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Introducing the Attestant overnight rate

BY Jim McDonald ON Jun 14, 2021

Introduction

One of the most common questions asked when staking Ether is “how much will I earn?”, however there are a number of factors involved in calculating a suitable value. This article introduces the Attestant overnight rate, which provides a realistic metric for returns from staking and is designed to be usable as a benchmark rate.

Rewards on the beacon chain

Rewards on the beacon chain today come from two sources: proposing blocks, and attesting to blocks that have been proposed. Only one active validator proposes a block each slot (12 seconds), whereas every active validator attests each epoch (approximately 6.5 minutes).

Action Frequency Reward
Propose a block Low High
Attest to a block High Low

Additional rewards are likely to be added as the beacon chain evolves1, however the general pattern of low-frequency high-reward and high-frequency low-reward operations is likely to continue.

The overall value of rewards depends on the total number of active validators2 at the time the reward is processed: the more validators that are active, the less individual contributions from each validator is worth. When the expected rewards are calculated and extrapolated over a year, they follow the curve shown below:

Reward rate, dependent on number of total Ether staked

Figure 1: Reward rate, dependent on number of total Ether staked

This all appears to be relatively simple: find out the number of active validators and read off the corresponding rewards rate for the year. However, it should be noted that the Y axis above is labelled maximum rewards rate. In reality there are multiple factors that can reduce this amount.

Firstly, the number of active validators can (and, in general, does) change each epoch. Although the change for any single epoch is small, over time it can result in a significant shift and hence change in the maximum rewards rate. Although in theory this can work both ways, at current there are significant numbers of new validators becoming active each day and minimal numbers of active validators becoming inactive, resulting in an ongoing trend of maximum rewards being reduced over time.

Secondly, rewards received are proportional to participation by all active validators. Even if a validator acts perfectly, if other validators do not then its rewards will be reduced. The reduction depends on not only the percentage of validators acting correctly, but also what failures the imperfect validators have, and when they manifest. Historical participation is around 99%, although it has fallen below 85%.

Thirdly, rewards are generated based on the validator’s effective balance, but in finance are measured on the validator’s real balance. This leads to a reduction on rewards over time, as validators accrue rewards and their balance increases but their absolute rewards do not increase commensurately.

Lastly, selection for block proposal (a low-frequency high-reward operation) is random, with independent selection. This means that two validators that act perfectly can have very different rewards based on nothing other than luck.

The Attestant overnight rate

The Attestant overnight rate provides a measurement of the annualized rate an average validator would expect to obtain over the past day3. The work “average” in the previous sentence covers a multitiude of conditions, so to be explicit:

  • all validators on mainnet that have been active for the full 24 hour period are used as the basis for the rate
  • the day rate for each validator is calculated as \(\frac{end\ balance}{start\ balance}-1\)
  • the annualized rate is calculated as \(day\ rate * 365\)
  • validators are ordered by their annualized rate, from low to high
  • the annualized rate at the 50th percentile of the data is taken to be the Attestant overnight rate

Like any metric, the decisions made on its derivation have an impact on its use. In the case of the Attestant overnight rate, its focus is on providing a metric that can be used to obtain the expectation rate for a single validator for. It is useful when looking at comparatives directly to obtain TODO. It does not attempt to predict the actual

It would be expected that a well-run validator running for a full 365 days would provide a return above the Attestant overnight rate, as during that time it would be likely receive multiple block proposals.

Accessing the Attestant overnight rate

Current values and recent history for the Attestant overnight rate are available at our web site. Full history of the Attestant overnight rate is available from the Cryptocompare API.

The future of the Attestant overnight rate

As Ethereum evolves, the overnight rate will evolve with it. Some examples of changes coming to Ethereum that will impact the Attestant overnight rate are below.

Altair

Altair rebalances attestation rewards between attester and proposer. At current, attestation rewards are split approximately \(\frac{31}{32}\) to the attester and \(\frac{1}{32}\) to the proposer. Altair changes this to be in line with the original desire of the specification, with \(\frac{28}{32}\) going to the attester and \(\frac{4}{32}\) to the proposer. This will result in a reduction to the Attestant overnight rate in line with the expected reduction in reward for a validator that attests but does not propose.

Sync committees

Sync committees will be introduced in the Altair upgrade, due in the third quarter of 2021. These will reduce the Attestant overnight rate slightly, due to .

Merge

Transaction rewards will be introduced in the merge upgrade, due in the first half of 2022. These will have no impact on the Attestant overnight rate, due to

Withdrawals

Withdrawals will be introduced some time after the merge upgrade. These will increase the Attestant overnight rate, due to allowing validators with greater than 32Ξ to exit, increasing the capital efficiency of the network.

Excess balance transfers

Excess balance transfers may be introduced some time after the merge upgrade. These will increase the Attestant overnight rate significantly, due to allowing validators with greater than 32Ξ to move their excess balance without exiting, increasing the capital efficiency of the network.


  1. For example, sync committees with the Altair release.↩︎

  2. Actually the total amount of active Ether, but to all intents and purposes they are equivalent.↩︎

  3. A day is defined as the 24-hour period from 00:00:00UTC to 00:00:00UTC↩︎

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