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Merge pull request ethereum#8520 from ethereum/fixFormatting
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Fix formatting on rewards and penalties page
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samajammin authored Nov 7, 2022
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Expand Up @@ -72,20 +72,20 @@ Slashing is a more severe action that results in the forceful removal of a valid

If these actions are detected, the validator is slashed. This means that 1/32 of their staked ether (up to a maximum of 1 ether) is immediately burned, then a 36 day removal period begins. During this removal period the validators stake gradually bleeds away. At the mid-point (Day 18) an additional penalty is applied whose magnitude scales with the total staked ether of all slashed validators in the 36 days prior to slashing event. This means that when more validators are slashed, the magnitude of the slash increases. The maximum slash is the full effective balance of all slashed validators (i.e. if there are lots of validators being slashed they could lose their entire stake). On the other hand, a single, isolated slashing event only burns a small portion of the validator's stake. This midpoint penalty that scales with the number of slashed validators is called the "correlation penalty".

## Inactivity Leak {#inactivity-leak}
## Inactivity leak {#inactivity-leak}

If the Beacon Chain has gone more than four epochs without finalizing, an emergency protocol called the "inactivity leak" is activated. The ultimate aim of the inactivity leak is to create the conditions required for the chain to recover finality. As explained above, finality requires a 2/3 majority of the total staked ether to agree on source and target checkpoints. If validators representing more than 1/3 of the total validators go offline or fail to submit correct attestations then it is not possible for a 2/3 supermajority to finalize checkpoints. The inactivity leak lets the stake belonging to the inactive validators gradually bleed away until they control less than 1/3 of the total stake, allowing the remaining active validators finalize the chain. However large the pool of inactive validators, the remaining active validators will eventually control >2/3 of the stake. The loss of stake is a strong incentive for inactive validators to reactivate as soon as possible! An inactivity leak scenario was encountered on the Medalla testnet when < 66% of active validators were able to come to consensus on the current head of the blockchain. The inactivity leak was activated and finality was eventually regained!

The reward, penalty and slashing design of the Beacon Chain encourages individual validators to behave correctly. However, from these design choices emerges a system that strongly incentivizes equal distribution of validators across multiple clients, and should strongly disincentivize single-client dominance.

## Further Reading {#further-reading}
## Further reading {#further-reading}

[Upgrading Ethereum: The incentive layer](https://eth2book.info/altair/part2/incentives)
[Incentives in Ethereum's hybrid Casper protocol](https://arxiv.org/pdf/1903.04205.pdf)
[Rewards and Penalties on Ethereum 2.0](https://consensys.net/blog/codefi/rewards-and-penalties-on-ethereum-20-phase-0/)
[Vitalik's annotated spec](https://github.com/ethereum/annotated-spec/blob/master/phase0/beacon-chain.md#rewards-and-penalties-1)
[Eth2 Slashing Prevention Tips](https://medium.com/prysmatic-labs/eth2-slashing-prevention-tips-f6faa5025f50)
- [Upgrading Ethereum: The incentive layer](https://eth2book.info/altair/part2/incentives)
- [Incentives in Ethereum's hybrid Casper protocol](https://arxiv.org/pdf/1903.04205.pdf)
- [Rewards and Penalties on Ethereum 2.0](https://consensys.net/blog/codefi/rewards-and-penalties-on-ethereum-20-phase-0/)
- [Vitalik's annotated spec](https://github.com/ethereum/annotated-spec/blob/master/phase0/beacon-chain.md#rewards-and-penalties-1)
- [Eth2 Slashing Prevention Tips](https://medium.com/prysmatic-labs/eth2-slashing-prevention-tips-f6faa5025f50)

_Sources_
_[https://consensys.net/blog/codefi/rewards-and-penalties-on-ethereum-20-phase-0/](https://consensys.net/blog/codefi/rewards-and-penalties-on-ethereum-20-phase-0/)_
_[https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-chain/](https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-chain/)_
- _[https://consensys.net/blog/codefi/rewards-and-penalties-on-ethereum-20-phase-0/](https://consensys.net/blog/codefi/rewards-and-penalties-on-ethereum-20-phase-0/)_
- _[https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-chain/](https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-chain/)_

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