How does E2 Staking contribute to yield?

E2 staking, as discussed by experts on the Bankless, contributes to yield through several mechanisms:

1. Validation Yield:

   • Sreeram Kannan explains that validation yield is generated from holding and locking down ETH in a contract while providing validation services. This is akin to a service provider fee, combining the staking of ETH with a service that ensures the protocol’s integrity. This unique form of yield is created due to the information asymmetry between the staker, who knows they are honest, and the network, which imposes a penalty on dishonesty, thus maintaining trust and generating yield 1.

2. MEV (Miner/Maximal Extractable Value):

   • The potential of MEV for increasing yields significantly is highlighted by Ejaaz Ahamadeen. Post Ethereum's proof of stake merger, validators could use MEV to increase their earnings substantially, potentially boosting staking yields by 60% to 300%. This opportunity arises from validators being able to reorder transactions in a block to maximize revenue, which could then be passed back to stakers, making staking more lucrative 2.

3. Transaction Fees and Tips:

   • Post merge, validators receive transaction tips which previously were earned by miners under the proof of work system. These tips, constituting roughly 10% of total transaction fees, are added to the staking yield, increasing overall returns from around 4.5% to possibly 7% or more depending on network activity and transaction fees 3.
     • 

       1

       Unlocking Yield

       00:48:40
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       2

       Maximizing Staker Yields

       01:04:21
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       3

       Rising ETH Staking Yield

       01:14:33

Each of these factors contributes uniquely to the yield from E2 staking, combining to create a potentially robust return for those participating in the staking process.