Ethereum Staking Rewards

Ethereum staking rewards are more complex than on other networks. They're best understood in the context of where they're generated: on the execution layer (EL) or consensus layer (CL).

Ethereum validators earn rewards for their participation in the network's consensus process. These rewards incentivize validators to perform their duties honestly and reliably, thereby securing the network. The rewards are categorized into two main types: consensus rewards and execution rewards. Understanding these rewards is essential for validators to maximize their earnings and contribute effectively to the Ethereum blockchain.

Consensus Layer 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 result in an increased balance on the validator's pub-key address on the beacon chain. When a public 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, lasting approximately 6.4 minutes, validators propose their attestations to the network. This collective information from all participating validators aids in achieving consensus regarding the state of the Ethereum blockchain.

Block Proposal Rewards:

• Validators are randomly selected to propose new blocks every 12 seconds, corresponding to one slot. It is important to note that a block may or may not be proposed in every slot, and some slots can remain empty.

Whistleblowing Rewards:

• Validators receive whistleblowing rewards when they provide evidence of dishonest behavior, such as proposing multiple blocks within a single slot or submitting conflicting attestations.

Sync Committee Rewards:

• At intervals of 256 epochs (~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 blockchain head 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 include MEV and priority fees.

Priority Fees:

• A priority fee is what a transaction sender pays a block producer to have their transaction included in a block. These fees incentivize validators to prioritize certain transactions over others.

MEV (Maximal Extractable Value) Rewards:

• MEV refers to the validator’s capability to include, exclude, and reorder transactions in a block to directly or indirectly profit. This can involve capturing arbitrage opportunities or prioritizing high-value transactions.