Ethereum Staking Rewards Could Plummet by 13% Under New Proposal

A draft proposal for Ethereum's EIP-8361 has sparked debate about the potential reduction in staking rewards. The proposal, backed by Justin Drake and five co-authors, aims to reduce rewards as more ETH enters staking, with a burn rate that would rise with the staking ratio.

Currently, 41.1 million ETH (33.7% of supply) is staked, and the proposal estimates that rewards could drop by around 13% at activation. The draft also includes an 18-month transition period to allow validators to adapt to the new incentives.

The proposal's burn mechanism would target the current issuance curve, which still pays around 1.51% annually even if nearly all ETH is staked. At the current staking ratio, the mechanism would burn an estimated 56% of rewards, while maximal extractable value income would remain untouched.

Large operators like Lido would face a weaker incentive to expand, but the pressure would not arrive equally, as home validators would face a more immediate trade-off due to unchanged penalties and falling net rewards. Critics question both the 50% cutoff and the proposal's timing, with some arguing that it is too aggressive.