MEV Smoothing Pools: A No Brainer for the Solo Staker and Small LSDs | Pol Lanski - Dappnode, dOrg

Wed, Oct 2, 2024, 12:00 AM

Solo Stakers can expect 42% more rewards while joining a MEV Smoothing Pool. This makes sense because of 3 key benefits: No Dependence on Luck: While the average validator will propose 3 blocks per year, some will propose more, some less. A Solo Staker does not have any control over this, and can only hope to get lucky and propose as much blocks as possible to maximize their rewards. Smoothing Pools change this by pooling together the block proposals of all its members, so that every member gets a share of the rewards of every block proposed by the pool. As long as someone proposes, you're accumulating rewards. No Missing high fee seasons: With an average of only 3 block proposals per year, how likely is someone to catch a block in a period of high fees? How much does it hurt to see a NFT sale, or a peak in activity and not catch any of the action? In a smoothing pool, block proposals are constant, so no matter what happens in the network, participants get a piece of it. Hitting MEV Lottery Blocks MEV rewards are distributed very unevenly over a power distribution: The vast majority of blocks have very low MEV rewards, while only very few blocks have very high rewards. As a Solo Staker, you have a very low chance of hitting one of these high-reward blocks. The median MEV typically hovers around 0.05 ETH, but certain lottery blocks can reach up to 30, 90, or even 300 ETH. By hitting all of the blocks of proposed members, the chance of getting a lottery block increase dramatically. Solo Stakers also contribute disproportionately to the resilience and decentralization of the network, but without a smoothing pool tend to have lower rewards. Due to MEV shenanigans, we are penalizing the actors that most contribute to the network. If we consider Solo Stakers as Public Goods for their outsized contribution to the network - shouldn't we find ways of increasing their revenue and incentivize this behaviour? Smoothing Pools present a great opportunity to donate Public Goods Funding to the pool and directly bump the APR of every solo staker that's a part of it. The Smoothing Pool Alliance (Smooth + Smoothly) will take care of this. Moreover, a Host of Small-Scale LSDs operated as community hubs via DVT will spawn thanks to protocols that allow communities to spin up their DVT: Stakehouse, Stakewise, Geode Finance... Since they don't have validator critical mass and they are community operated, they must resort to a Smoothing Pool to be competitive. APPLICATIONS FOR ETHDenver 2024: #YearOfTheSpork ARE OPEN APPLY NOW https://ethdenver.com/apply