This report covers all of Figment’s Ethereum validators that were active throughout the months of April, May, and June in 2024. On Ethereum, we are one of the largest independent protocol staking providers. All of the data utilized in this report is powered by Figment’s Data team unless otherwise stated.
In order to gain a complete understanding of a validator’s performance, it is crucial to consider various factors and evaluate their performance over an extended time frame. Comparing performance across validators or groups of validators is a nuanced exercise that requires controlling for randomness or luck. For example, validators can be lucky in the sense that they are chosen to perform certain higher-reward duties, like proposing blocks or participating in the sync committee, more frequently than expected. They can also be lucky if they are chosen to propose a block during times of higher demand for blockspace, and thereby receive higher execution layer rewards.
Q2 Metrics:
- ~27% of ETH Circulating Supply Staked
- Figment’s average SRR Rate throughout Q2 was 3.48%, on par with the network average
- 0 Double-sign Slashing Events on Figment validators
- Figment Ethereum validators participation rate in Q2 was 99.88%
As Ethereum stakers navigate the landscape of staking rewards, it is crucial to understand Figment’s definition of risk-adjusted rewards and what they mean in real terms. This section of the report provides an overview of the risks associated with forked software, an often overlooked but crucial engineering risk for the validators.
What are Risk-Adjusted Rewards?
Risk-adjusted rewards refer to the rewards earned by stakers after taking into account the level of risk and potential consequences involved in achieving said rewards. At Figment, we focus on risk-adjusted rewards rather than rewards in isolation to ensure our customers can optimize their staking rewards while minimizing exposure to potential hazards.
What is Forking and Why do Some Node Operators do it?
Open-source software like Ethereum clients and MEV-Boost is developed and tested by teams of experts and the larger Ethereum community for a long period before release.
Forking open-source software involves copying the source code from the original project and modifying it. This new project diverges from the original, extends the code independently, and leads to the creation of distinct software variants. Some node operators fork software to maximize their rewards by introducing advanced logic.
MEV-Boost connects validators to various relays that offer bids for block proposals, resembling an auction that allows validators to choose the highest reward without requiring complex changes to the existing Ethereum node setup. However, forking MEV-Boost to modify its logic for higher MEV rewards poses significant risks to the node operator and the network itself.
Forked Software: Timing Games
Forking MEV-Boost for timing games involves introducing artificial delays in interacting with relays during auctions. These delays offer more time for the validators to pick higher bids produced by builders, which can lead to higher rewards. However, this practice can present an element of risk:
Network integrity: This practice is frowned upon by the Ethereum community as these behaviors potentially increase gas fees for the end-users and can jeopardize block proposals and the inclusion of transactions on chain. Moreover, as shown below, these delays can also cause reorgs in the Ethereum blockchain, hurting the network’s health.
Source: https://hackmd.io/@dataalways/latency-is-money
As shown above, the probability of a forked block leading to reorgs increases as the timing games go beyond 1.2 seconds in the slot time.
Missed proposals:
Some node operators implement forked software to introduce excessive timing games, which artificially boost the average rewards rate by benefiting a few validators with large rewards. However, this practice negatively impacts many of their other validators by causing them to miss their opportunities to propose blocks. Although block proposals are rare, they contribute significantly to a validator’s total rewards. Excessive timing games of a node operator increase the likelihood of missed proposals, undermining the overall performance and rewards of individual validators of the node operator.
Forked Software: Ethereum Clients
Forking open-source Ethereum clients e.g. Lighthouse or GETH introduces several risks including the creation of a single point of failure:
Single Point of Failure: Thinly tested versions of the open-source software can introduce a single point of failure, reducing the resilience needed for risk mitigation and disaster recovery. For instance, after the Dencun upgrade, an incompatibility between one consensus client and relay led to a peak of 13% missed blocks. Node operators using the forked version of the consensus client couldn’t upgrade to the bug-free version and continued to miss proposals. This lack of resilience directly resulted from forking the client software.
Source: https://beaconcha.in
As shown above, an incompatibility between a relay and a consensus client led to missed proposals. The validators that have forked that consensus client may not have the ability to switch to another open-source client.
At Figment, we mitigate these risks by using battle-tested open-source software and ensuring redundancy. This strategy boosts our operational security and allows us to switch away from malfunctioning software should that be the right course of action.
Ethereum Rewards
When staking Ethereum, validators receive both consensus layer (CL) and execution layer (EL) rewards. CL rewards account for the majority of the rewards in Q2 at ~82%, compared to ~18% for EL rewards.
