Ethereum Staking Rate Rises: Radical Change Proposed to Preserve Decentralized Structure

Ethereum's staking rate has been increasing steadily, with over one-third of the total supply already staked. Jerome de Tychey, a developer involved in the proposal, notes that even if all circulating ETH were staked, the staking yield would not fall below approximately 1.5% under the current system.

The proposed EIP-8361 aims to address this issue by introducing an 'Incremental Supply Burning' mechanism, which would deduct and burn a portion of validators' theoretical task rewards during each epoch. This percentage of rewards burned would increase in parallel with the amount of ETH staked, effectively reducing the net staking yield.

The proposal suggests that if over 70 million ETH are staked by January 1, 2028, corresponding to more than 55% of Ethereum's total supply, validators could face significant risks. Proponents argue that excessively high staking rates could lead to a concentration of staked ETH in custody companies and large staking providers, weakening Ethereum's decentralized structure.