Ethereum developers are considering a proposal that could eventually bring new ETH issuance to zero by burning a growing portion of validator rewards as staking participation increases.

The proposal, called EIP-8361, would introduce a dynamic burn mechanism tied to the amount of ETH locked in staking. If staked ETH reaches approximately 60.25 million coins—about half of Ethereum’s total supply—the system would burn all newly issued staking rewards, pushing net issuance to zero and potentially making ETH more scarce.

Under Ethereum’s proof-of-stake model, users secure the network by locking ETH and operating validators that confirm transactions. These validators are rewarded with newly created ETH. The proposed change would gradually redirect more of those rewards toward permanent destruction instead of adding them to supply.

The burn rate would adjust at the end of each Ethereum epoch, which takes roughly 6.4 minutes. As the staking ratio rises, the share of rewards burned would increase steadily until reaching a complete 100% burn at the target threshold.

The proposal would not reduce validator earnings from transaction fees or tips, and validators would continue performing the same network functions. Only newly issued ETH rewards would be affected. The change would be introduced gradually, with an 18-month phase-in period following an estimated six-month rollout period.

Six Ethereum researchers, including Ethereum Foundation researcher Justin Drake, signed the proposal. It was submitted shortly before the deadline for smaller updates to be considered for Ethereum’s upcoming Hegotá upgrade.

According to the proposal’s authors, Ethereum’s current staking model creates an ongoing incentive for users to lock up additional ETH. Even if all ETH were already staked, the network would continue offering roughly 1.5% yield, meaning there would still be motivation for more deposits.

Jérôme de Tychey, one of the proposal’s authors, estimates that staked ETH could exceed 70 million by January 2028 if the current system remains unchanged. The proposal argues that beyond a certain point, higher staking levels could create new risks by concentrating ETH among large exchanges and staking providers while making it harder for smaller independent validators to participate.

Around 41 million ETH is currently staked, representing nearly 34% of supply. Another 2.5 million ETH is waiting to become active, with the activation queue stretching beyond six weeks. Ethereum limits validator entry and exits to prevent sudden changes that could disrupt network stability.

The proposal has divided opinion across the Ethereum community.

Stani Kulechov, CEO of Aave Labs, warned that cutting staking rewards could weaken ETH-based borrowing strategies. Many DeFi users borrow ETH to increase their staked positions, a strategy that depends on staking returns exceeding borrowing costs.

Mike Silagadze, founder of liquid staking platform ether.fi, raised concerns about both the proposal’s timing and its broader impact. He argued that such a major change to Ethereum’s economic model requires more discussion and could affect the wider DeFi ecosystem.

Silagadze said lower staking returns could disadvantage individual validators and push more staking activity toward large centralized providers with lower operating costs. He also warned that major DeFi protocols could experience capital outflows if the proposal is adopted.

He further argued that reducing staking incentives could slow new ETH deposits and potentially bring large amounts of previously staked ETH back into circulation.

The main uncertainty is whether EIP-8361 will be included in Hegotá, Ethereum’s planned 2026 upgrade focused on improving network efficiency, reducing state growth, and strengthening censorship resistance.

While the proposal would represent a major shift in Ethereum’s monetary policy by potentially eliminating new issuance once half of the supply is staked, it faces limited implementation progress and a lack of broad agreement among validators.

Given those hurdles, the change may be pushed to a later upgrade rather than included in Hegotá. The authors estimate that every month of delay could increase Ethereum’s staking ratio by roughly 1.5 percentage points.