FAQs for Blockdaemon ETH Staking Customers

There are no actions required by Blockdaemon customers before The Merge.

The following FAQs are for informational purposes only and do not require any extra steps from the customer. Read on to learn more about the expected increases in rewards from transaction fees and MEV rewards.

What changes for me as a Blockdaemon ETH staking customer with The Merge?

Operationally, nothing changes for you. Your validator IDs remain the same and we take care of all necessary client updates to ensure a smooth transition.

Financially, you start to earn rewards once your validator actively starts participating in securing the Ethereum consensus on the Beacon Chain. These rewards have been issued regularly for attesting to blocks proposed by others, and occasionally from publishing a block itself when it is your turn.

Starting with The Merge, there will be additional income streams that previously have gone to the Proof-of-Work miners. Models suggest that both of these together could about double the total revenue of a validator:

  • Transaction Fee Rewards: whenever a block that your validator has built was accepted into the blockchain, you will receive the transaction fees (gas paid in $ETH) by the users that have transactions in this block.
  • MEV Rewards: If you don’t opt out of our recommended participation in MEV, you will also likely get some “tips” in the blocks you are building from people searching and using MEV opportunities.

What is MEV?

Maximal extractable value (MEV) refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block. The Ethereum Foundation explains some MEV use cases and consequences on their website.

As a validator, you probably cannot and don’t want to search for MEV opportunities yourself. But there is a way to benefit from it, while at the same time helping the network – some call this “ethical MEV” or “democratized MEV”. By far the most prominent ethical MEV implementation was developed by Flashbots. Flashbots is a research and development organization working on mitigating the negative externalities of Maximal Extractable Value (MEV) extraction techniques and avoiding the existential risks MEV could cause to stateful blockchains like Ethereum. You can read more about this here

What is Blockdaemon doing to help me to participate in MEV?

If you don’t opt out in writing via email ([email protected]), we will be running a software (most likely MEV-Boost by Flashbots) on your validator node that allows it to participate in democratized MEV as explained above. In that way, you help to alleviate negative consequences for the network and take a fair share (as automatically determined by the market) of profits from the MEV searchers. If the block your validator is publishing contains any MEV transaction in so called bundles, you will receive the “tips” (rewards) the same way as you receive the normal transaction fees – sent to your Eth1 withdrawal address. We expect no increased risks to the stability of the validator in running the MEV-Boost software. Flashbots has been the trusted MEV solution on Ethereum for over two years.

Preparedness in the Face of Uncertain OFAC Authority 

Like many in the Ethereum community, Blockdaemon is currently investigating the implications of the inclusion of specific wallets on the Office of Foreign Asset Control sanctions list.

We expect to solidify our stance in the coming weeks as further analysis is completed and industry consensus is reached; but know that we are preparing our validator configurations to be able to accommodate every contingency.  For questions or concerns about OFAC compliance please reach out to your Technical Account Manager.  

When will I receive my different types of rewards as a validator?

The transaction fees (and any potential MEV rewards) are transferred automatically and immediately to your Eth1 withdrawal address that you specified when setting up your validator with us. We can never touch any of your funds. Each individual validator node is currently expected to create a block every ~60 days on average. If you use the same withdrawal address for multiple validators, you will see these rewards being transferred to the address more often, respectively.

Your protocol rewards (for block creation itself, attestations etc., emitted from the protocol) will continue to accrue on your validator until withdrawals are enabled via the respective EIP (Ethereum Improvement Proposal) several months after The Merge.

The current specification stipulates that any excess amount > 32 Eth (= your accrued rewards so far) will be automatically pushed out to your Eth1 withdrawal address about 1-2x per month. Depending on when your validator has started operating, you can expect a larger amount of accumulated rewards the first time, followed by somewhat regular but much smaller payments.

When can I withdraw my 32 Eth stake per validator?

The 32 Eth per validator staking collateral will NOT be withdrawable with The Merge. It will only be enabled in a hard fork afterwards, which is expected to be ~6 months after The Merge.

What is the Blockdaemon commission rate for the different revenue streams?

The Blockdaemon commission rate was agreed with you on your order form. This percentage is applied to all revenue generated from your validator, such as the protocol rewards, transactions fees and potentially also MEV rewards.

When will Blockdaemon invoice me for the commission on my rewards?

Blockdaemon will start invoicing the commission on your rewards approximately one month after The Merge. Depending on the exact day, which is not yet known, it might be a little less or more time as we will settle into a monthly invoicing rhythm. Your invoice will be in $ETH and you will have 30 days to transfer the money to the address specified on the invoice.

When will The Merge actually happen?

The Merge is fast approaching. The last test network Goerli occurred on August 10th. Currently, The Merge is planned to happen between September 10 and 20th. This Mainnet Merge is the relevant date for everything described here.

Will there be any PoW-forks from miners after The Merge?

There may well be attempts to make the transition contentious and keep other PoW-fork(s) alive after The Merge, even though Ethereum Classic already exists as a PoW alternative.

If any forks occur (e.g. from Eth-PoW), the forked token would be based on the balances from the existing Ethereum addresses to which a customer would need to control the private key. But even then, these assets would need to be named and supported by exchanges, custodians, etc to become liquid for its holders. Blockdaemon is non-custodial, thus does not hold any Eth for customers and will not be involved in this.

Who can I contact if I have any questions?

Speak to your Technical Account Manager (TAM) (formerly known as Relationship Managers) for more details or any other question.