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Author: Admin | 2025-04-28
Validator economics in this way, we’re paving the way for more competitive staking opportunities. As a result, we are positioned to offer the best NRR (Network Reward Rate) in the market.Auto-Compounding: Unlocking exceptional NRR and Staking EfficiencyOne of the most significant user-facing changes with Pectra is the introduction of auto-compounding for Consensus Layer rewards. This feature can be enabled by either consolidating two 0x01 validators into one 0x02 validator, updating credentials on an existing validator, or spinning up a new 0x02 one. For our dApp, we are introducing intuitive validator merging flows, allowing users to batch-merge existing validators (since Pectra’s smart contracts currently permit only two at a time). Previously, Consensus layer rewards (which account for ~75% of total staking rewards) were sent directly to withdrawal addresses. With the new 0x02 validators, these rewards are automatically re-delegated into the validator, providing the opportunity to produce extra returns and enhance long-term NRR. The benefits of auto-compounding:For Validators operating at base ETH (CL+EL) NRR of 3.2%, auto-compounding gradually increases staking returns, for example:After 1 year, APR can rise to approximately 3.24%After 5 years, APR approximately increases to 3.42%While these numbers may seem marginal, the cumulative effect is substantial. Over five years, an auto-compounded validator generates approximately 5.47 ETH, compared to 5.12 ETH for a non-compounded validator. With ETH at current market prices, this difference translates to over $1,000 in additional rewards from the network per validator.However, there is a critical threshold—auto-compounding only works if the validator remains below 2048 ETH. Once this limit is reached, all rewards will be distributed to the withdrawal address, effectively stopping the compounding effect.To maintain auto-compounding for as long as possible, P2P.org will cap the maximum validator balance at 1,920 ETH, providing a runway of over two years before reaching the limit. This strategic approach ensures that users can continue to be eligible for returns and stake efficiently without interruptions. By setting this cap, we can maintain a consistent and sustainable growth model, allowing us to provide optimal returns during this timeframe. This ensures that our users not only have a reliable staking experience but also benefit
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