Consensus Layer Rewards
CL rewards are allocated to validators for attesting, proposing blocks, and participating in the sync committee. Attesting is a frequent occurrence and is primarily driven by the participation rate of a validator which is discussed later in the report. Figment’s performance in Q2 for median CL rewards was 0.0021 ETH per validator per day, which was on par with the network median. In the event that a validator is selected to propose a block, they also receive EL rewards.
Execution Layer Rewards
Validators only receive EL rewards when they are proposing blocks, which is a random and infrequent event (happening, typically, once every 144 days or so with the current validator count). Even if a validator is randomly selected to propose a block, the size of the rewards is determined based on the cost of transacting on the network. These costs include priority fees and Maximal Extractable Value (MEV) related rewards.
The EL fees are volatile. Using the median as a metric for reporting EL rewards is a more reliable method than using the mean, primarily due to the variability and presence of large outliers in rewards resulting from MEV activities. The median, as a measure of central tendency, is less sensitive to extreme values and outliers, providing a more representative value for the typical reward earned by validators.
In Q2, when Figment validators were selected to propose blocks, they received a median of 0.039, slightly higher than the network median of 0.038 ETH. With the EL rewards being random, we expect this number to fluctuate quarter by quarter.
Between these two reward types, CL rewards are much less volatile and less prone to the “luck factor” than EL rewards — the image below displays the difference in variability between EL rewards and CL rewards.
Participation Rate
Every epoch validators attest to the state of Ethereum, where an attestation includes the beacon block root, a source checkpoint and a target checkpoint, among other data. Implicitly, new blocks accrue votes through these attestations and achieve consensus and ultimately finalization (when the epoch they are contained in becomes finalized).
Participation Rate is a measure of how often a validator successfully attests when it is selected by the protocol to participate in a committee. A validator could be unable to attest for many reasons, including downtime or misconfiguration. As a result, the Participation Rate is a reliable indicator of network uptime and validator stability.
In Q2, Figment performed above the network average, with an average Participation Rate of 99.88%, which is slightly higher than the average validator with a Participation Rate of 99.67%.
Slashing
Figment’s performance throughout Q2 2024 remained strong, with no slashing penalties. As the image below displays, on other validators throughout Q2, there were 11 slashing events on Ethereum, all related to attestation violations (source).
Slashing is a large risk to validator performance and has a significant negative impact on rewards.
Figment pioneered the concept of “Safety Over Liveness” on our validator infrastructure that minimizes the chances of being slashed. We also offer coverage to mitigate losses in the case of a slashing event.
Stake ETH with Figment
Figment is the leading provider of staking infrastructure. Figment provides the complete staking solution for over 500 institutional clients, including asset managers, exchanges, wallets, foundations, custodians, and large token holders, to earn rewards on their digital assets. Figment is one of the largest non-custodial staking providers on Ethereum. Institutional staking services from Figment include seamless point-and-click staking, portfolio reward tracking, API integrations, audited infrastructure, and slashing protection. This all leads to Figment’s mission to support the adoption, growth, and long-term success of the digital asset ecosystem. To learn more about Figment, please visit figment.io.
When it comes to Staking Ethereum, Figment offers:
- Collect More Rewards: Figment, utilizing Flashbots’ MEV-Boost to connect to multiple OFAC-compliant MEV relays, optimizes risk-adjusted rewards for customers.
- Multi-Client Infrastructure: Figment supports both the Lighthouse and Teku Ethereum clients. Multiple client implementations can make the network stronger by reducing its dependency on a single codebase. Figment supports multiple clients to avoid client concentration and reduce the impact of a client-specific problem leading to potential penalties.
- Point-and-Click Staking: Experience the best staking interface for ETH with access to the Figment app. View your staking positions in real-time as well as stake, unstake, and view rewards. Track your portfolio across multiple networks and download detailed reports.
- Optimized Rewards Reporting: Access detailed and comprehensive rewards statements in various formats.
Figment offers point-and-click staking, insights dashboards, rewards tracking, and statements—providing a seamless Ethereum staking experience. Individual users maintain control with true non-custodial staking while institutions benefit from Figment’s robust infrastructure that provides security and optimized rewards. Sign up now and start staking Ethereum.
The information herein is being provided to you for general informational purposes only. It is not intended to be, nor should it be relied upon as, legal, business, tax, or investment advice. Figment undertakes no obligation to update the information herein.
