Ethereum’s Controversial Reward Burning Plan Withdrawn: What’s Next for ETH Supply?

EIP-8363, which proposed burning a portion of validator rewards as the amount of $ETH staked increases, has been removed from Ethereum’s Hegota update.

The EIP-8363 proposal, which aimed to burn a portion of the rewards earned by Ethereum validators, has been withdrawn from the evaluation process for the Hegota network update. Jérôme de Tychey, a co-author of the proposal and President of Ethereum France, stated that they agreed with the view that it would be inappropriate to decide on changes of a monetary policy nature within the process that defines the scope of the network update.

EIP-8363 proposed burning an increasing portion of validator rewards as the staked $ETH rate on the Ethereum network increases. Proponents of the proposal argued that excessively high staking rates could centralize the validator structure and weaken $ETH’s monetary role.

However, industry participants and Ethereum core developers indicated that a broader discussion was needed regarding the proposal’s potential impact on security, economic incentives, and solo validators. How the burning curve would be calculated, the impact of liquid staking protocols, and the structure of the validator set were among the main points of contention.

The withdrawal of the proposal does not mean that the idea of reducing or burning staking rewards on Ethereum has been completely abandoned. The authors of the EIP plan to conduct a review process for $ETH supply policy independent of the network update.

According to the new schedule, one of the first comprehensive meetings will be held at the Devcon event in November. A new forum is being considered for January at the cryptoeconomics workshop at Columbia University. Technical workshops are planned for February and March, and a more concrete proposal will be worked on with developers at the EthCC event in April.

Therefore, EIP-8363 is not expected to be implemented in the Hegota update. However, the discussion about Ethereum’s long-term supply and staking incentives will continue in a separate process.

*This is not investment advice.