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.

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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. In auction outputs the validator's obligation appears as bondObligationPmpe.

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. The per-validator figure is effParticipatingBidPmpe, the minimum bid needed to stay in the winning set.

What triggers the penalty: A reduction of the total offer that takes it below the winning level while the validator still holds Marinade stake. Reward and market drift never trigger the penalty on their own. Only the validator's own setting changes do.

The comparison basis: The offer is not compared against the previous epoch alone. Marinade takes the lower of this epoch's effParticipatingBidPmpe and the worst effParticipatingBidPmpe across the last bidTooLowPenaltyHistoryEpochs auctions, currently 3. That floor is then relaxed by bidTooLowPenaltyPermittedDeviationPmpe, currently 0.01, so an offer within 1% below the floor is not penalised.

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 relaxed historical floor, 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 per-epoch amount is published as revShare.bidTooLowPenaltyPmpe in the SAM scores API, https://scoring.marinade.finance/api/v1/scores/sam?epoch=X, and per-validator charges are summarised on the PSR dashboard.

Not a protected event. The Bid Reduction Penalty settles under the BidTooLowPenalty settlement reason, which is separate from the protected events (DowntimeRevenueImpact and CommissionSamIncrease). The PSR protected-events view does not list it.

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.

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. When a validator raises any commission within the epoch, whether inflation, MEV, or block rewards, the settlement covers only the rewards stakers should have received that epoch, drawn from the bond and subject to a small grace. It appears as the CommissionSamIncreaseSettlement event in the Discord validators feed and on the PSR dashboard. Nothing is charged beyond that difference, and the new commission 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.

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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. Currently paused: activatingStakePmpeMult is set to 0, so no activating fee is charged.

• 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.