Rewards and Penalties

Being a validator in the Ethereum network comes with various responsibilities, rewards, and potential penalties. In this guide, we break them down to help you better understand your staking performance on AVADO.

Rewards

Your validators will receive two streams of rewards, on the Execution Layer and the Consensus Layer, respectively:

	Execution Layer	Consensus Layer
Purpose	Maintain the global ledger of Ethereum transactions.	Maintain the integrity and security of Ethereum's Proof of Stake consensus network.
Validator Duties	Produce blocks	Produce attestations Propose blocks Participate in sync committees Report slashings
Frequency of Duties	Random [1]	Attestations: once every epoch Proposer and sync committees: random [1] Slashing: by chance
Components of Rewards	Tips (Priority Fees) MEV-Boost rewards	Attester fee Proposer fee Sync committee fee Slasher fee
Size of Rewards	Highly variable [2], may potentially be boosted by MEV-Boost.	Relatively predictable based on network conditions and set formulae [3].
Distribution of Rewards	Immediate upon block production	Accrue on validator balance, then periodically "skimmed" by a sweep mechanism.
Destination of Rewards	Fee Recipient Address	Withdrawal Address

Remarks:

1. To get a sense of the current average number of days it takes to be assigned one proposal, you can visit the Lucky Staker website. It's important to note that these numbers represent statistical averages and individual experiences may vary significantly.

2. To estimate the current average block rewards, see Rated Network web site.

3. For an understanding of how the Consensus Layer rewards are calculated, see this beaconcha.in Knowledge Base article.

What is a Sync Committee Fee?

A Sync Committee is a group of 512 validators, randomly assigned by the Ethereum 2.0 network. A new committee is chosen every 256 epochs, roughly 27 hours. This committee continually signs block headers for each new slot in the beacon chain.

If your validator is assigned to a Sync Committee duty, it will receive significantly higher rewards compared to normal attestation rewards. This windfall of rewards lasts for a duration of 8,192 Slots, approximately 27 hours.

During this period, it is crucial to ensure that your validator node is up and running. Missing or failing to fulfill Sync Committee duties can result in penalties that are as large as the the potential rewards.

Subscribe to Notifications on beaconcha.in to get alerts for Sync Committee duties. There is a 27-hour lead time before the duties start. It is advised that node operators avoid any scheduled downtime until the end of the duties; otherwise the penalties could accumulate very quickly.

What is a Slasher Fee?

In the Ethereum Proof of Stake network, a "slasher" refers to a mechanism designed to penalize validators who engage in malicious or harmful behavior. Slashing is a penalty imposed on validators who violate the network's rules or attempt to compromise its security.

Found slashings are broadcasted to the network and the next block proposer adds the proof to the block. The block proposer receives a reward for slashing the malicious validator.

In reality, this is a very rare event.

Where can I see the Execution and Consensus Rewards?

The Charts tab on beaconcha.in displays Execution and Consensus rewards in green and blue, respectively.

In this example, the validator received a proposal and earned both Execution (green) and Consensus (blue) incomes. The Execution income represents the reward for block production, while the Consensus income is a combined fee for attestations and block proposals. These rewards are notably larger than the typical daily income earned solely from attestations.

Where do the Rewards Go?

Let's re-revisit The Solo Staker's Journey diagram for better context:

Fee Recipient Address

Execution Layer rewards are directed to the Fee Recipient Address.

Recall that you can set a default Fee Recipient Address for all your validators, and you can change the Fee Recipient Address any time for individual validators if you wish. See: Set Default Fee Recipient Address.

The Fee Recipient Address is only relevant when your validator is assigned to produce a block and receives Tips and/or MEV-Boost rewards. Tips (also called Priority Fees) are payments made by Ethereum users to validators for including their transactions. MEV-Boost rewards, on the other hand, are additional rewards obtained through strategic ordering or manipulation of transactions to maximize value. To participate and earn MEV-Boost rewards, you can install and configure the MEV-Boost dapp.

Withdrawal Address

Consensus Layer rewards go to the Withdrawal Address.

Recall that you have the option to set a Withdrawal Address in the following ways:

• Initially during the Key Generation process. If you used the Wagyu Key Gen software, you had the opportunity to set the Withdrawal Address and include it in the deposit data file when making the ETH deposit.

