Ethereum Researchers Propose Burning Validator Rewards to Curb Staking Growth

A group of Ethereum researchers and developers has proposed changing the network's issuance policy by burning part of validator consensus rewards. The draft EIP-8363, titled 'Tapered Issuance Burn,' aims to reduce staking growth beyond a certain threshold. According to the proposal, as more ETH is staked, a larger portion of validator rewards will be burned for attestations, block proposals, and participation in the sync committee.

The changes would be introduced gradually over 18 months. When 60.25 million ETH are staked, about 50% of the current supply, the deduction would reach 100%. The authors argue that this would remove the lower bound on staking yields and reduce the incentive to lock an ever-larger share of ETH.

However, not everyone agrees with the proposal. Aave founder Stani Kulechov believes that reducing rewards could weaken institutional demand for ETH and DeFi borrowing activity. Ether.Fi CEO Mike Silagadze also expressed concern, stating that the changes would hit solo stakers the hardest.