Rewards and Slashing
The providers and validators that opt-in to the mev-commit protocol are incentivized to act honestly and follow the protocol. This honest behavior is enforced by a reward and slashing mechanism. Both the providers and the validators are required to stake a certain amount of tokens to participate in the mev-commit protocol. The mechanism is designed to reward providers for fulfilling their commitments and to penalize them for breaking them. It also disincentivizes providers from issuing commitments that they cannot fulfill. Additionally, validators can be penalized if they fail to propose a block from mev-commit registered block builders on the L1 chain.
Validators have three methods to opt-in to mev-commit, as described in the validators section. The staked (or restaked) tokens are used to secure the mev-commit protocol and to incentivize validators to include blocks built by mev-commit providers in the L1 chain. Crucially, if the validator acts maliciously on the mev-commit protocol they can be slashed and lose a portion of their staked (or restaked) tokens. Next, we discuss the rewards and slashing mechanisms for providers and validators in more detail.
Providers
There are four possible outcomes after a commitment is made by a provider and an Ethereum block is proposed:
- The bid amount is rewarded to the provider for fulfilling the commitment.
- The provider stake is slashed for breaking the commitment.
- The provider is slashed if the commitment is not opened by either the provider or the bidder.
- Nothing happens as the provider was not the winning execution provider for the Ethereum block.
We discuss each case in more detail below.
Rewards
Upon successfully fulfilling a commitment, a provider will be rewarded the bid amount, minus a 2% fee (this fee accumulates in the mev-commit protocol treasury). This reward is paid by the mev-commit oracle to the provider’s account after the corresponding slot is settled by the oracle according to the block included in L1.
Slashing
In this section we discuss the provider’s slashing cases.
Broken Commitment
Upon breaking a commitment, a provider will be slashed from their stake equal to the bid amount they committed to (taking into account the bid decay), including a 5% penalty fee. The principal slash amount will be transferred to the bidder for the broken commitment, and the penalty fee will be transferred to the mev-commit protocol treasury. If the provider does not have enough stake left to cover the entirety of the slashing penalty and the bid amount, the maximal amount of the bid amount that can be slashed will be slashed and given to the bidder. Any remaining funds in the provider’s stake will go towards maximally paying the 5% slashing penalty to the treasury. The precedence means the bid amount slashing that goes to the bidder will be prioritized first, and only after that will the treasury be compensated for as much of the 5% slashing penalty as possible.
Unopened Commitment
If a commitment is not opened by either the provider or the bidder within 24 hours from the time of inclusion of the commitment in the mev-commit chain then the provider is penalized by the fixed amount of 1 ETH. The penalized amount from the provider goes to the mev-commit treasury, not to the bidder. This is because the bidder is not known in this case and to discourage the bidder from omitting the opening of the commitment based on the bid amount.
Neutral Outcome
The protocol will not take action in the event of a commitment being made and the provider not being the execution provider for the winning block. However, the network will be monitored to see how these neutral outcomes affect the mev-commit protocol, and a reputation scoring system can be employed in the future to quantify the credibility of a provider’s commitment. Providers with a higher reputation score can then have lower staking requirements, and vice versa.
Validators/Proposers
A validator that opts into mev-commit makes an implicit commitment to include a block from a mev-commit registered block builder in L1 whenever they become the proposer of the slot.
Rewards
Upon successfully including a block built by mev-commit providers in L1, the proposer is paid by the provider/builder through the mev-boost auction.
Slashing
In this section we discuss the proposer’s slashing cases.
Missed Block
A proposer can completely miss its slot and not include any block in L1. This can happen either due to network issues by the proposer, due to the relay not delivering the block’s contents on time, or due to chain reorgs. In any case, mev-commit does not slash the proposer for missing a block as the proposer does not profit from omitting a block and it is potentially out of their control.
Included Block Not Built by mev-commit Provider
A proposer can include a block in L1 that was not produced by a mev-commit provider. This can happen for the following reasons:
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The proposer includes a block from a builder that is not participating in the mev-commit protocol. This can be due to a malicious behavior by the proposer or due to the proposer using a relay that is not compatible with mev-commit (and thus delivering blocks not built by mev-commit providers).
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The proposer includes a block that was built by itself.
Case (1) is considered non-compliant behavior and thus the proposer will be slashed from their stake the fixed amount of 1 ETH.
Case (2) should only happen very rarely when the value of the block it receives from the relay is too low, and mev-commit will not slash proposers in this case. However, due to the lack of a robust mechanism for builder attribution of a block in Ethereum’s PBS, we will monitor how often proposers choose to build their own blocks, and if needed we will revisit this decision to discourage misbehavior by the proposers.
Currently, the restaking case with Eigenlayer only allows the stake to be frozen for an undetermined period of time and not slashed permanently (i.e., burned). While the stake is frozen, the proposer is not able to participate in mev-commit. The proposer can pay a fee to unfreeze its stake. This is a limitation of the current Eigenlayer implementation, and it is expected to be resolved.
Builder and Proposer Attribution
The current methodology for identifying the provider responsible for building the L1 block relies on the extra_data field within the block’s execution payload for block builders. The builder must post its EOA address registered with the mev-commit provider registry, in the extra_data field. This correlates an L1 block built by a mev-commit provider to its corresponding EOA registered with the mev-commit protocol.
We plan to upgrade this with a cryptographically secure method of attribution and are actively championing the availability of robust builder identity in Ethereum. For proposers the attribution method is simpler as proposers are recognized within the Ethereum protocol.