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Opinion
Why APR Is a Misleading Metric for Evaluating Node Operator Performance
We explain why APR is not the best metric for measuring node operator performance and suggest better suited alternatives
October 21, 2024
5 min read

In the context of Ethereum and Proof-of-Stake (PoS) networks, the Annual Percentage Rate (APR) is often presented as a clear and accessible measure of validator performance. As a summary statistic, APR seeks to answer a straightforward question: If I stake 32 ETH today, how much can I expect to have after one year?

However, APR is fundamentally an oversimplification of a highly complex system. Its role as both a measure of past returns and a forecasting tool obscures the intricate dynamics that govern validator rewards on Ethereum.

For example, using APR to predict future returns is like:

- > Using a small sample of stocks from the S&P 500 to estimate the average yearly return —similar to how APR behaves for small validators.

-> Using just 1-2 years of S&P 500 data to forecast long-term returns —similar to relying on short-term APR data like 7-day or 30-day rates.

This article aims to unpack the underlying biases of APR, explore the stochastic nature of validator rewards, and propose alternative metrics that offer a more accurate assessment of node operator performance—metrics which align more closely with operational realities. Finally, we will examine how Chorus One’s approach, incorporating our proprietary MEV-boost fork, Adagio, captures a more refined understanding of Ethereum staking dynamics. By optimizing the interaction with Ethereum’s proposer-builder separation, Adagio allows us to consistently improve validator efficiency, resulting in tangible improvements in performance without relying on the variability of APR metrics.

How is APR Calculated?

Ethereum validators are compensated through two primary reward streams:

  1. Consensus Layer (CL) Rewards: These rewards arise from the validator's core duties—validating transactions and, in some cases, proposing new blocks. The most deterministic of these duties is attestation, which every validator performs at regular intervals (every epoch). However, other rewards such as block proposals and sync committee participation are assigned randomly.
  2. Execution Layer (EL) Rewards: EL rewards derive from transaction fees and, notably, Maximal Extractable Value (MEV), which is only accessible to validators selected to propose a block. (read: Execution Layer Rewards = non-deterministic = random).

While the attestation process is deterministic, rewards from block proposals and MEV are inherently probabilistic. This variability introduces a fundamental challenge: APR assumes a uniform distribution of rewards across validators, which is far from reality. The skewed nature of the reward distribution makes APR a poor proxy for expected returns, especially over shorter time horizons.

The Role of Randomness in Validator Rewards

The central flaw in using APR as a measure of validator performance lies in its failure to account for the randomness that defines much of the reward structure. To illustrate this, consider the following:

  • Proposer Selection: The likelihood of being chosen to propose a block is distributed randomly across the validator set. Block proposals, when they occur, result in substantial rewards, especially when considering MEV opportunities. However, given that the probability of selection is low for any individual validator, APR for smaller operators can be heavily skewed by the randomness of proposal selection.
  • Sync Committee Participation: Sync committees are another source of rewards assigned randomly. Like block proposals, this can cause significant variability in rewards over time, particularly for validators operating on a smaller scale.

As these rewards are driven by skewed distributions, their mean value—a key input for APR—becomes a biased estimator. Skewness is a measure of how asymmetrically data is distributed , see e.g. here. In probability theory, the mean of a skewed distribution is a poor representation of the typical outcome. Validators who are fortunate enough to receive multiple block proposals or sync committee assignments will see a disproportionately higher APR compared to validators who, through no fault of their own, are assigned fewer opportunities.

The Impact of Validator Set Size

To further understand how randomness impacts APR, it is useful to visualize the reward distribution for validators operating at different scales.

The plot above shows how reward skewness changes based on the number of validators controlled. Precisely, higher is the skewness, longer is the upper tail, indicating that the overall distribution is asymmetric on the right. The consequence is that the mean is higher than the median. MEV rewards are the most skewed (bottom-right), meaning they vary the most between validators. Sync committee selection also has a significant impact (top-left), while block proposals have the least skew (bottom-left).

What’s clear is that as the number of validators increases, the skewness in rewards drops significantly. This means larger validator sets see more consistent rewards, while smaller sets face more variability due to randomness. The same holds true even by accounting for only a smaller time period instead of the whole year data.

-> This highlights why APR, when viewed in isolation, is not a reliable measure of performance, particularly for node operators running fewer validators.

