After the merge it is clear where the yield comes from, but right now I do not understand where the approx. 4.4% come from?
Is the supply of eth simply inflated by the beacon chain in order to pay out rewards?
2 Answers
Currently on the beacon chain, each validator is rewarded to conduct actions helping the protocol to reach consensus.
Duing an epoch (32 slots or 6min24sec) each validator can receive a reward up to 0.84375*staked_ETH*64/(sqrt(total balance)). This reward is decomposed according to the following actions:
You can find more details concerning these rewards here or directly on the ethereum github repo.
To be clear I didn't gave you the rewards for when a validator becomes proposer, and I used the current version which is called Altair.
It's created out of nothing like the rewards miners are getting right now to secure the protocol. The supply is inflated in order to pay out the validators and secure the beacon chain and the whole network after the Merge.
Those rewards will only be accessible once withdrawal is implemented and included in a fork so practically, the ETH supply is only going to be inflated once withdrawals are possible which is planned for the next fork after the Merge.
There are various changes that happened and that are planned that will eventually make ETH a deflationary currency. Here are some resources to learn more about that monetary policy:
- Monetary Policy from EthHub
- ultrasound.money (Check their project the supply graph)
