Smoothing Pools on Ethereum chain
What is a Smoothing Pool?
A smoothing pool is a mechanism designed to reduce the variability of execution layer rewards for Ethereum validators. In traditional solo staking, the rewards a validator earns depend heavily on factors such as block proposals and the inclusion of MEV (Maximal Extractable Value). This variability can lead to inconsistent rewards over time.
By joining a smoothing pool, validators pool their rewards, enabling more consistent payouts over time. The collective approach reduces the reliance on luck and offers a more predictable staking experience.
Why Use a Smoothing Pool?
Smoothing pools are especially advantageous for solo stakers who want to optimize their rewards without joining large centralized pools. Analysis has shown that over a 5-year period, validators in a smoothing pool earn 41.6% more than those staking solo.
Additionally, the likelihood of a validator in a smoothing pool outperforming solo staking is as high as 78%, making it an effective strategy for improving long-term rewards.
For a detailed exploration of the benefits, see the comprehensive Analysis of the Smoothing Pool by Ken Smith. Alternatively, watch his explanation on YouTube.
Key Benefits of Joining a Smoothing Pool
- Increased Rewards: Over time, pooling rewards ensures higher overall returns compared to staking solo.
- Reduced Variability: Share rewards with other validators to achieve a more consistent payout structure.
- Decentralization: Smoothing pools empower solo stakers, offering an alternative to large, centralized pools.
You can find other resources about staking pools on the Rocketpool website.