Ethereum researchers just wanted to reduce staking incentives. Instead, they sparked one of the biggest debates over the network’s economics since the Merge.
Ethereum Improvement Proposal EIP-8363, or “Tapered Issuance Burn,” would gradually reduce staking rewards as more and more Ether is locked up to secure the network — eventually cutting new protocol issuance to zero once 50% of ETH’s supply is staked.
Its authors, including Ethereum Foundation’s Justin Drake and Ethereum Community Conference (ETHCC) co-founder Jerome de Tychey, argue that Ethereum has reached the point where additional staking provides diminishing security returns, while diluting holders who choose not to stake.
In other words: Ethereum should stop paying for security it no longer needs.
There’s just one problem, a lot of people hate the idea.
From DeFi builders to staking providers and institutional investors, critics argue it could weaken decentralization, disrupt Ethereum’s lending markets and undermine confidence in the network’s monetary policy. As Ether.fi founder Mike Silagadze puts it:
“This is so disappointing on every level. […] This is bad for decentralization, this is bad for Ethereum adoption, and this is bad for the credibility of the network.”
Dr. Steve Berryman, Bitwise’s head of client partnerships for Ethereum, tells Magazine:
“Institutional adoption requires certainty and playing with the issuance at the margin would cause uncertainty and institutions hate uncertainty.”
So is Ethereum really paying too much for security, or is EIP-8368 a solution in search of a problem?
Is Ethereum over-staked?
Ethereum currently has around 41.5 million ETH staked, earning 2.67%, and representing 34.07% of the entire supply, according to the Ethereum Validator Queue.
EIP-8363, Tapered Issuance Burn. Source: Jerome de Tychey
While more ETH locked up generally makes the network harder to attack, EIP-8368’s authors argue those security gains become increasingly marginal while Ethereum continues issuing rewards to validators.
EIP-8363 would gradually remove that incentive, and the authors argue Ethereum should stop subsidizing additional staking once the network is sufficiently secure.
Yet not everyone agrees that the problem even exists in the first place. It’s certainly true that the amount staked has increased substantially in 2026, up 15% since the start of the year.
Berryman argues that market forces are already slowing participation without the need to change Ethereum’s issuance policy.
“We will come to a natural ceiling probably by the end of this year,” he says, arguing that yields falling to around 2% are unlikely to attract significantly more ETH to be locked up in staking. “People need a certain amount of liquidity,” he says.
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Berryman says recent growth has largely been driven by institutional entrants such as Bitmine and BlackRock, but argues that once those players complete their staking allocations, participation is likely to plateau again.
Source: Validatorqueue.com
Ethereum commentator Leo Lanza, who also opposes the proposal, challenges the core assumption that issuance on Ethereum represents a meaningful “stealth tax” on non-stakers.
Ethereum’s annual inflation remains below 1%, he says, arguing that even gold, widely viewed as the world’s premier monetary asset, expands its supply by roughly 1% to 2% annually:
“The free market already solves this […] Let the market adjust.”
Could the cure be worse than the disease?
Supporters of EIP-8368 argue the change would curb unnecessary issuance and discourage staking from becoming overly concentrated among large custodians and liquid staking providers. But critics say the proposal risks creating bigger problems than it’s trying to solve.
Greg Koumoutsos, technical research lead at the Lido Labs Foundation, says today’s staking ratio of around one-third of ETH supply does not appear unhealthy, though he agrees it is reasonable to think proactively about excessive staking.
More importantly, he argues the proposal oversimplifies what Ethereum’s issuance is actually paying for:
“Ethereum is not only paying for slashable ETH; it is paying for decentralization, operator diversity, censorship resistance, and network resilience.”
Koumoutsos says lower issuance is not automatically a better security policy unless those broader trade-offs are also taken into account.
Another factor to consider is that liquid staking is now deeply integrated into Ethereum’s DeFi ecosystem, and staking derivatives are widely used as collateral and in lending and yield strategies.
“It will obviously kill a huge chunk of DeFi which is built around the staking ecosystem,” Silagadze argues.
Stani Kulechov, founder of Aave, Ethereum’s largest decentralized lending protocol, says that reducing staking rewards risks undermining that broader ecosystem.
“My concern is……
cointelegraph.com