The non-custodial ETH staking service provided by imToken creates independent validator nodes for users, which participate in creating blocks and maintaining the Ethereum network. The validators receive rewards for their role in maintaining the security and integrity of the network.
Based on the rewards’ source and distribution form, validators’ income can be divided into two categories: 1) staking rewards; 2) block rewards.
What Are Staking Rewards?
Staking rewards are income validators earn at the Ethereum consensus layer. Validators are mainly responsible for building and confirming new blocks at the consensus layer. By correctly performing these tasks, validators receive staking rewards generated by each block.
The overall staking rate of Ethereum determines the amount of staking rewards distributed to validators.The higher the total amount of ETH staked in the network, the lower the annualized return rate of validators, and vice versa. Check the network-wide ETH staking data in this article.
If a validator goes offline due to network issues, it will miss out on staking rewards generated by new Ethereum blocks during that period. Therefore, maintaining a good online rate for validators is essential for stable staking rewards, and imToken provides professional operation and maintenance services to ensure a near 100% online rate for validators.
The Ethereum network defaults to sending staking rewards to the consensus layer and periodically extracting accumulated staking rewards to the withdrawal address set by the validator. The network automatically executes this process without the need for user or node service provider operations.
In addition, if a validator goes offline for an extended period or deviates from consensus when validating blocks, their stake is slashed and they won’t generate rewards during that period.ImToken supports non-custodial staking services operated by professional node operators to ensure stable validator operations.
What Are Block Rewards?
Block rewards are additional rewards validators receive when selected to propose the next block, which is usually a very low probability event. In addition to receiving staking rewards, validators receive a portion of the transaction fees users pay when transacting on the Ethereum blockchain.
Furthermore, when a validator connects to an additional block auction market (i.e., via tools like MEV-Boost), they are likely to earn additional auction revenue when creating blocks.
Overall, block rewards are more like a lucky draw. Once a validator is permitted to propose a block, they are likely to increase their revenue through the block auction market. However, the probability is low, and typically a validator needs to run for several months before having the opportunity to construct a block.
The Ethereum network defaults to sending block rewards to the execution layer, and the validator independently configures the address to receive the rewards.
Due to the low probability of a single validator obtaining a block reward, imToken optimizes the block reward distribution mechanism by aggregating all block rewards into a profit pool. The rewards are then distributed evenly among imToken's non-custodial staking service validators, ensuring they receive block rewards daily from the profit pool. The larger the scale of validators created through imToken, the higher the daily block reward revenue they will receive.
Staking rewards and block rewards are the two primary sources of income for validators. Maintaining stable operation of validators can earn staking rewards while obtaining block rewards requires some luck.
Increasing the validator's block reward income can be achieved by connecting to additional block auction markets and improving the block reward distribution mechanism. In September 2022, imToken connected to the MEV-Boost block auction market and will also introduce a shared block reward profit pool distribution model to help validators obtain stable block rewards in the future.