The staking ratio has increased, yet ETH is still inflating. The root cause is: Layer 2 (L2) networks are siphoning transaction volume away from the mainnet, and currently the issuance rate of staking rewards exceeds the transaction fees burned on the mainnet via EIP-1559. A higher staking ratio locks up circulating supply, but it does not automatically reduce the issuance of new ETH.
Step 1: Recognize 'Locking' and 'Burning' Are Two Different Things
What to do: Understand that staking ETH and reducing the total ETH supply are not directly related.
How to do it: Staking locks ETH from the circulating market to the Beacon Chain, reducing tradable supply on secondary markets. Whether total ETH increases depends on the difference between new issuance and fee burns:
Issuance side: Validators create new ETH as rewards each time they produce a block. Higher staking ratio means more validators, actually increasing total new ETH issuance. Current annual ETH issuance rate is about 0.8%.
Burn side: EIP-1559 burns the base fee of every transaction. But with L2 booming, transactions migrate from mainnet to L2, drastically reducing mainnet gas fees and burn amounts.
Completion standard: You can distinguish that 'staking locks ETH' and 'fee burning destroys ETH' are two independent mechanisms; the former does not necessarily cause the latter.
Step 2: Check Current Data – Staking Increases, Supply Also Increases
What to do: Use on-chain data to verify the phenomenon that 'staking ratio rises but supply still increases'.
How to do it: Compare the following data:
Total Staked: As of August 2026, approximately 41 million ETH are staked, accounting for 34% of total supply.
Circulating Supply Change: Since the Merge, ETH circulating supply has increased by over 1 million ETH, with an annual inflation rate of about 0.24%.
Queue Waiting for Activation: Another roughly 2.5 million ETH are in the queue for staking activation, with a waiting time exceeding six weeks.
Common misunderstanding: Many people think 'high staking ratio → less circulating supply → ETH should become scarcer'. But at the protocol level, new ETH issuance hasn't decreased, and L2 effectively blocks much of the burn channel, so net staking ratio and circulating supply rise together.
High-risk warning: Current staking yield is about 2.62%. If net issuance remains positive, it means ETH holders not staking are continuously diluted. Grayscale's research head notes that if staking exceeds a certain level, further incentivizing staking becomes 'counterproductive', diluting all holders' value without significantly enhancing security.
Step 3: Community Is Proposing a Fix – EIP-8361
What to do: Understand the proposed solution to this contradiction.
How to do it: The community has just submitted EIP-8361 (Deferred Issuance Burn Proposal), which aims to gradually burn validator rewards until net issuance reaches zero when the staking ratio exceeds 50%. The logic is:
At the current staking ratio (34%), even if all ETH were staked, the staking yield would still not fall below about 1.5%, lacking an effective 'shutdown mechanism'.
Proposes to burn a portion of validator rewards each epoch, with the burn ratio increasing as staking size grows.
When staking ratio approaches 50%, burn ratio reaches 100%, net issuance tends to zero, pushing ETH into deflation more frequently.
This proposal is highly controversial. Aave's founder publicly opposes it, arguing that zero staking yield would destroy ETH lending strategies and the DeFi credit market. The founder of ether.fi warns that the proposal would eliminate solo stakers, concentrating staking into 'large centralized entities with zero capital cost'.
Verification method: Open ultrasound.money or beaconcha.in, check ETH's 'Net Supply Change' curve. If the 7-day or 30-day change is positive (+0.XX%), it means ETH is still inflating. Regularly monitor EIP-8361 progress – if passed, it would be implemented in an upgrade in the second half of 2026 or later.
