Details of Ethereum Staking
Last updated
Last updated
Validator nodes perform two main functions
When the validator node is selected to propose a block, the node selects some of the unconfirmed transactions from the network, adds them to a block, and proposes it to the network.
When the validator node is not proposing a block, the node observes the proposed block created by the selected validator, reviews it, and attests to its validity by signing an attestation message
In Ethereum, the staking rewards from these 2 activities
For proposing a block, the validator is rewarded by the transaction fees paid by the transactions included in the block, i.e., priority fees. The proposer also earns a reward for including the attestations for the previous block.
For attestations to valid blocks created by other validators, the validator earns an attestation reward from the network's token inflation, i.e., newly minted ETH. Missing attestations, e.g., because of downtime, are penalized by subtracting ETH from the validator's ETH balance.
In the section, we discussed the main jobs of the validator nodes on the Ethereum Network: Proposing and Attestations.
In this section, we go a step deeper to explain the process of proposing blocks and the concept of Proposer-Builder Separation (PBS)
The validator nodes on Ethereum are responsible for building and proposing blocks on the Ethereum network. The building part means selecting the transactions that eventually become part of the block. The proposing part means signing the resulting block hash and propagating this block to the network. With the increased complexity of Ethereum's applications and the rise of MEV (Maximal Extractable Value), selecting which transactions to include in a block became a complex and critical process. Transaction selection significantly affects the fees earned by the validator and, hence, the expected staking yield.
With the increased complexity, specialized entities, i.e., Block Builders, were needed to focus on the task of transaction selection. Block builders integrate the public mempool, private order flows, and MEV marketplaces to select the highest-fee transactions and transaction bundles. Block builders then share the suggested block with the validators to propose to the network.