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Validator Payout Pool

What is the PBS Payout Pool?

The PBS Payout Pool contract is an innovative contract mechanism designed to manage and administer payouts related to proposer-builder coordination in Ethereum block building.

Proposers must verify their 32 ETH validator effective balance and active status on-chain, confirming their commitment to allocating blockspace for PoN PBS parties. This commitment to give blockspace to PoN PBS parties ensures a steady payout from the pool, regardless of block production.

Builders must affirm their intent to process all block payouts to the designated PBS Payout Pool contract address. Non-compliance or deviation from these core commitments may result in penalties, which are enforced by a protocol actor called the reporter, who is then compensated from the payout pool for upholding rule adherence within the system.

The system operates in defined cycles to manage activations, payouts, and reports. Each participant must meet a certain threshold in their attributes (such as the effective balance of the proposer, minimum stake balance of the builder, etc.) for payment processing. The system also manages proposer debt, penalty payouts, and removal of non-performing proposers for commitment breaches.

The PBS Payout Pool’s unique design allows adaptability, functioning as a smart-contract-based payout management system. It regulates inbound and outbound payments in accordance with the status of registered members (proposer, reporter, builder), operating as a hybrid registry system that manages state changes of its users autonomously.

Payout Process?

MEV payouts in the PBS Payout Pool contract are processed in a cyclical fashion at a global level, aligning with the activation of individual PBS proposers. This process repeats every 1575 blocks, roughly equating to one week.

Payouts to proposers are calculated on a pro-rata basis across all active proposers at the end of each cycle, regardless of block production within that cycle.

The payout pool uses an adaptive accounting model, dynamically adjusting based on accumulated payouts for a cycle and the related active debt of its proposers. It also reconciles pending payouts for active and exited reporters, top-ups from the staked balance of builders, and deductions for relays.

Penalty processing occurs on a shorter cycle of 100 blocks. Immediate deductions are made from the penalized proposer’s account. If the balance is insufficient, a debt position is created for the reporter and remaining proposers in the pool, to be offset by the penalized proposer's future earnings from the pool.

Further in-depth information and details regarding the PBS functionalities can be found in the Runtime Verification Formal Audit.

See more details about rules and governance in the Payout Section.

How is it adaptive?

It is adaptive due to its unique structure of redistributing penalties. Validators who act maliciously or violate rules will be slashed and penalties, with a portion of these penalties being channeled back into the system. These redistributed funds are then allocated half to the reporter and half to the honest validators, effectively boosting their earnings. This self-adjusting mechanism ensures a fair system that rewards good behavior while deterring dishonest activity.