Ethereum 2.0 Inflation/Rewards/Slashing

Did a code reading about Ethereum2.0, here’s part of inflation, rewarding and slashing.

Ethereum 2.0 - Inflation/Rewards/Slashing

PREPARED BY Stefan Liu

Inflation

https://ycharts.com/indicators/ethereum_supply https://ethereum.org/en/upgrades/merge/issuance/



ETH issuance

​ Mining rewards ~13,000 ETH/day pre-merge

​ Staking rewards ~1,600 ETH/day pre-merge

​ After The Merge, only the ~1,600 ETH per day will remain, dropping total new ETH issuance by ~90%

​ The burn: At an average gas price of at least 16 gwei, at least 1,600 ETH is burned every day, which effectively brings net ETH inflation to zero or less post-merge.

Pre-merge issuance breakdown

Total ETH supply: ~119,300,000 ETH (as of Q2 2022)

Execution layer issuance:

​ Estimating at 2.08 ETH per 13.3 seconds*: ~4,930,000 ETH issued in a year

​ Currently inflating at ~4.13% (4.93M per year / 119.3M total)

​ *This includes the 2 ETH per canonical block, plus an average of 0.08 ETH over time from ommer blocks. Also uses 13.3 seconds, the baseline block time target without any influence from a difficulty bomb. (See source) Consensus layer issuance:

​ Using 13,000,000 total ETH staked, the rate of ETH issuance is ~1600 ETH/day (See source)

​ Results in ~584,000 ETH issued in a year

​ Currently inflating at ~0.49% (584K per year / 119.3M total)

Total annual issuance rate: ~4.62% (4.13% + 0.49%)

~89.4% of the issuance is going to miners on the execution layer (4.13 / 4.62 * 100)

~10.6% is being issued to stakers on the consensus layer (0.49 / 4.62 * 100)

Post-merge inflation breakdown

​ Total ETH supply: ~119,300,000 ETH (as of Q2 2022)

​ Execution layer issuance: 0

​ Consensus layer issuance: Same as above, ~0.49% annual issuance rate (with 13 million ETH staked)

​ Total annual issuance rate: ~0.49%

Total annual issuance rate: ~0.49%

Net reduction in annual ETH issuance: ~89.4% (0.49% / 4.62% * 100)

Rewards

Attestation Rewards

Conditions:

• PackedSlot > AttSlot +  minAttestationInclusionDelay(1)
• PackedSlot < AttSlot + SlotsPerEpoch(32)
• ValidSignature

Rewards:

baseReward = AttesterEffectiveBalance * BaseRewardFactor(64)/ sqrt(totalBalance)

numerator = baseRewards * (timelySourceWeight(14) + timelyTargetWeight(26) + timelyHeadWeight(14))

denominator = (weightDenominator(64) - proposerWeight(8)) * weightDenominator(64) / properserWeight(8)

• IncreaseBalance: proposerRewards = numerator / denominator(448) = AttesterEffectiveBalance * 7.714285714285714 / sqrt(totalBalance) ~2111gwei (* 420000/32 = 0.02818eth)

https://github.com/prysmaticlabs/prysm/blob/d077483577bc8fdc658940adf71d8d11dfa5949b/beacon-chain/core/altair/attestation.go#L48

Slashing

Proposer Slashing


Conditions

• Same proposer

• Same slot

• Diff header

• Valid signature

  https://github.com/prysmaticlabs/prysm/blob/84916672c6ad0856db7b22861a7c4903326b0121/beacon-chain/core/blocks/proposer_slashing.go#L97

  Slash

• ExitEpoch = slotEpoch + 1 + maxSeedLookahead(4)

• WithdrawableEpoch = max( .  exitEpoch + minValidatorWithdrawabilityDelay(256), . slotEpoch + epochsPerSlashingVector(8192) )

  https://github.com/prysmaticlabs/prysm/blob/5d4078305acf9b0779a2416e60885ee4d3ccc2ff/beacon-chain/core/validators/validator.go#L44

• DecreaseBalance on slashed proposer:  effectiveBalance/penaltyQuotient(32) ~ 1 eth

• IncreaseBalance
  proposerReward  = effectiveBalance/whistleBlowerRewardQuotient(512) / properoserRewardQuotient(8) ~0.0078125 eth

• IncreaseBalance  whistleBlowerReward = effectiveBalance/whistleBlowerRewardQuotient(512) - proposerReward ~ 0.0546875

• MarkAsSlashed

• InitExit

• SlashBeforeWithdraw:  WithdrawableEpoch - 4096

• DecreaseBalance = effectiveBalance * min(activeBalance, totalSlashedBalance * 3)/activeBalance ~ 32 ETH

Attester Slashing

Conditions:

• Double votes or Surround votes

• ValidSignature

  https://github.com/prysmaticlabs/prysm/blob/84916672c6ad0856db7b22861a7c4903326b0121/beacon-chain/core/blocks/attester_slashing.go#L145