This plot shows the distribution of simulated APR assuming different number of validators controlled. It is evident how the APR becomes reliable only when the number of controlled validators is high compared with the number of active validators (purple and cyan histograms). This is because, as we saw earlier, when more validators are controlled, the skewness in rewards decreases, making APR more reliable.

It is worth noting that, the aggregate APR of an entity controlling more validators is not the APR of a single customer, usually holding a lower number of validators. In this case, the APR of the small subset is affected by higher variance as in the case of low number of validators controlled.

However, when rewards are pooled—such as in solutions like Chorus One’s ETH staking vault on Stakewise —this variance is minimized. By pooling rewards across many validators, customers gain exposure to the performance of top-tier node operators while benefiting from a more consistent and stable APR.

Reliable Metrics for Measuring Validator Performance

In light of these insights, what should we look at when evaluating a validator’s true performance? A more reliable framework involves focusing on the operational aspects that are within the control of the validator:

  1. Effectiveness: A validator’s effectiveness in performing assigned duties is a far more accurate reflection of performance than APR. This includes attestation success rates, proposal success rates, and participation in sync committees when selected.
  2. Uptime and Availability: Validators with high uptime are well-positioned to maximize their performance, even if they are not selected for block proposals frequently. Ensuring near-perfect uptime guarantees that a validator will never miss an opportunity when one arises.
  3. Frequency of Fulfilled Duties: Tracking how often a validator fulfills its core responsibilities, particularly in terms of attestation and proposal accuracy, is key. Validators with higher frequencies of fulfilled duties demonstrate operational excellence, independent of the randomness associated with reward assignment.

These metrics provide a far more grounded understanding of validator performance than APR, which often serves more as a reflection of stochastic luck than actual skill or operational consistency.

Understanding Chorus One’s ETH Validator Performance

At Chorus One, we approach Ethereum staking with a deep commitment to performance optimization. While APR figures may fluctuate due to the randomness of block proposals, we have developed sophisticated tools to maximize validator returns and minimize variance.

Central to this approach is Adagio, our internally optimized MEV-boost client. Adagio improves Execution Layer rewards by optimizing the way we interact with block builders. Specifically, we have introduced latency parameters that allow us to extract higher MEV rewards without compromising slot accuracy. This gives our validators a distinct advantage in capturing Execution Layer rewards, effectively smoothing out the variability that undermines traditional APR metrics.

Moreover, our focus on uptime and effectiveness ensures that our validators consistently outperform industry benchmarks. By maintaining near-perfect operational performance and leveraging cutting-edge tools like Adagio, Chorus One is able to deliver superior returns over the long term, irrespective of the randomness that defines APR calculations.

Source: Ethereum Network

Source: Chorus One

Over the past 30 days, Adagio has delivered an 8.45% increase in MEV rewards compared to a standard configuration without Adagio.

For real-time tracking of Adagio's MEV rewards and to explore its performance further, visit our live dashboard: Adagio Dashboard.

Final Word: The Truth About APR

APR, while often used as a shorthand for node operator performance, is a fundamentally flawed metric. Its reliance on skewed distributions and random events, such as block proposals and sync committee participation, makes it a biased estimator for expected returns. Instead of focusing on APR, a more reliable approach to evaluating validator performance involves analyzing metrics like effectiveness, uptime, and frequency of fulfilled duties.

At Chorus One, our focus on operational precision and technical advancement allows us to consistently deliver reliable performance. With solutions like Adagio, we enhance reward optimization, offering staking outcomes that navigate the inherent volatility and randomness of APR-based assessments.

Staking ETH with Chorus One is effortless—just a few clicks, and you’re on your way to earning rewards. No hassle, just seamless staking.

Start staking today: https://opus.chorus.one/pool/stake/

Or, speak to our team to learn more.

Learn more about MEV and Ethereum node operator performance:
MEV:Metrics that Matter

Timing Games and Implications on MEV extraction

Check out all our research reports

About Chorus One

Chorus One is one of the largest institutional staking providers globally, operating infrastructure for over 60 Proof-of-Stake (PoS) networks, including Ethereum, Cosmos, Solana, Avalanche, Near, and others. Since 2018, we have been at the forefront of the PoS industry, offering easy-to-use, enterprise-grade staking solutions, conducting industry-leading research, and investing in innovative protocols through Chorus One Ventures. As an ISO 27001 certified provider, Chorus One also offers slashing and double-signing insurance to its institutional clients. For more information, visit chorus.one or follow us on LinkedIn, X (formerly Twitter), and Telegram.

