Rewards and Reduce Staking Incentives
A new Ethereum proposal, EIP-8361, aims to reduce the incentive to stake more ETH by burning validator rewards. The draft, titled Tapered Issuance Burn, would deduct a rising share of every validator's rewards as the staking ratio climbs, cancelling consensus issuance outright at 50%. This is different from previous reduction plans that left the incentive to stake in place.
The burn fraction is total active balance divided by a new constant, SATURATION_BALANCE, raised to the power of 3/2. At the set level of 60,250,000 ETH, approximately half the current supply, the burn cancels a performing validator's issuance exactly. Above it, consensus issuance is zero.
The proposal frames the goal in two parts: protecting Ethereum from capture as more of the supply sits with custodians, exchanges and ETF providers rather than its owners, and defending ETH's monetary role against staking derivatives that displace it as collateral. Liquid staking protocols hold $34.9 billion, per DefiLlama, with Lido alone at $17.6 billion.
The timing of the proposal drew an objection within hours. Greg Koumoutsos posted in the Ethereum Magicians thread that the proposal had landed 48 hours before the deadline to propose EIPs for Hegotá, leaving inadequate time for community review of a monetary policy change of this magnitude.