  Slash:

• ExitEpoch = slotEpoch + 1 + maxSeedLookahead(4)

• WithdrawableEpoch = max( exitEpoch + minValidatorWithdrawabilityDelay(256), slotEpoch + epochsPerSlashingVector(9182) )

  https://github.com/prysmaticlabs/prysm/blob/5d4078305acf9b0779a2416e60885ee4d3ccc2ff/beacon-chain/core/validators/validator.go#L44

• DecreaseBalance on slashed proposer:  effectiveBalance/penaltyQuotient(32) ~ 1 eth

• IncreaseBalance
  proposerReward  = effectiveBalance/whistleBlowerRewardQuotient(512) / properoserRewardQuotient(8) ~ 0.0078125 eth

• IncreaseBalance  whistleBlowerReward = effectiveBalance/whistleBlowerRewardQuotient(512) - proposerReward ~ 0.0546875 eth

• MarkAsSlashed

• InitExit

• SlashBeforeWithdraw:  WithdrawableEpoch - 4096 DecreaseBalance = effectiveBalance * min(activeBalance, totalSlashedBalance * 3)/activeBalance ~ 32 ETH

Sync Slashing

Conditions:

• Vote on last slot
• Same last block root or not

• Valid Signature

  https://github.com/prysmaticlabs/prysm/blob/d077483577bc8fdc658940adf71d8d11dfa5949b/beacon-chain/core/altair/block.go#L129

  Slash:

• (didnt vote, or vote on diff root)

baseRewardIncrement = effectiveBalanceIncrement(1gwei) * baseRewardFactor(64) / sqrt(activeBalance)

totalBaseRewards = baseRewardIncrement * activeBalance/effectiveBalanceIncrement(1gwei)  = activeBalance * baseRewardFactor(64) / sqrt(activeBalance)

participantReward = totalBaseRewards * syncRewardsWeight(2) / weightDenominator(64) /  slotsPerEpoch(32) / syncCommitteeSize(512) = 0.0001220703125 * activeBalance / sqrt(activeBalance) ~ 14270 gwei (*32 * 225  = 0.1027eth)

proposerRewards = participantReward * proposerWeight(8) / (weightDenominator(64) - proposerWeight(8)) = 0.00001743861607142857 * activeBalance / sqrt(activeBalance) ~ 2038 gwei    ( * 512 = 0.00104eth)

IncreaseBalance: participantRewards IncreaseBalance: proposerRewards DecreaseBalance: participantRewards

Inactivity Slashing on Epoch End

inactivityScore

• isPrevEpochTargetAttester: inactivityScore - 1

• !isPreveEpochTargetAttester: inactivityScore + 4

• !isInInactivityLeak: inactivity - 16

  https://github.com/prysmaticlabs/prysm/blob/d077483577bc8fdc658940adf71d8d11dfa5949b/beacon-chain/core/altair/epoch_precompute.go#L74

Slash:

baseRewardMultiplier = effectiveBalanceIncrement(1gwei) * baseRewardFactor(64)/sqrt(activeBalance)

baseReward = effectiveBalance * baseRewardMultiplier / effectiveIncrement(1gwei) = effectiveBalance * baseRewardFactor(64)/sqrt(activeBalance)

activeIncrement = activeBalance / effectiveIncrement(1gwei) inactivityDenominator = inactivityScoreBias(4) * inactivityPenaltyQuotient(2**24)

​ https://github.com/prysmaticlabs/prysm/blob/d077483577bc8fdc658940adf71d8d11dfa5949b/beacon-chain/core/altair/epoch_precompute.go#L287


quota = srcWeight(14) * prevEpochAttested + targetWeight(26) * prevEpochTargetAttested + headWeight(14) * prevEpochHeadAttested

validatorReward = baseReward * quota / effectiveIncrement(1gwei) / (activeIncrement * weightDenominator(64)) ~ 14781 (* 225 = 0.00332eth)

validatorPenalty = baseReward / weightDenominator(64) * (srcWeight + targetWeight) + effectiveBalance * inactivityScore / inactiveDenominator ~ 10949 Gwei ( * 225 = 0.00246eth )

Summary 2022 9.14

Issued ETH

120,000,000 ETH

ActiveBalance

13,607,322 ETH

Validators

427057

ETH burnt

1423ETH/Day   ~ -0.43% inflation

Produced ETH Beacon Chain

1915ETH/256Epochs ~0.5% inflation

Proposer Reward per Block

0.029 ETH

Validator Reward per Day

0.00332 ETH

Sync Committee Reward per 256 Epochs

0.1168ETH

Sync Committee / 256 epochs

​ 14270 * 32 * 256 * 512 = 59.85

Proposer / 256 epochs

​ 2111 * 427057/32  * 32 * 256 +  2038 * 512 * 32 * 256= 239.33

Attestation / 256 epochs

​ 14781 * 256 * 427057 = 1615.9