Ethereum developers propose burning validator rewards to curb staking growth

A group of six researchers submitted a draft Ethereum Improvement Proposal that would burn a growing share of validator rewards. 

The plan would burn the validator rewards in accordance with how much ETH gets staked. It addresses the fact that there is currently no point where the incentive to stake more ETH shuts off. 

What is the Tapered Issuance Burn?

Six researchers, including Jérôme de Tychey, Ladislaus von Daniels, and Justin Drake from the Ethereum Foundation, have put forward a proposal that would change how Ethereum pays validators by deducting from the rewards validators already earn. 

The deduction grows as the staking ratio climbs, and when the staking ratio hits around half of all ETH supply, the deduction reaches 100%. 

Since the Merge in September 2022, Ethereum’s execution-layer issuance has been zero, and stakers receive roughly 1,700 ETH a day, although that figure shifts with the amount staked.

The proposal also spread out the change over a period of 18 months to avoid a sharp drop in yields.

If the new system were to be implemented immediately, the authors of the proposal say it would cut net consensus yield from about 2.6% to 1.2% at the current staking ratio, causing many stakers to exit. 

Stani Kulechov, the founder of Aave, argued on X that capping staking rewards to 0% above 50% staked would make Ethereum yields unpredictable and uneconomical for institutional buyers who prefer predictable cash flows. 

Why change the ETH reward method?

The share of ETH staked hit an all-time high of 33.33% on July 28, 2026, and the current policy has no restrictions on how high the staking ratio can go. Under today’s system, the yield falls only with the square root of the number of validators and keeps a floor of roughly 1.5%, no matter how much ETH is staked. 

Bitmine Immersion Technologies (NYSE: BMNR) has raised centralization concerns after staking more than 5 million ETH, which represents about 4.8% of circulating supply. The firm added 150,120 ETH worth roughly $278 million on August 4, bringing its total holdings to about 5.8 million ETH.

The proposal would also reduce the amount of new ETH entering circulation while limiting dilution for holders who choose not to stake. 

However, lower consensus rewards could reduce the appeal of liquid staking protocols and staked ETH investment products, since their underlying yields would decline. Liquid staking protocols currently hold $34.9 billion, with Lido alone at $17.6 billion. 

The proposal is currently in a stage of public review on the Ethereum Magicians forum, where it will get feedback from client teams and stakers. The proposal logged one thumbs-down and two positive reactions at submission.

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