• At any later time using tools like AVADO's Withdrawal Address Tool: You will need to use your 24-word secret recovery phrase for this purpose.

The Withdrawal Address can only be set once and cannot be changed. You can verify the status of your Withdrawal Address by visiting your Validator Page on the beaconcha.in website and checking under the Deposits tab. Once a Withdrawal Address has been set, you should see withdrawal credentials that start with 0x01.

If you have set up a Withdrawal Address, your Consensus Layer rewards (validator balance above 32 ETH) will be periodically transferred, or "skimmed", from the Beacon Chain to your Withdrawal Address. These are known as partial withdrawals, and happen periodically on "validator sweep".

Validator Sweep

The process of scanning validators for withdrawals occurs sequentially, starting from the validator with index number 0 and progressing in one direction like a clock hand. When the last validator is reached, the sweep process starts over again from the beginning.

During the sweep process, each validator's account is evaluated for potential partial or full withdrawals. The time it takes for the sweep to reach a specific validator and process their withdrawal depends on the total number of validators on the network.

To check the current "sweep delay" and get an idea of the time it takes for withdrawals to occur, you can visit https://www.validatorqueue.com/.

Withdrawal History

To access the full history of withdrawals processed for your validator and check the expected timing of the next withdrawal, you can navigate to the Withdrawals tab on your Validator Page on beaconcha.in.

Alternatively, you can find the same information by searching for your Withdrawal Address on etherscan. Please note that withdrawals are not regular Ethereum transactions and will not appear under the Transactions tab. Instead, you need to look under the Beacon Chain tab on etherscan to locate them. Additionally, you will observe a corresponding increase in your ETH balance when withdrawals are processed.

Withdrawals are not regular Ethereum transactions. They do not show up under the Transactions tab on etherscan. Instead, look under the Beacon Chain tab to find them.

How often do my Validators get a Proposal?

From EthStaker Knowledge Base:

It's random

How often a validator receives block proposals, and is selected to be part of a sync committee, is entirely random. As long as you do not see missed proposals, there is absolutely nothing you can do to increase the frequency.

True randomness can feel quite odd. A validator not getting a proposal for 9 months is perfectly normal. A validator getting two proposals in a week is entirely normal. Over a large enough set, this evens out, but for a handful of validators, randomness can indeed feel unsettling.

Is there really nothing I can do?!?

No, it's random. There is nothing you can do to increase your chances at proposals, short of running more validators.

Penalties

Validators are penalized for small amounts of ETH if they are offline and fail to perform their assigned duties. The penalties are comparable to the rewards for the same period of time.

Missed Duties	Panelties
Missed Attestations	The penalties for missing the target and source votes are equal to the rewards the attester would have received had they submitted them. This means that instead of having the reward added to their balance, they have an equal value removed from their balance. No penalty for missing the head vote (i.e. head votes are only rewarded, never penalized). No penalty associated with the inclusion delay - the reward will simply not be added to the validator's balance.
Missed Proposals	No penalty for failing to propose a block. You simply lose the rewards (on both Execution and Consensus Layers).
Missed Sync Committees	There is a penalty for each missed Sync Committee duty that is considerably larger than the penalty for a missed attestation. Since Sync Committee duties are assigned for a block of 8,192 slots (256 epochs), in the unfortunate event that your validator is offline for the entire period (~27 hours), the total penalties can be substantial.

Penalties are not the same as Slashing

In any case, the penalties are small amounts of ETH that are approximately equal to the rewards the validator would have received if they had not missed their duties. For example, the penalties for missed attestations amount to around 0.0016 ETH or about 5 USD per validator per day (April 2024).

Penalties are not the same as slashing! Read on for more details.

Slashing

Slashing is reserved for more serious offenses. Validators can be slashed for actions such as double signing or other malicious behavior that compromises the security and integrity of the network. Slashing results in a reduction of a portion of the offending validators existing stake, causing a gradual loss of ETH over time until the validator is forcefully ejected and marked as "slashed". This is irreversible.

Realistically, the only condition that can cause a slashing is if you run your validator's keys on two nodes at the same time (such as running more than one Consensus Client on your AVADO, or running more than one AVADO, and loading the same keys into both). Don't let this happen, and you won't get slashed.

Missing attestation duties do not result in slashing.