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Blockdaemon Blog
ETH Merge: Maximize Your Rewards with MEV
Daemon News
Jul 29, 2022
By:
Dean
Hanson
&
TL;DR The Ethereum Merge is coming soon, but that doesn’t mean you should wait. By staking ETH today you could receive more than double the rewards. Plus, by using MEV you can continue to maximize your rewards post-merge.
Proof-of-Stake (PoS) marks an important evolution in blockchain networks.
This switch away from mining is already democratizing networks and reducing the environmental impact of protocols. Importantly too, PoS is giving token holders a chance to receive rewards. While a number of smaller networks run a PoS consensus mechanism, by far the most significant push is coming from the Ethereum network.
The Merge Will Move Ethereum to PoS
Traditionally a Proof-of-Work (PoW) network, Ethereum is currently running an additional PoS beacon chain (often referred to as Eth2). These two chains are expected to fully transition over to PoS this year, in an event known as The Merge. After the successful testnet merges on Ropsten, Sepolia and Goerli testnet. There is now a clear path for mainnet Merge - this is scheduled for September.
Are You Planning to Stake Post-Merge?
The merge is potentially just around the corner, does this mean you should wait to stake your ETH?Since Ethereum 2.0 is already running, you can stake ETH today to start receiving rewards ASAP.
If you are holding at least 32 ETH, there are benefits for acting early and achieving a first-mover advantage - as is often the case in blockchains and cryptocurrency.
3 Reasons to Stake ETH Before The Merge
1. Start Receiving ETH ASAP: You Can Already Receive 4.2% Rewards
At the moment, your ETH is just sitting idle. But it could already be generating rewards.
For example, if you stake your ETH with us today, you can expect roughly 4.2% rewards once your validator has been activated. The long-term reward forecast is a lot higher (see point 3), but 4.2% is still a great staking reward and is infinitely better than zero.
2. Beat The Rush: You Can Get In Ahead of the Queue
When you first stake ETH, your validator joins an activation queue. Sometimes, it can take a while for your validator to be activated. Only six validators can enter the network per epoch (which is about 6.4 min). So roughly 1350 Eth2 validators can be added to the network per day. Any validators outside this threshold are added to the queue.
At the time of writing the queue is currently at zero, however, at times it has been between 1-4 weeks.
When the merge finally happens, we anticipate that the queue, and subsequent wait, will increase dramatically. Once you’ve made a commitment to stake your ETH, you want to maximize your rewards as quickly as possible.
Ask yourself, do you want to sit in a holding pattern while others are being rewarded?
3. Receive More ETH: You Can Expect Higher Post-Merge Rewards
As of this writing, initial post-merge staking rewards are expected to be as high 8-9%, with an expected long-term reward level of ~6%.The main reason for staking is to generate rewards. If you miss this initial period, you could miss out on maximizing your returns. Especially when you consider the potential activation queue (mentioned above).
MEV Can Increase Post-Merge Rewards
Post-merge rewards are expected to increase by 10-20% with Flashbot’s MEV-Boost.
What is MEV?
Maximal extractable value (MEV) is the maximum value that can be extracted from block production in excess of the standard block reward and gas fees. This is achieved by including, excluding, and changing the order of transactions in a block. The Ethereum Foundation explains some of MEV’s various use cases on its website.
How MEV-Boost Enables MEV on ETH PoS Validators
While MEV is considered nefarious by some, there are ways to use MEV to help the network - some call this “ethical MEV” or “democratized MEV”.
By far the most prominent implementation of ethical MEV was developed by Flashbots. Flashbots is a research and development organization that mitigates MEV’s negative externalities and prevents the existential risks MEV causes to stateful blockchains like Ethereum.
How Blockdaemon is Collaborating with MEV-Boost
Blockdaemon plans to run Flashbot’s MEV-Boost (democratized MEV software) on your ETH PoS validator node.
This helps to alleviate negative consequences for the network.If the block your validator is publishing contains any MEV transaction bundles, the tips (extra rewards) will be sent to your Eth1 withdrawal address. These MEV rewards can increase the overall staking rewards by 10-20%.
Blockdaemon is a Founding Member of Flashbots Eth2 Working group and continues to collaborate on preparing MEV-Boost for Mainnet.We lead the way in node operator readiness and have successfully produced MEV-Boost blocks on testnets Ropsten.
Watch Blockdaemon’s Limaris Torres take part in the MEV.Day validator panel
Staking today versus staking post-merge could receive you more than double the reward, but how do you get started? Once you’ve decided to stake your ETH, you need to find a validator. When delegating your tokens, it’s important to select a provider who gives maximum rewards with minimum risk.
We provide a ‘custom-tailored’ ETH staking program to help our customers stake quickly and safely.
When you stake with us, you are joining a huge pool of existing Eth2 validators. We also provide business & technical risk mitigation:
Best-in-class infrastructure for stable and rapid performance
Sophisticated in-depth monitoring for minimal downtime
100% slashing insurance for Blockdaemon-incurred penalties
Free-of-charge, white-glove services for onboarding new clients
Stake Your ETH With Blockdaemon Today
Don’t wait until it’s too late, now is the time to stake your ETH and maximize your rewards.
Disclaimer: This information, as well as the information and resources available on this website, is intended to be used for educational purposes only. It is not financial advice or a solicitation to buy or sell any assets or to make any financial decisions. Before making any investment decisions, it is important for you to do your own analysis as well as take independent financial advice from a professional taking into consideration your own specific needs and circumstances.
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