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A fresh Ethereum proposal aimed at capping how much new $ETH gets created through staking has kicked off a heated debate among developers, with Aave founder Stani Kulechov warning it could quietly weaken demand for the asset itself.
What the Proposal Actually Does
Developer Jerome de Tychey submitted the draft as EIP-8361, calling it “Tapered Issuance Burn.” The proposal, EIP-8361, would reduce Ethereum’s staking issuance to zero at 50%, meaning once staked $ETH reaches half of the total supply, validators would stop earning new issuance rewards entirely.
The change wouldn’t hit all at once. The yield reduction would phase in over about 18 months total, per the proposal, with an additional six months of lead time built in before the network fork activates, giving the ecosystem roughly two years to adjust. Under the plan, issuance would peak at around 0.5% of supply annually, near a 20% staking ratio, then gradually taper down to nothing as the 50% threshold approaches.
De Tychey argues the current system is actually worse for stakers long term, since it offers no built-in limit on dilution and provides no natural mechanism to slow rewards as more $ETH gets staked. He also noted the proposal builds on years of research and public debate among core Ethereum contributors, including input from Vitalik Buterin and several other longtime researchers in the space.
Why Kulechov Is Pushing Back
Kulechov argues the plan solves the wrong problem. In a lengthy post, he said capping rewards to zero above 50% staked introduces exactly the kind of unpredictability that scares off serious capital. “This uncertainty has a significant adoption cost,” he wrote, arguing institutions generally prefer assets with predictable yield over ones where returns could vanish based on a supply threshold.
He raised a similar concern for solo stakers, who he said tend to be more sensitive to pricing changes than large institutional players.
The DeFi Angle Kulechov Is Most Worried About
Kulechov’s sharpest criticism centered on lending markets. If staking rewards fall to zero, he argued, most reasons to borrow $ETH within DeFi effectively disappear, since there would be little upside left to justify the cost of borrowing it. “The only reason to borrow $ETH ironically would be to short it,” he wrote.
He also floated a broader risk: investors comfortable holding $ETH purely for its yield exposure might rotate into other yield-bearing assets instead, including stablecoins, a shift he compared to capital moving between asset classes in traditional finance when interest rates change, just running in the opposite direction from what’s typically expected.
Not Everyone Agrees With Either Side
Reaction beyond the two camps has been mixed. One community member questioned whether the proposal should move forward at all before a separate mechanism exists to reward solo and home stakers more generously, potentially scaling rewards based on how small a staker’s share of the network is.
For now, the proposal remains a draft without an assigned final EIP number, and discussion continues on Ethereum’s public forums as the community weighs whether tapering issuance protects the network’s long-term health or undercuts the very asset it’s meant to secure.
Combined with existing fee burns, $ETH’s total supply could start shrinking more, according to supporters of the plan, who argue it moves Ethereum’s monetary policy toward the kind of predictability large investors have been asking for. Kulechov, for his part, remains unconvinced. “Ethereum should not be punished for its growth,” he wrote.