A new draft proposal, EIP-8361, published Aug. 4, aims to burn a rising fraction of validator rewards as more ETH is staked, reducing net consensus-layer issuance to zero once the staking ratio reaches 50 percent of total ETH supply.
The proposal, titled "Tapered Issuance Burn," counts Ethereum Foundation researcher Justin Drake among its six authors, alongside Jérôme de Tychey and Ladislaus von Daniels. It targets a core property of Ethereum's current issuance curve: staking incentives persist regardless of the staking ratio, maintaining a yield floor of approximately 1.5 percent.
Currently, about 33 percent of ETH is staked, totaling roughly 40 million ETH. The consensus layer distributes approximately 1,054,000 ETH annually, representing a 2.62 percent yield. Execution-layer rewards contribute an additional 0.20 percent, with issuance accounting for at least 93 percent of total staking yield.
Under EIP-8361, each epoch, validators would incur a deduction for every assigned duty—including attestation, block proposal and sync committee participation. The deduction is sized as a fraction of the idealized reward for that duty, and the deducted ETH is destroyed.
The burn fraction is determined by dividing the total active balance by a new constant, `SATURATION_BALANCE`, raised to the power of 3/2, capped at 100 percent. `SATURATION_BALANCE` is set at 60,250,000 ETH, representing approximately half of the current 120.7 million ETH supply.
At the `SATURATION_BALANCE` level, the burn precisely cancels a performing validator's issuance. Above that threshold, consensus issuance falls to zero. The authors say the 50 percent saturation ratio is a ceiling on incentives, not a network target, allowing the market to establish an equilibrium where net yield meets staker demand for liquidity and risk premiums.
If implemented fully at the fork, the burn would immediately cut net consensus yield from about 2.6 percent to 1.2 percent at today's staking ratio. The authors predict that reduction would prompt a substantial exit of staked ETH upon activation.
To mitigate disruption, the reduction phases in over 18 months. The specification introduces a new constant, `TRANSITION_BASE_REWARD_FACTOR`, set at 128, which decays linearly to the existing `BASE_REWARD_FACTOR` of 64 over 123,300 epochs.
This phased approach lifts the net-yield curve to cross the current one at a 31 percent staking ratio, near the network's present state, allowing stakers to begin near today's yield levels. The taper's shape applies from the first epoch after activation, however, stopping issuance rewards for any growth beyond 50 percent on day one.
One consequence of the deduction mechanism: while per-duty incentives remain intact, recovering from an outage takes longer. At the current staking ratio, recovery time extends by approximately a factor of 3.8, measured in days of net earnings rather than in ETH.
Aave founder Stani Kulechov has criticized EIP-8361, raising concerns over its implications. The proposal is currently a draft, subject to community discussion and potential revisions before it could be considered for inclusion in a future Ethereum network upgrade. Ethereum currently trades at $1,871.