Networks
Introducing Pectra Series: Ethereum's Next Evolutionary Leap (Part 1)
An introduction to Ethereum's Pectra upgrade, and the decision to split Pectra into two phases
October 16, 2024
5 min read

Ethereum’s continuous drive for innovation has brought us through various transformative upgrades over the years. From the transition to Proof of Stake with The Merge to the improved fee structures of the London hard fork, Ethereum has proven time and again that it can adapt, scale, and evolve. Now, the Ethereum community is on the cusp of something even more significant: the Pectra upgrade—Ethereum’s most ambitious overhaul yet.

The Pectra upgrade, poised to begin its roll out in early 2025, promises to push the boundaries of Ethereum's scalability, security, and efficiency, each focusing on different aspects of Ethereum’s architecture.  These enhancements will ensure Ethereum is equipped to handle the next phase of decentralized applications and economic activity.

This introductory article will give you a comprehensive overview of Pectra, explain the rationale behind splitting the upgrade into two phases, and provide a sneak peek into the key staking oriented Ethereum Improvement Proposals (EIPs) that will shape the network’s future. In subsequent articles, we will dive deeper into each major EIP, exploring their implications for both developers and users.

Why Split Pectra into Two?

The decision to split Pectra into two phases—Pectra A and Pectra B—was driven by the growing complexity of the planned upgrades. To manage this scope without introducing bugs or security risks, Ethereum developers opted for a phased approach, with Pectra A launching in early 2025 and Pectra B following later in the year. This approach allows for a smoother, more controlled rollout, giving developers the time to test and refine each change thoroughly.

Pectra A focuses on critical improvements such as reducing node data storage through Verkle Trees, which will lessen the load on validators, as well as introducing "smart account" features and other staking changes, like MAX-EB.

Pectra B, while not yet finalized, is expected to include PeerDAS, a feature aimed at enhancing Layer 2 scalability, along with changes to the Ethereum Virtual Machine (EVM).

A Glimpse at the Key EIPs in Pectra

Each phase of Pectra comes with its own set of EIPs, aimed at enhancing Ethereum’s performance, security, and developer experience. Some key staking-related EIPs confirmed for the first phase include:

  • EIP-6110: This proposal reduces the delay between staking on the Ethereum execution layer and processing on the Beacon Chain, streamlining staking operations and speeding up consensus.
  • EIP-7002: This EIP enables staking pool protocols to directly initiate withdrawals to create more secure staking models; opening the door for permissionless, automated ETH staking pools.
  • EIP-7251: Known as the "MAX-EB" EIP, this change increases the effective balance for validators, allowing larger stakes and consolidating validators to improve network efficiency.

For the full list of Pectra-related EIPs, visit this link.

What Pectra Means for Ethereum’s Future

The Pectra upgrade is more than just a technical enhancement—it represents the future of Ethereum. By addressing critical issues such as scalability, transaction costs, and decentralization, Pectra prepares the network to handle the demands of tomorrow’s decentralized applications.

In the following articles, we'll explore these EIPs in greater detail. From streamlining staking operations to the benefits of "MAX-EB," we’ll examine how these changes will impact the ecosystem, particularly in the realm of staking, and why they’re crucial to Ethereum's continued growth.

Stay tuned as we unpack each EIP and see how Pectra will redefine Ethereum for the years to come.

About Chorus One

Chorus One is one of the largest institutional staking providers globally, operating infrastructure for over 60 Proof-of-Stake (PoS) networks, including Ethereum, Cosmos, Solana, Avalanche, Near, and others. Since 2018, we have been at the forefront of the PoS industry, offering easy-to-use, enterprise-grade staking solutions, conducting industry-leading research, and investing in innovative protocols through Chorus One Ventures. As an ISO 27001 certified provider, Chorus One also offers slashing and double-signing insurance to its institutional clients. For more information, visit chorus.one or follow us on LinkedIn, X (formerly Twitter), and Telegram.

