Index Calculation

The ESR is calculated at the network level, which represents the average reward paid out to validators during each observation period. Because validators are randomly selected to perform specific roles, the reward rate on a node level is not necessarily the same as the calculated ESR.

The ESR calculation follows a 365.25-day convention to annualize staking rewards, which averages the difference in leap years, as indicated in the formula.

$$ESR_n = N_d \times N_o \times \frac{\sum_{i=e_1}^{e_n} 8 \times (PA_i + PSY_i) + PSL_i + ER_i - S_i}{\frac{1}{n} \times \sum_{i=e_1}^{e_n} EB_{i-1}}$$

$$\begin{align*} & ESR_n: \text{The average annualized ESR based on an observation period of } n \text{ epochs.} \\ & N_d: \text{The number of days in the year } = 365.25. \\ & N_o: \text{The number of observation periods in a day } = 1. \\ & n: \text{The number of epochs in the observation period, in this case, } 225. \\ & e_1, e_n: \text{The first epoch and the last epoch in the observation period, respectively.} \\ & PA_i: \text{The total Proposer Attestation Inclusion Rewards (incl. Penalties) for all proposers in the epoch.} \\ & PSY_i: \text{The total Proposer Sync Inclusion Rewards (incl. Penalties) for all proposers in the epoch.} \\ & PSL_i: \text{The total Proposer Slashing Inclusion Rewards for all proposers in the epoch.} \\ & ER_i: \text{The total Execution Layer Rewards, either Priority Fees or MEV reward, across all blocks in the epoch.} \\ & S_i: \text{The total ETH lost by validators to attester and proposer slashings.} \\ & EB_{i-1}: \text{The network effective balance at the start of the epoch (or end of the previous epoch).} \end{align*}$$