Here's How Much Ethereum Validators Will Earn Post-Merge

Sat, 09/10/2022 - 15:22
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Pseudonymous Ethereum (ETH) analyst who goes by Pintail on Twitter and GitHub authored detailed models of the economic effects of EIP-1559 implementation, Altair and Medalla upgrades and various Uniswap (UNI) yield farming strategies. Now he calculated the upcoming rewards of Ethereum (ETH) proof-of-stake (PoS) validators.

Ethereum (ETH) validators might earn 5.3%-7.3% in APR: Model

According to a longread shared by Pintail, the vast majority of rewards shared between Ethereum (ETH) network participants actually come from so-called "MEV" (Maximal or Miner Extractable Value).

This overhyped variable will not change much with the implementation of the Merge upgrade on Ethereum (ETH) mainnet, despite the fact that the block interval on Ethereum (ETH) changes from 13.5 seconds (on average) to 12 seconds (fixed).

Pintail tracked the MEV dynamics for the last six months. Based on these calculations, the median return for validators on post-Merge Ethereum (ETH) will be about 6.1%.

However, the actual statistics of validator rewards might vary, Pintail added:

Modelling based on the same level of MEV being paid to validators post-merge indicates a median return for validators of 6.1% APR (including both MEV and consensus layer rewards), with a lower quartile of 5.3% and an upper quartile of 7.3%.

Here's how Ethereum (ETH) validators can make their returns more predictable

This indicator includes both consensus layer rewards and so-called MEV. However, some users will see their rewards less variable than those of their competitors.

Pintail foresees that such predictability can be achieved by running multiple validators or "pooling" with peers on the network. For instance, this can be achieved through staking Ethers with liquid staking providers.

Here's How to Take Advantage of Ethereum Merge: CoinGecko Co-Founder

As covered by U.Today previously, Ethereum (ETH) will activate the Merge upgrade on Sept. 15, 2022. The ecosystem of miners will be replaced by stakers on Ethereum (ETH) as it migrates towards a proof-of-stake (PoS) consensus.