Six authors, including Ethereum Foundation contributor Justin Drake, published a draft proposal on Aug. 4 outlining a mechanism to burn validator rewards. The proposal, designated EIP-8361, seeks to remove the perpetual incentive to stake more ETH by halting net consensus-layer issuance at a 50 percent staking ratio.
The current Ethereum issuance model allows staking yield to decline with increased staked ETH but maintains a floor near 1.5 percent. This structure means the incentive to stake never fully disengages, leaving the market to determine equilibrium based on staker risk premiums.
EIP-8361 introduces a deduction for validators based on each assigned duty—attestations, block proposals and sync committee participation. This deduction, calculated as a fraction of the idealized reward for that duty, is then destroyed.
The burn fraction depends on the total active balance of staked ETH. It is calculated by dividing the total active balance by a new constant, SATURATION_BALANCE, and raising the result to the power of 3/2. The burn is capped at 100 percent of the reward.
SATURATION_BALANCE is set at 60,250,000 ETH, representing approximately half of the current total supply of 120.7 million ETH. At that level, the burn would precisely cancel a performing validator's issuance, bringing net consensus issuance to zero.
If the staking ratio surpasses 50 percent, consensus issuance would remain at zero. The proposal said this saturation ratio is not a network target, expecting the market to settle below it where net yield adequately compensates stakers for liquidity, slashing, operational and regulatory risks.
Ethereum currently has about 33 percent of its ETH supply staked, totaling roughly 40 million ETH. The consensus layer distributes approximately 1,054,000 ETH annually, equating to a 2.62 percent yield. Execution-layer rewards contribute an additional 0.20 percent at most, with issuance accounting for at least 93 percent of total staking yield.
The proposed deduction applies whether a validator performs its duty or not, preserving per-duty incentives. This design means recovering from an outage would take longer—estimated at a factor of 3.8 at today's staking ratio, measured by net earnings.
If implemented immediately and in full, the burn would reduce net consensus yield from about 2.6 percent to 1.2 percent at the current staking ratio. The authors anticipate this reduction would prompt a substantial exit of staked ETH upon activation.
To mitigate disruption, the proposal outlines an 18-month phased reduction. A new constant, TRANSITION_BASE_REWARD_FACTOR, set at 128, would linearly decay to the existing BASE_REWARD_FACTOR of 64 over 123,300 epochs.
This phased approach means the net-yield curve would initially align with the current curve at a 31 percent staking ratio, close to the network's present state. Stakers would experience yields near current levels during the transition. The taper's full shape begins from the first epoch after activation, immediately ceasing reward for growth beyond the 50 percent saturation point.
