ETH staking rewards and penalties
Rewards
Staking rewards incentivize participants to lock up their Ether (ETH) as collateral and become validators, thereby actively contribute to the operations and security of the Ethereum network. Validators are responsible for attestations, proposing blocks, and actively engaging in sync committees. In return for their participation, validators receive staking rewards in the form of additional ETH. Ethereum rewards can be divided into two categories: Consensus layer and Execution layer rewards.
Consensus Layer (CL) rewards
Consensus layer rewards are provided to validators for block proposals, block validation, and active participation in sync committees. The rewards obtained through attestations or proposals results in an increased balance on the validator's pub-key address on the beacon chain. When a pub-key's balance exceeds 32 ETH, periodic transfers are made to the validator's withdrawal credential by the Ethereum chain.
Block attestation rewards - An attestation represents a validator's vote in support of their perspective on the blockchain. Each epoch, which lasts approximately 6.4 minutes, validators propose their attestations to the network. This collective information from all participating validators aids in achieving consensus regarding the Ethereum blockchain's state. Learn more
Block proposal rewards - A Validator is selected randomly for block proposals every 12 seconds, i.e. one slot. It should be noted that a block may or may not be proposed in every slot, some slots can remain empty. Learn more
Whistleblowing rewards - A validators receives whistleblowing rewards when validators provide evidence of dishonest behaviour, like proposing multiple blocks within a single slot or submitting conflicting attestations.
Sync committee rewards - At an interval of 256 epochs, equivalent to approximately 27.3 hours, the Ethereum network randomly chooses 512 validators to form the sync committee. Sync committees allow light clients to keep track of the head of the blockchain without needing to access the entire validator set.
Execution Layer (EL) rewards
Execution layer rewards are provided to validators as a form of recognition for their handling of specific transactions that require special attention. Execution Layer rewards includes MEV and Priority fees.
Priority fees - A priority fee is what a transaction sender would pay a block producer for the transaction to be included in a block. Learn more
MEV rewards - MEV (maximal extractable value) refers to the operator’s capability to include, exclude, and reorder transactions in a block to directly or indirectly profit. Learn more
Penalties
Penalties in Ethereum play a crucial role in enforcing network rules, deterring malicious behaviour, and preserving the integrity and security of the blockchain. Validators who engage in incorrect behaviour can face penalties, which result in the deduction of certain amount of ETH from their staking collateral of 32 ETH. Some of the most common penalties imposed on validators include: Attestation penalty, sync committee penalty, inactivity leak and slashing. Learn more
Attestation penalty - If a validator is offline or misses an attestation, or signs an attestation late, a small amount of ETH is deducted from their validator's balance as a penalty.
Sync committee penalty - A sync committee validator may face penalties for signing the incorrect head block or failing to participate at all. These penalties are equivalent to the incentive they would have received for making the correct contribution.
Inactivity leak - If the Beacon Chain has gone more than four epochs without 2/3 supermajority, an emergency protocol called the "inactivity leak" is activated. The inactivity leak lets the stake belonging to the inactive validators gradually bleed away until they control less than 1/3 of the total stake, allowing the remaining active validators finalize the chain. Learn more
Slashing - Slashing is forceful removal of a validator from the network which results in the loss of their staked ETH. There are three ways a validator can be slashed: 1. By proposing and signing two different blocks for the same slot, 2. By attesting to a block that "surrounds" another one (effectively changing history) and 3. By "double voting," by attesting to two candidates for the same block. Learn more
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