Critical Proposal for Ethereum Staking Yields: Could Drop from 2.6% to 1.2%

While the supply of staked ETH on Ethereum has risen from approximately 29% to 34% since the beginning of the year, a new proposal suggests reducing validator rewards based on the staking ratio.

With the staking ratio on the Ethereum network approaching one-third of the total supply, questions regarding the long-term sustainability of yields from staking operations have increased. In this environment, researchers including Justin Drake from the Ethereum Foundation filed the EIP-8361 proposal on August 4.

EIP-8361 proposes that as the staking ratio increases, a larger portion of validator rewards should be burned—removed from circulation. It is planned that the burn rate would reach 100% when the staking ratio reaches 50%, with no net new supply for validators after this level.

EIP-8361 Could Lower Validator Yields

According to modeling by the proposal’s authors, the annual consensus yield near the current staking ratio could fall from 2.6% to 1.2%. However, it is envisioned that this change would not occur all at once but would be implemented over an 18-month transition period. These calculations are based on a hypothetical model created by the authors of the proposal.

This scenario could also directly impact companies that generate staking income by holding ETH. The revenues of ETH treasury companies such as Bitmine (BMNR) and Sharplink (SBET) could be cut roughly in half at current staking levels. It is noted that this pressure could increase further if the staking ratio approaches 50%.

One of the standout features of ETH treasury companies for investors is their ability to provide organic yield by staking the ETH they hold. If the proposal is accepted, the reduction in this yield could lead investors to see less reason to pay a premium for these companies compared to simply holding staked ETH. EIP-8361 has not yet been accepted.