News
September 2024 Crypto Ecosystem Recap: A Shift Toward Maturity and Growth
A recap of September 2024: Market and Network highlights (Eithereum, Bitcoin, Solana, Restaking & beyond)
October 15, 2024
5 min read

The cryptocurrency ecosystem experienced a remarkable month in September 2024, marked by market resilience, major network developments, and high-profile events, such as Token2049. Key networks like Bitcoin, Ethereum, Solana, and Cosmos made significant strides, and institutional momentum surged. With a blend of market performance, regulatory clarity, and network advancements, the month underscored the growing maturity and interconnectedness of the crypto landscape.

Market Highlights: Bitcoin Shines Amid Institutional Revival

Bitcoin (BTC) defied its typical September slump, recording its best monthly performance in over a decade with a 7.3% gain and closing just above $63K. This historic uptrend pushed Bitcoin’s market cap beyond $1.2 trillion, with daily trading volumes averaging $32.4 billion. This surge in Bitcoin’s value reflects increased institutional demand, aided by global monetary easing and a weaker U.S. dollar, which created favorable market conditions.

Despite geopolitical uncertainties, Bitcoin maintained a solid position above $60K, signaling strong market confidence as investors anticipate a continued rally in “Uptober.”

In contrast, Ethereum (ETH) underperformed relative to Bitcoin, with the ETH/BTC pair hitting a three-and-a-half-year low. Still, the broader market momentum remained intact, driven by regulatory developments:

Ethereum: Layer 2 Growth, Restaking, and Scaling Plans

Ethereum’s ecosystem made strides in scalability and infrastructure development, though it faced challenges in price performance. Notable developments included:

  1. Layer 2 Rollouts: Odyssey Testnet: A developer-centric testnet launched by Ithaca, combining Reth and OP Stack for experimentation without staking.
  2. Restaking via EigenLayer: EigenLayer expanded its validator set and rolled out programmatic incentives v1, driving yield opportunities for ETH stakers and operators. This move underscored the growing importance of restaking as a value layer in Ethereum’s security architecture.
  3. Scaling via Pectra: Ethereum’s Pectra upgrade was split into two phases, with key features scheduled for Q1 2025 and additional enhancements, including PeerDAS, targeted for H2 2025.
Solana: Governance, MEV Optimization, and Validator Opportunities
  1. Validator PartnershipsChorus One partnered with Solayer, a restaking platform promising high yields. Start restaking with Solayer here: https://app.solayer.org/invite/CHORUS

Bitcoin Staking: Babylon and LRT Collaborations

September was an active month for Bitcoin staking initiatives. Babylon Labs raised its second deposit cap, opening the door for increased staking participation. With nearly 23889.62550726 BTC deposited (~$1.5B), Babylon has now claimed the spot as the third largest restaking protocol by TVL, right behind EigenLayer and Symbiotic.  

Cosmos: SDK v2 and Cross-Chain Innovation

The Cosmos ecosystem introduced major upgrades and partnerships:

  1. Cosmos SDK v2
    • The release of SDK v2 split the Cosmos SDK into two components—Server Layer for consensus and State Transition Function for transaction processing—giving developers more flexibility. This modular framework is expected to accelerate innovation across Cosmos chains.
  2. dYdX Expansion
    • With Antonio Juliano returning as CEO, dYdX expanded into perpetual prediction markets, including novel markets such as political outcomes. This strategic move positions dYdX at the forefront of decentralized derivatives innovation.
Ecosystem Momentum: Regulatory Developments and Restaking Expansion

Institutional momentum and regulatory clarity played a crucial role in September’s market performance. Alongside Bitcoin’s success, Ethereum, Solana, and Cosmos made significant progress in staking infrastructure and interoperability. The introduction of EigenLayer incentives and Solayer partnerships highlighted the importance of restaking for both network security and validator rewards.

With the UK clarifying digital asset ownership, Nigeria issuing exchange licenses, and Kazakhstan approving Binance’s operations, the global crypto landscape continues to evolve toward greater regulatory clarity and acceptance.

Looking Ahead: A Strong Foundation for Q4 and Beyond

September 2024 marked a significant shift toward market maturity, with key networks delivering on governance, scaling, and restaking initiatives. As Bitcoin continues to trade above $60K, and Ethereum advances with Layer 2 and restaking solutions, the market is well-positioned for further growth in Q4 2024.

