Strategies for Ethereum Validators: Navigating Rewards, Risks, and Attestation Efficiency

March 28, 2024

In the intricate world of Ethereum attestation, Ethereum validators play a crucial role in maintaining the network’s security and integrity by confirming the accuracy of the blockchain’s current state. With validators attesting hundreds of times a day and a substantial portion of their rewards tied to these activities, the importance of optimizing attestation processes cannot be overstated. 

A common misunderstanding persists regarding the efficacy of attestation improvement and its impact on rewards and Ethereum. This article aims to shed light on the tangible benefits of enhancing Consensus Layer (CL) metrics, explore the consequences of missed attestations, and discuss the potential risks associated with over-engineering solutions. 

Attestation On Ethereum: What Really Matters

Attestation in Ethereum is the process through which validators confirm the accuracy of the blockchain’s current state by voting and reaching a consensus, thereby ensuring the security and integrity of the chain.

A validator attests 225 times a day, the rewards from which constitutes 85% and 70% of the total Consensus Layer (CL) rewards and the total rewards, respectively. Considering their significant impact on rewards, it is crucial to understand the tangible benefits of improving CL metrics, the consequences of missing attestations, and the risks posed by over-engineered solutions. Learn more about staking rewards

Figure 1: Breakdown of CL and EL staking rewards over time (source: Figment Staking app)

Understanding Ethereum Attestation Rewards and Penalties

Attestation rewards come from different types of duties for which validators are responsible. Performing attestation duties correctly and in a timely manner results in rewards for the validator. Failing to perform certain attestation duties correctly or in a timely manner leads to penalties or missed rewards. 

Figment validators are closely monitored thanks to our in-house capabilities to monitor attestations in real time for each validator client and utilize automatic alerts to notify us of unexpected events. This ensures that Figment customers are unlikely to face significant penalties for failing to attest.

Optimizing Your ETH Validators: Benefits & Risks 

To enhance validator performance, there are two primary strategies:

  • A marginal improvement in correctness and timeliness of attestation duties.
  • Failover solutions to maintain operations and rewards during brief downtimes.

Given Figment’s already high performance, perfecting attestation accuracy and timeliness could marginally increase annual rewards by about 1 basis point, or around $20 per validator per year. (ETH is valued at $3,500 at the time of writing and is subject to change.) Yet, these minor improvements come with significant risks. 

  1. Efforts to maximize performance through forking existing software can compromise agility in addressing security vulnerabilities. Forking refers to copying an existing open source software project and then modifying it in a different direction away from the original source. This is generally a bad practice for staking providers because the copied version will not benefit from the updates for new features and resolution of existing bugs.  Forking and modifying open source software like client software complicates diagnosing and fixing bugs and impedes DevOps teams’ ability to update to more recent versions. 
  2. This strategy may lead to creation of a single point of failure as a result of forking a battle-tested open-source software and turning it to a proprietary closed source thinly tested software. 

For each Ethereum validator, making an attestation earns approximately $0.03, indicating that the financial impact of a validator going offline for a brief period is minimal. As mentioned earlier, since a validator attests 225 times a day, penalties would amount to approximately $6.5 per validator per day for being offline and failing to attest.

While establishing quick failover solutions for continuous operation during short outages presents slight benefits, it significantly increases risks due to the potential for severe penalties and slashing for double-signing. Such penalties can be substantial, with a single incident potentially resulting in a loss of around 1 ETH during a forced exit from the validator set. Furthermore, if the incident is part of a larger pattern involving multiple validators—known as correlated slashing events—the penalties could escalate dramatically.

Figment’s Ethereum Attestation Principles

At Figment, we strive for excellence, not just by optimizing operations and introducing innovative solutions, but also through our thoughtful and strategic guiding principles. 

While the pursuit of perfect attestation performance might seem like an admirable goal, it’s essential to weigh the marginal benefits against the potential risks carefully. We prioritize the safety of our customers’ assets above all else, adhering to a philosophy of balance between optimal performance and minimal risk exposure.

Our approach in attestation is rooted in strategic solutions and thought leadership, avoiding the pitfalls of over-engineered solutions that could compromise the security and agility of our operations. As we continue to navigate the complexities of blockchain validation, our commitment to maintaining this delicate balance ensures that our customers’ investments remain secure, underscoring our role as a trusted partner in the blockchain ecosystem.

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. 



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