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Autopsy of Ethereum's Post-Merge Reward System

Mikel Cortes-Goicoechea, Tarun Mohandas-Daryanani, Jose Luis Muñoz-Tapia, Leonardo Bautista-Gomez

TL;DR

This paper aims to break down both theoretically and empirically the new reward system in this post-merge era of Ethereum, and presents a highly detailed description of the different rewards and their share among validators' rewards.

Abstract

Like most modern blockchain networks, Ethereum has relied on economic incentives to promote honest participation in the chain's consensus. The distributed character of the platform, together with the "randomness" or "luck" factor that both proof of work (PoW) and proof of stake (PoS) provide when electing the next block proposer, pushed the industry to model and improve the reward system of the system. With several improvements to predict PoW block proposal rewards and to maximize the extractable rewards of the same ones, the ultimate Ethereum's transition to PoS applied in the Paris Hard-Fork, more generally known as "The Merge", has meant a significant modification on the reward system in the platform. In this paper, we aim to break down both theoretically and empirically the new reward system in this post-merge era. We present a highly detailed description of the different rewards and their share among validators' rewards. Ultimately, we offer a study that uses the presented reward model to analyze the performance of the network during this transition.

Autopsy of Ethereum's Post-Merge Reward System

TL;DR

This paper aims to break down both theoretically and empirically the new reward system in this post-merge era of Ethereum, and presents a highly detailed description of the different rewards and their share among validators' rewards.

Abstract

Like most modern blockchain networks, Ethereum has relied on economic incentives to promote honest participation in the chain's consensus. The distributed character of the platform, together with the "randomness" or "luck" factor that both proof of work (PoW) and proof of stake (PoS) provide when electing the next block proposer, pushed the industry to model and improve the reward system of the system. With several improvements to predict PoW block proposal rewards and to maximize the extractable rewards of the same ones, the ultimate Ethereum's transition to PoS applied in the Paris Hard-Fork, more generally known as "The Merge", has meant a significant modification on the reward system in the platform. In this paper, we aim to break down both theoretically and empirically the new reward system in this post-merge era. We present a highly detailed description of the different rewards and their share among validators' rewards. Ultimately, we offer a study that uses the presented reward model to analyze the performance of the network during this transition.
Paper Structure (22 sections, 8 equations, 8 figures, 2 tables)

This paper contains 22 sections, 8 equations, 8 figures, 2 tables.

Table of Contents

  1. Introduction
  2. State of the Art
  3. Methodology
  4. Execution Layer's Block Proposal Rewards
  5. Characterization of Attestation Rewards
  6. Characterization of Sync Committees Rewards
  7. Characterization of Block Proposals
  8. Validators' Penalizations
  9. Maximum Extractable Reward (MER)
  10. Beacon State Analyzer
  11. Validator to Staking Pools Mapping
  12. Discussion
  13. Descentralization of the Consensus
  14. Validators Overall Performance
  15. Missed Attestation Flags
  16. ...and 7 more sections

Figures (8)

  • Figure 1: Evolution of rewards for different layers in Ethereum.
  • Figure 2: Rewards extracting schema followed by the state analyzer tool for Epoch $n-1$ (in red: actions of our indexer tool; in blue, actions at the protocol).
  • Figure 3: Block proposal's distribution per mining and staking entities for the two months of study.
  • Figure 4: Time distribution of missed flags percentage from the total number of validators. Aggregating the total missed flags on the top chart and distinct missed flags at the bottom.
  • Figure 5: Number of missed blocks pre- and post-merge.
  • ...and 3 more figures