Ethereum Proposal Aims to Cut Staking Rewards in Half

The idea from Justin Drake and co-authors would materially reshape ETH issuance and staking incentives, with consequences for validators, Lido, and how rewards are distributed on Ethereum.

Key Takeaways

• Ethereum Foundation researcher Justin Drake and five co-authors want to lower staking rewards once half of all ETH is locked up.
• According to BeInCrypto, the annual reward would drop to about 1.1%, from 2.6% now, while part of the reward would be burned periodically.
• The proposal is not final yet and still has to go through editors, client teams, and a network upgrade before anything changes.

Ethereum Foundation researcher Justin Drake and five co-authors are pushing a plan to reduce the reward for staking ETH. Their draft proposal would shut off that reward once half of all ETH is locked up. For stakers, that would mean lower yield. For everyone else, it would leave a relatively larger share of the total ETH supply.

How the Proposal Works

At the center of the proposal is a change to issuance. Right now, Ethereum pays participants for helping secure the network by locking up ETH, validating transactions, and earning newly issued ETH in return. Based on BeInCrypto's calculations, the annual reward would fall to about 1.1%, down from 2.6% today.

That distinction matters because proof-of-stake rewards come not only from new issuance, but also from transaction fees and MEV, the extra income generated by ordering transactions. Since Ethereum moved from Proof of Work to Proof of Stake in September 2022, that system has changed completely, and energy-intensive mining is no longer part of the process.

The authors also want a portion of the reward to be burned on a recurring basis. As more ETH gets staked, that burned share grows. At the current level, 56% of the reward would be removed. Once staking reaches 60.25 million ETH, the full amount would be burned.

Who Feels the Pressure First

In theory, the biggest operators would hit the cap first, but the numbers suggest that point is still some way off. BeInCrypto ran the formula against Lido and found that expansion would still make sense until roughly 49 million ETH is staked, which is almost 8 million more than today.

That also matters in a market where staking has been under pressure for a while as participation keeps climbing. Validator yields have gradually slipped from above 4% to around 2.7%, mostly because more ETH is being locked up. The Pectra upgrade in May 2025 added another wrinkle with 0x02 compounding validators, which can automatically reinvest rewards and support up to 2,048 ETH per validator.

Smaller stakers would feel the change too. Their losses would stay the same, but the rewards would shrink, making it take longer to recover after going offline. The authors say validators would still earn MEV income, but that would not offset the new burn.

Why This Matters for ETH

For Ethereum investors and network participants, this is really a debate about incentives. Lower staking rewards could change how value is distributed across the network, even as the total amount of staked ETH has kept rising for years. At the same time, the growth of restaking protocols shows that many stakers are already chasing extra yield on top of the base reward, which makes proposals like this even more sensitive.

The plan is still far from final. It would need to move through editors, client teams, and then a network upgrade before anything actually changes. For now, it mainly shows that the conversation around issuance, staking, and network security on Ethereum is back on the table.