Author: Bankless
Compiled by Deep潮 TechFlow
Shenchao Summary: Ethereum’s staking rate has surpassed 33% and continues to rise. An EF researcher proposes limiting the staking rate to below 50% through a burn mechanism. Supporters argue this would prevent staking giants from monopolizing the network and protect non-staking ETH holders; opponents warn it could undermine DeFi yield benchmarks and suppress independent stakers. This debate is pivotal to Ethereum’s economic model over the next decade.
The Ethereum community engaged in intense debate this week over the EIP-8363 proposal.
The concept of "decreasing issuance and burning" can be traced back to 2023, when Ethereum Foundation researchers began publicly expressing concerns that ETH staking rates had no upper limit. A related discussion was held at the Bankless Summit 2024.
Why EIP-8363? Why now?
According to Ethereum's current issuance curve, staking rewards have no stopping point. As more ETH is staked, the yield decreases, but researchers indicate that even when close to 100% of ETH supply is locked, the yield will only bottom out at around 1.5%.
The current Ethereum staking rate has exceeded 33% of ETH supply and shows no signs of slowing. The concern is that if this trend continues, it could lead to two risks:
Could lead to the majority of ETH being concentrated in the hands of a few companies and liquid staking providers, weakening the Ethereum community’s ability to counter manipulated validator sets through forks.
After surpassing a certain staking threshold, issuance effectively becomes a permanent dilution tax on all non-stakers, forcing every ETH holder to choose between joining staking or watching their share shrink.
EIP-8363 was created specifically to address this issue. If implemented, this mechanism will continue to calculate validator rewards as before, but burn an increasingly larger portion of them. The burn ratio increases with total staked ETH until it fully offsets consensus rewards when staked ETH reaches approximately 50% of the total supply.
Once this threshold is crossed, EIP-8363 will enable validators to earn solely from transaction tips and MEV (the additional value obtained by block producers through including, excluding, or reordering transactions), rather than from new issuance, until the staking rate falls below 50% again.
Therefore, under this model, validators still have incentives, but less ETH is minted. The core objective of this model is to control the staking rate and mitigate ETH dilution risk. Although well-intentioned, recent criticism has emerged, arguing that the proposal is poorly designed.
The main objection I’ve seen is that EIP-8363 threatens DeFi vitality. Staking yields have become the benchmark rate for ETH, with on-chain lending, liquid staking tokens, and other products all pricing off this rate. Aave founder Stani Kulechov argues that this proposal would make it difficult for institutional buyers to predict staking yields, potentially eliminating the rationale for borrowing ETH.
"Ethereum should not be punished for its growth," he wrote.
I also see critics arguing that EIP-8363 would undermine the viability of solo staking. The key point is that home stakers’ hardware and electricity costs do not decrease with reduced rewards, so any decline in net rewards erodes profit margins more severely than for centralized exchanges running thousands of validators.
Moreover, as consensus issuance decreases, MEV accounts for a larger share of validators' residual income. Critics argue that this dynamic itself fosters centralization, as MEV capture rewards scale and precision more than original issuance.
On the other hand, supporters of EIP-8363 argue that it enhances ETH’s monetary properties by protecting non-staked ETH from dilution and establishing a true supply cap, further solidifying ETH’s position as “hard money.”
Supporters also countered the claim that independent stakers would be hit harder, arguing that since burning increases with total staking, the point at which adding more validators becomes unprofitable arrives earliest for those who already hold the largest shares.
This means home stakers still have an incentive to grow all the way to the 50% threshold, whereas large stakers do not. In contrast, today’s curve design rewards growth regardless of who you are or how much you’ve staked.
That said, the most thoughtful discussion I’ve seen on EIP-8363 comes from EF’s DeFi expert ivangbi, who today proposed a reasonable middle ground in a new (personal, not EF-official) post. He argues that the model is theoretically viable and DeFi could survive it—but only if the fixes and arguments are more robust, rather than based on “pseudo-economics.” Well worth reading in full.
As I understand it, today is the deadline for the Hegotá upgrade for EIP-8363 to achieve PFI status (i.e., "Proposed for Inclusion," the Ethereum minimum threshold meaning "place this on the agenda for discussion"). However, no approvals have been granted yet, and the Hegotá upgrade itself is not expected to go live on mainnet until next year.
If EIP-8363 does move forward, there will still be a long preparation period regardless, as its implementation would trigger an 18-month transition period. However, the proposal could also stall after this week, with the staking rate continuing its upward trend. At that point, we’ll need to see whether this debate resurfaces in the future.
Regardless of the outcome, the big question is whether Ethereum is currently overpaying for security—and if so, is this fix worth enduring the pain of validation? No one has a definitive answer yet, so stay tuned over the coming months.