Can Ethereum Have Too Much Staking? The Debate Behind EIP-8363

Proof-of-stake networks reward users for staking their assets and helping secure the network. Ethereum is now debating whether those incentives should continue unchanged as a larger share of ETH is staked.

That question is at the center of a growing debate within Ethereum. Ethereum Improvement Proposal (EIP) 8363 (originally published as EIP-8361), Tapered Issuance Burn, proposes progressively reducing the economic incentive to stake ETH as the percentage of the supply being staked increases. Drafted by Ethereum researchers including Justin Drake and Jérôme de Tychey, the proposal has drawn opposition from prominent crypto figures including Aave founder Stani Kulechov and SharpLink CEO Joseph Chalom.

The proposal's stated objective is to “Burn a fraction of validator rewards that rises with the staking ratio, removing the issuance incentive to stake more than 50% of all ETH.” In simpler terms, staking ETH would become progressively less profitable as more ETH is staked. Those in favor argue that continued issuance to validators dilutes unstaked ETH holders and that excessively high staking levels could create additional centralization and security risks.

When users stake ETH, they set it aside to participate in validating transactions and securing the Ethereum network. The proposal argues that once enough ETH is already being staked, Ethereum does not need to keep incentivizing users to stake more. It proposes deducting a portion of validator rewards and burning that ETH. Burning crypto permanently removes it from circulation, reducing the amount of new ETH ultimately issued through staking rewards. The portion burned would increase as the amount of ETH staked increases. At a saturation balance of 60.25 million ETH, approximately 50% of the current ETH supply, the burn would fully offset consensus-layer issuance rewards. The authors expect the staking market to reach an equilibrium below that level.

Because applying the change immediately would sharply reduce staking yields at today’s staking ratio, the proposal includes an 18-month transition period. During that period, staking yields would begin close to current levels and gradually move toward the proposed permanent curve.

There are prominent crypto figures who are strongly against the proposal. Aave founder Stani Kulechov has shared multiple posts opposing the new EIP, including:

“It looks to me that not only the majority, but almost everyone with a bit of common sense is against EIP-8361. It may go down as one of the most resisted Ethereum proposals ever, perhaps second only to ProgPoW.

What people genuinely want is for Ethereum to focus on solving problems that drive real demand and make the network more competitive.

The EF [Ethereum Foundation]'s ivory tower academic approach will not solve those challenges. It's disconnected from the builders in the trenches who choose to build on Ethereum every day. We should not take them for granted.”

SharpLink CEO Joseph Chalom published a post on X where he summarized his opposition to the proposal:

“EIP-8363 is addressing this problem in the wrong way. This is an economic and business challenge, not a technical one. Worse, it would suppress the incentive that brought a massive wave of institutional adoption, which will only grow alongside the rise of tokenization and agentic payments.“

The controversy surrounding EIP-8363 raises a question that extends beyond the immediate debate over Ethereum's staking yield. Proof-of-stake systems rely on economic incentives to encourage enough capital to participate in validation and secure the network. Ethereum's current debate asks what should happen when those incentives continue attracting stake beyond the level developers believe provides meaningful additional security.

That distinction is important when considering Chalom's argument. Institutional demand for staking may be beneficial for Ethereum adoption, but maximizing demand for a financial product is not necessarily the same objective as optimizing a consensus mechanism. If Ethereum can maintain sufficient economic security without continually incentivizing a larger percentage of ETH to be staked, additional issuance must be weighed against its effects on dilution, staking concentration and the amount of ETH available outside the staking system.

At the same time, Kulechov's criticism raises a different question about where Ethereum's development priorities should lie. Altering issuance can change incentives, but it does not itself create additional demand for blockspace or applications. His criticism reflects a broader disagreement over whether Ethereum's economic parameters require intervention or whether developers should instead prioritize increasing network usage and allow the staking market to develop around it.

EIP-8363 remains a draft, and its proposed changes may never be adopted. The significance of the debate is therefore larger than the proposal itself. Ethereum spent much of its transition to proof-of-stake creating incentives for users to participate in securing the network. Developers are now debating whether those same incentives could eventually encourage more staking than the network needs. How Ethereum resolves that tension could provide an important test of how proof-of-stake economics behave as a network matures.

The debate also points to an important difference between proof-of-stake and proof-of-work. Proof-of-work networks do not have to decide how much of the token supply should be staked or adjust rewards based on how much is participating in consensus. Instead, miners respond to separate economic incentives, including block rewards, transaction fees and the cost of providing computational work. Proof-of-work has its own long-term incentive questions, particularly around declining block subsidies and the security budget, but questions around staking levels and the issuance used to incentivize them are specific to proof-of-stake economics.