Ethereum Proposal Could Eliminate New ETH Creation If Validator Deposits Surge Further

Ethereum developers are exploring a proposal that could eventually stop new ETH creation entirely by burning an increasing portion of validator rewards as more of the supply moves into staking.

The proposal, EIP-8361, introduces a system where the amount of ETH burned from staking rewards rises alongside the staking ratio. If approximately 60.25 million ETH—around half of all existing ETH—is staked, the burn rate would reach 100%, effectively bringing net issuance down to zero. Supporters believe the change could improve ETH scarcity and reduce dilution for long-term holders.

Ethereum’s proof-of-stake network relies on validators who lock ETH and verify transactions. In return, validators receive newly issued ETH rewards. Under the proposed system, a larger share of those newly created coins would be permanently destroyed instead of entering circulation.

The burn would take place at the end of each Ethereum epoch, which occurs roughly every 6.4 minutes. The percentage of rewards removed would increase gradually as the staking ratio climbs, eventually reaching a full burn once the network approaches the proposed threshold.

Validator operations would remain unchanged, and participants would continue earning transaction fees and tips from block production. The proposal only impacts newly issued ETH rewards. The transition would be introduced gradually over an 18-month period after an estimated six-month preparation stage.

EIP-8361 was signed by six Ethereum researchers, including Ethereum Foundation researcher Justin Drake. The proposal was released shortly before the deadline for smaller updates to be considered for Ethereum’s upcoming Hegotá upgrade.

According to the proposal’s authors, Ethereum’s current staking model creates an ongoing incentive for users to keep adding ETH to staking. Even if the entire supply were locked, the network would still provide an estimated 1.5% yield, leaving room for additional deposits.

Jérôme de Tychey, a contributor to the proposal, estimates that staked ETH could surpass 70 million by early 2028 if the current system remains unchanged. The proposal argues that excessive staking could eventually create risks by increasing dependence on large exchanges and staking providers while making participation harder for smaller independent validators.

Around 41 million ETH is currently staked, representing close to one-third of the total supply. Another 2.5 million ETH is waiting in the activation queue, with delays lasting more than six weeks. Ethereum limits the speed at which validators can enter and exit the network to prevent sudden changes from affecting security.

The proposal has sparked disagreement among Ethereum developers and DeFi participants.

Stani Kulechov, CEO of Aave Labs, warned that lower staking returns could weaken ETH borrowing strategies. Many users borrow ETH through DeFi platforms to increase their staking exposure, a strategy that depends on staking yields staying above borrowing costs.

Mike Silagadze, founder of liquid staking platform ether.fi, raised concerns about both the process and the potential impact. He argued that changing Ethereum’s economic model requires broader discussion and could have major consequences across decentralized finance.

Silagadze said lower rewards could disadvantage smaller validators and push more staking activity toward large centralized providers with lower costs. He also warned that reduced incentives could lead to capital leaving several major DeFi protocols.

He further suggested that weaker staking returns could slow new deposits and potentially push billions of dollars worth of ETH back into circulation.

The biggest uncertainty is whether EIP-8361 will become part of Hegotá, Ethereum’s planned 2026 upgrade focused on network efficiency, state reduction, and censorship resistance.

While the proposal would mark a significant change to Ethereum’s monetary policy by potentially ending new ETH issuance once half the supply is staked, it faces limited development time and no clear consensus among validators.

Because of these challenges, the proposal may be postponed to a later upgrade rather than included in Hegotá. The authors estimate that every month of delay could increase the staking ratio by roughly 1.5 percentage points.