Ethereum Researchers Propose Staking Reward Cuts Amid Rising Staked Ether Share

A group of Ethereum researchers and developers has proposed a network update to curb the rising share of staked Ether, which recently surpassed 33%. The Tapered Issuance Burn proposal, currently being assigned the provisional number EIP-8363, aims to reduce validator rewards as the proportion of staked ETH increases. According to Jérôme de Tychey, one of the proposal's authors, this is necessary to address the dilution tax on every holder and prevent unchecked issuance from eroding Ether's role as a neutral store of value.

The proposed policy would see issuance peak at 0.5% of ETH supply per year at its highest (around 20% of ETH is staked), declining to zero when the staking ratio reaches the 60.25 million ETH threshold, or approximately 50% of the current ETH supply. This change would phase in over 18 months.

However, critics argue that reducing staking rewards could weaken institutional demand for ETH and disrupt DeFi markets built around staking yield. Some developers warn that this policy may force out solo validators before larger institutions are affected, leading to a more concentrated validator set.