This report covers all of Figment’s active Ethereum validators throughout July, August, and September of 2024. On Ethereum, we are one of the largest independent protocol staking providers. Unless otherwise stated, all of the data utilized in this report is powered by Figment’s Data team.
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 chosen to perform specific 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. For example, on August 5th, Ethereum experienced its largest MEV reward payout since the Merge.
This MEV spike on August 5th coincided with significant market events, such as the unwind of the Japanese Yen carry trade. As the Bank of Japan adjusted its monetary policy, this market turbulence extended across various asset classes including crypto assets, particularly impacting Ethereum. As the global capital markets reacted to volatility, Ethereum saw a 26% sell-off as it was already in an aggravated sell-heavy market for three reasons: Open Interest decline, Jump trading’s ETH sell-off, and ETHE Liquidations.
During this time, demand for blockspace on Ethereum surged. This surge led to higher execution layer (EL) rewards for validators lucky enough to propose blocks during this period of increased activity. The event underscores the importance of considering broader market dynamics when analyzing validator performance, as external factors can create opportunities for outsized rewards that are not purely based on the validator’s operational efficiency or stake size.
Read more about the specifics of how the Yen Carry trade unwind supercharged Ethereum staking rewards in our co-authored report with MarketVector here.
Q3 Metrics:
- ~28% of ETH Supply Staked
- Figment’s average SRR Rate throughout Q3 was 3.3%
- 0 Double-sign Slashing Events on Figment validators
- Figment Ethereum validators participation rate in Q3 was 99.9%
What are Risk-Adjusted Rewards?
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.
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.
Figment navigates various risks to maximize risk-adjusted rewards for Ethereum staking. While some risks such as security and regulatory risks are well-known, others such as engineering risks can be more nuanced. Read more about risk-adjusted rewards here.
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 at ~85%in Q3 , compared to ~15% 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 Q3 for median CL rewards was 0.00207 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 150 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 related to the demand for block space. Priority fees and Maximal Extractable Value (MEV) rewards tend to be higher during periods of elevated demand.
(source)
As the chart above displays, EL fees are volatile and the rewards from MEV can vary substantially from day to day. August 5th, 2024 experienced the highest MEV reward amount since the merge.
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 Q3, when Figment validators were selected to propose blocks, they received a median of 0.036 ETH, slightly lower than the network median of 0.037 ETH. With 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. Note the spike around August 5th showing the previously mentioned MEV volatility.
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. 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 Q3, Figment performed above the network average, with an average Participation Rate of 99.9%, which is slightly higher than the average validator with a Participation Rate of 99.7%.
Slashing
Figment’s performance throughout Q3 2024 remained strong, with no slashing penalties. As the image below displays, there were 10 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 Figment’s mission to support the adoption, growth, and long-term success of the digital asset ecosystem.
When it comes to Staking Ethereum, Figment offers:
- Risk-Adjusted 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.
- Click-to-Stake: 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.
Want to know how Figment can assess your staking performance on Ethereum? Contact us to understand how we provide detailed insights and strategies to help you maximize your rewards.
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