The market’s ability to weather geopolitical uncertainty while embracing new technologies and regulatory frameworks reflects its resilience and readiness for wider institutional adoption. The combination of network upgrades, governance innovations, and cross-chain interoperability suggests a promising future for the decentralized economy.

As we move into Q4, the focus remains on sustaining market momentum, and unlocking the full potential of (re)staking infrastructure—setting the stage for another transformative phase in the blockchain industry.

About Chorus One

Chorus One is one of the largest institutional staking providers globally, operating infrastructure for over 60 Proof-of-Stake (PoS) networks, including Ethereum, Cosmos, Solana, Avalanche, Near, and others. Since 2018, we have been at the forefront of the PoS industry, offering easy-to-use, enterprise-grade staking solutions, conducting industry-leading research, and investing in innovative protocols through Chorus One Ventures. As an ISO 27001 certified provider, Chorus One also offers slashing and double-signing insurance to its institutional clients. For more information, visit chorus.one or follow us on LinkedIn, X (formerly Twitter), and Telegram.

News
Network Offboarding Announcement: Mars, Secret, Gelato, and Evmos
In light of recent developments, we’ve made the decision to offboard a few networks in order to streamline our focus and dedicate more resources to networks that offer stronger long-term growth and user adoption.
October 10, 2024
5 min read

At Chorus One, our primary goal is to provide our users with the best possible experience across a wide variety of networks. In light of current market conditions and lower network activity, we’ve made the decision to offboard a few networks. This change allows us to streamline our focus and dedicate more resources to networks that offer stronger long-term growth and user adoption.

Networks being offboarded:
  • Evmos
  • Mars
  • Secret
  • Gelato
Why we're making this change:

While we have enjoyed working with and supporting these networks, we’ve observed a few trends that have led to this decision:

  1. Market Conditions: The volatility and price movement of these tokens have impacted their sustainability from a node operation perspective. In uncertain market conditions, it’s crucial for us to prioritize networks that show resilience and consistent growth.
  2. Low Network Activity: Despite their early potential, the applications and user adoption on these networks have not reached the levels necessary to justify continued support. In our commitment to delivering the best experience to our users, we believe it’s important to focus on networks with higher engagement and vibrant ecosystems.

What does this mean for you?

If you’re currently staking tokens on any of the networks we are offboarding, please take note of the following important details:

  • Migrate your stake to a different validator:
    We kindly ask that you migrate any tokens you have staked on Mars, Secret, and Gelato by November 10th to a different validator. After this date, staking services on these networks will no longer be supported, and it’s important to ensure your tokens are securely unstaked before then.
  • Evmos:
    With the recent upgrade in the network, the validator set was reduced to just a small number of slots. With Chorus One node already out of the active set, we have already completed the off-boarding process for Evmos. If you have any questions regarding this transition, please feel free to reach out to our support team.

An update on staking fees

In alignment with our focus on networks that demonstrate long-term sustainability and growth, we will be adjusting our staking fees on the following networks:

  • Agoric: 15%
  • Celo: 10%
  • Dymension: 10%
  • Kava: 15%
  • Kyve: 10%
  • Oasis: 8%
  • Persistence: 15%
  • Polygon: 12.5%
  • Regen: 20%
  • Stargaze: 10%
  • XPLA: 15%

These fee changes reflect our ongoing efforts to ensure high-quality service while maintaining sustainable operations across networks with strong potential.

Looking forward:

This decision allows us to allocate more resources and attention to the networks that show the most promise in terms of activity, user growth, and long-term sustainability. As we continue to grow and evolve, we remain committed to offering the best staking services and supporting the most innovative and active networks in the industry.

Need help?

If you have any questions or need assistance with unstaking your tokens, our support team is here to help. Feel free to reach out to us via support@chorus.one.

About Chorus One

Chorus One is one of the largest institutional staking providers globally, operating infrastructure for over 60 Proof-of-Stake (PoS) networks, including Ethereum, Cosmos, Solana, Avalanche, Near, and others. Since 2018, we have been at the forefront of the PoS industry, offering easy-to-use, enterprise-grade staking solutions, conducting industry-leading research, and investing in innovative protocols through Chorus One Ventures. As an ISO 27001 certified provider, Chorus One also offers slashing and double-signing insurance to its institutional clients. For more information, visit chorus.one or follow us on LinkedIn, X (formerly Twitter), and Telegram.

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