Bid Reduction Penalty

Penalty mechanics for validators who reduce their bid after receiving stake.

TL;DR: A validator pays nothing as long as the total offer keeps clearing the auction, at any size of change. A charge applies only when a reduction takes the offer below the winning level while Marinade stake is still delegated to the validator. It settles the difference for the time the stake needs to redelegate, proportional to the reduction.

Overview

Marinade's auction matches stake to what each validator offers. The Bid Reduction Penalty exists for one situation: a validator reduces the total offer below the level that wins stake, but Marinade stake stays delegated for the epochs it takes to redelegate. During that window stakers earn below the price the auction set, and the penalty settles that difference from the bond.

The rule is the same for every validator and every kind of change, whether the offer moves through the bid or through inflation, MEV, or block reward commissions, on chain or in the bond.

Paying does not keep the stake. A validator who reduces the offer below the winning level is unstaked, even after the difference is settled. Marinade rebalances the stake to protect the protocol and uphold fairness for stakers.

Key Concepts

The total offer: A validator's offer is the bid plus the inflation, MEV, and block rewards passed to stakers. The auction prices stake on that offer each epoch.

The winning level: The auction's clearing price, the total offer of the last validator that still wins stake in that epoch. An offer at or above the winning level clears, and stake keeps flowing. An offer below it no longer clears, so stake stops flowing and existing Marinade stake redelegates away.

What triggers the penalty: A reduction of the total offer that takes it below the winning level while the validator still holds Marinade stake. The reduction is measured against the validator's own previous-epoch offer, re-priced at current reward rates. Reward and market drift never trigger the penalty on their own. Only the validator's own setting changes do.

What it does: It settles the difference from the bond, proportional to the size of the reduction and the stake held. A validator whose offer still clears never pays, at any size of change. Below the winning level, a gradual change and an at-once change settle the same total. A validator receiving new stake is never charged.

How the Amount Is Determined

The charge scales with three things: how far the offer fell below the winning level, the amount of Marinade stake held, and the number of epochs the stake takes to redelegate. A small reduction on a small delegation settles little. A large reduction on a large delegation, held across several redelegation epochs, settles more. The exact amount charged in any epoch is shown on the PSR protected-events dashboard.

How to Avoid It

There are two clean paths.

• Keep the offer at or above the winning level: Any change to the bid or commission is then repriced by the auction at no cost, at any size.

• Exit cleanly: To scale down or leave, withdraw the bond, let the stake redelegate over the following epochs, then rejoin the auction with a new offer. See Eligibility Criteria for the full exit flow.

Per-epoch values are published on the PSR protected-events dashboard.

Two Layers of Protection

Two separate mechanisms keep stakers whole, and they cover different windows.

• Per-epoch settlement: Each epoch is sold to stakers at the commission the auction priced. A commission raise within the epoch settles the difference for that one epoch from the bond, with a small grace, then prices in normally from the next auction.

• Bid Reduction Penalty: Covers the redelegation window after a validator reduces the offer below the winning level, which the per-epoch settlement cannot see.

Related Mechanisms

Other mechanisms can charge a validator's bond in the same epoch:

• Activating Stake Fee: a one-time charge on new stake as it activates, scaled by how far above the clearing bid the validator sits. It applies to incoming stake, not to changes after the fact.

• Bond Risk Reduction Mechanism: charged when the bond is underfunded relative to active stake. It addresses bond size relative to stake, not the offer itself.