Rewards and Slashing

Staking rewards come from protocol inflation and transaction tips. Slashing removes stake for provable misbehavior — rare for honest participants but catastrophic when it occurs.

Consensus layer inflation mints new ETH to validators. Execution layer tips from MEV and priority fees post-Merge add variable upside. Some chains also share explicit transaction fee revenue with stakers.

Nominal 4% APR with 2% ETH inflation means roughly 2% real yield in ETH terms. Tax treatment varies — rewards are often taxable as income when received in many jurisdictions.