Ethereum devs propose cutting staking rewards to 0% at 50%

Ethereum developers have proposed a change called the ‘Tapered Issuance Burn’ that would deduct and burn part of validators’ duty rewards as staking participation increases. The mechanism is designed so net annual issuance falls to zero when roughly 50% of the ETH supply is staked.

Under the draft plan, the burn rate would rise with the staking ratio. Annual issuance would peak at about 0.5% of supply when roughly 20% of ETH is staked, then decline toward zero as the share of staked ETH approaches 50%. Developers say the current reward schedule would leave yields near 1.5% even if nearly all ETH were staked. Developer Jerome de Tychey projected more than 70 million ETH could be staked by January 2028, representing more than 55% of supply, if incentives are not adjusted.

Supporters of the proposal argue higher issuance risks diluting holders who do not stake and could make small solo validators uneconomic, concentrating stake among custodial services and large providers. They also note that lower issuance combined with existing transaction-fee burns and recent blob-burn mechanics could make ETH supply more predictable and increase the chance of periodic deflation. De Tychey wrote that ‘the staking market finally settles where yield equals the risk premium stakers demand.’

The proposal is intended to be phased in over about 18 months. Developers have pointed to roughly six months of lead time before a potential protocol upgrade if the plan advances. The draft remains subject to community debate and further revision.

Not all participants support the idea. Aave founder Stani Kulechov warned the cap could reduce institutional interest and disrupt decentralized finance activity by making staking returns more uncertain. He wrote that capping staking rewards at zero when over half of supply is staked could push investors toward networks with clearer yield profiles and could weaken borrowing strategies across DeFi. ‘This just makes ETH less viable as an asset and restricts its potential,’ he wrote.

Ethereum’s staking ratio passed one-third of supply in April. On-chain activity and trading on Ethereum-based decentralized exchanges have cooled; monthly spot volume on those exchanges was $29 billion in July, about 76% below its August 2025 peak.

Developers and critics say the discussion will help determine parameters for a future network upgrade.