Proposal [SIP1]: Smooth Terms of Use Policy

Below is a first draft of the Smooth Terms of use, a keystone towards solving the Vanilla Proposers Problem.

I’ve named the first proposal of the DAO as SIP#1, which stands for Smooth Improvement Proposal #1, after Ethereum Improvement Proposals.

This is a request for comments, and the idea is that after a period of 2 weeks, it will go to vote. During these 2 weeks, discussion is expected to happen and this draft will change if it needs to, to transform itself to something that can go to vote with a rough consensus from the forum.

Please leave your comments or modifications here and let the first step to SmoothDAO begin:


Smooth Terms of Use Policy

Status: Draft v1.1
Date: 30th Oct 2024

A. Overview

Smooth is a MEV Smoothing pool that aims to smooth the variance of MEV rewards and increase overall rewards for users by providing better access to lottery blocks (blocks created by block builders and distributed via MEV Boost). It maximizes rewards through the inclusion of Maximal Extractable Value (MEV) by utilizing MEV Boost and competitive relays. Validators participating in the Smooth pool are expected to use these mechanisms to ensure equitable contribution to the pool’s performance. This document outlines the terms of use, behavior expectations, and penalties for validators within the Smooth ecosystem, with a focus on ensuring fairness and accountability.

B. Purpose

This policy establishes the rules that all validators and participants in the Smooth ecosystem must adhere to. It is designed to prevent validators from submitting only vanilla blocks —those without MEV Boost— while benefiting from the higher rewards generated by others. The policy defines how MEV participation is mandatory for validators and introduces penalties for non-compliance to maintain fairness and maximize overall rewards for all participants.

C. Scope

This policy applies to all validators operating in the Smooth staking pool, their withdrawal addresses, and other associated parties. It governs block proposal practices, specifically ensuring that all validators utilize MEV Boost or equivalent services to maximize the value of proposed blocks.

D. Policy Statement

D.1 Problematic Behavior

In the Smooth pool, some validators consistently propose vanilla blocks without leveraging MEV Boost or connecting to competitive relays. While it’s completely fine to do not want to use MEV boost and some can even consider it as the ethical choice - one that doesn’t extract value from the chain users - this practice diminishes overall pool rewards, as vanilla blocks typically generate lower returns than MEV-boosted blocks. These validators unfairly benefit from the MEV contributions of others without contributing themselves, leading to reduced rewards for all other participants. Those wishing to not benefit from the practises of MEV extraction should also not join Smooth.

D.2 Goals of the Policy

The primary objectives of this policy are:

  • Fairness: Ensure that all validators in the pool contribute equally to the pool’s MEV extraction, rather than benefiting from the rewards without participation.
  • Transparency: Provide a clear framework to monitor and enforce compliance, ensuring that validators who do not adhere to the policy are identified and penalized.
  • Accountability: Establish penalties, including banning validators who repeatedly fail to use MEV Boost or submit only vanilla blocks.

E. Validator Requirements

E.1 Use of MEV Boost and Relays

Participants in the Smooth pool - defined as validators and their withdrawal addresses - are required to:

  • Propose blocks through MEV Boost and be subscribed to a sufficient number of competitive relays.
  • Actively contribute to the MEV ecosystem, ensuring they propose blocks that maximize potential rewards for the pool.
  • Avoid submitting three consecutive vanilla blocks without MEV participation.

E.2 Penalties for Non-Compliance

Participants that fail to meet these requirements will face penalties, which include being banned from the Smooth pool. The specific conditions are:

  • A withdrawal address that proposes three consecutive vanilla blocks without using MEV Boost or competitive relays will be subject to a ban from the pool.
  • The ban applies to the withdrawal address of that validator and all of the validators with the same withdrawal address. Validators under the same withdrawal address are likely to be under the same non-MEV Boost setup, ensuring that non-compliant validators are removed faster.

F. Monitoring & Enforcement

F.1 Monitoring Compliance

The Smooth Oracle and governance tools will track validator behavior, specifically monitoring the nature of proposed blocks. The system will automatically flag any validator that proposes a vanilla block and will create a forum thread or equivalent platform for transparency. Three consecutive vanilla blocks from validators belonging to the same withdrawal address will trigger a review and potential vote.

F.2 Governance and Voting Process

SmoothDAO, comprised of Smooth participants, will be responsible for enforcing this policy. The following process will be used:

  • When a withdrawal address is flagged for non-compliance (i.e., proposing three consecutive vanilla blocks), a proposal to ban the withdrawal address will be put forward.
  • Voting will take place on the Snapshot platform, with voting power weighted by each participant’s contribution to the pool’s rewards.
  • If the vote passes, the on-chain result will be recorded, and the offending validator will be banned from the pool.

G. Penalties

Withdrawal addresses that are found in breach of this policy will face the following penalties:

1.	Three Consecutive Vanilla Blocks: A withdrawal address that proposes three vanilla blocks in a row without MEV Boost will be banned from participating in the Smooth pool.
2.	Ban Period: The ban will apply until the withdrawal address resolves their non-compliance and meets the participation standards required by the Smooth DAO, i.e.: submits the difference between their vanilla blocks and the maximum MEV available on that block to the pool in a demonstrable manner and requests to be added back to the pool. A withdrawal address that has been banned will also be considered compliant after proposing 3 MEV blocks to the pool, potentially triggering an unban governance vote.
3. The claimable rewards of the withdrawal address will remain claimable. 
4. Pending rewards of this withdrawal address will be distributed among the rest of the validators.
5. During the ban, no more rewards will be allocated to any of the validators of that withrdawal address. 

H. Governance & Amendments

The SmoothDAO retains the right to amend this policy to ensure fairness and effectiveness as the pool evolves. All amendments will be subject to a governance vote, and participants will be notified of changes through the Smooth platform.

I. Definitions

  • Vanilla Blocks: Blocks proposed without the use of MEV Boost, typically offering lower rewards.
  • MEV Boost: A service that allows validators to receive pre-built, high-value blocks from block builders, maximizing rewards by extracting MEV.
  • Validator: A node operator responsible for proposing blocks on the Ethereum network as part of the Smooth staking pool.
  • Relays: Services that connect validators with block builders in the MEV Boost system to propose optimized blocks.
  • SmoothDAO: The governance body composed of Smooth participants, responsible for enforcing rules and managing the pool.

J. Revision History

  • Version 1.0 - Initial Draft of Smooth Terms of Use (Date: 16th Oct 2024)
  • Version 1.1 - Adding an unban clause of 3 MEV blocks, unifying language around validator and withdrawal address.

This policy aims to maintain fairness and transparency within the Smooth pool, ensuring all validators contribute to and benefit from MEV rewards equitably.

Submitting here some of the relevant discussion on Discord as here is a more permanent medium.


In regards to @MrYukonC 's idea, I think it’s an excellent idea to have an automatic manner of getting approved back into the pool. This will be more useful for people with large amounts of validators than single validator stakers, as having to wait for 3 blocks could leave them without rewards for a very long time, but it is useful nonetheless to have this method aside from the suggested method in G.2 of “paying back the delta”.

Changes queued for Draft v2:

  • Adding an unban clause of 3 MEV blocks as per @MrYukonC 's improvement
  • Unifying language around validator and withdrawal address as per @HansBrix 's remark

This is now an official proposal in Snapshot:

https://snapshot.org/#/dao.smooth.dappnode.eth/proposal/0xddd71930ac1a2876cc7e012861320a19b24fc2c4cc8289060c626737413251a3