To highlight the effect that a smoothing pool has, let’s consider the following scenario:
- Maximum penalty rate is 100%
- We have a node with one minipool, commission is 0% (to keep it simple) and we have 10% RPL staked
- A total of 1,000 minipools (0% commission) have opted in to the smoothing pool, all attestions are successful
20 ETH MEV block happens while we are opted out
What’s supposed to happen: We get 10 ETH (50%), while 10 ETH goes to rETH. Stealing is not profitable, because the stealable amount (10 ETH from rETH holders) is smaller than the amount we can get penalized for.
20 ETH MEV block happens while we are opted in
What’s supposed to happen: 10 ETH goes to rETH, 10 ETH goes to smoothing pool. We can expect to get back 0.01 ETH from the smoothing pool as our fair share of this block. Stealing is now profitable, beceause the stealable amount is 19.99 ETH(10 ETH from rETH holders + 9.99 ETH from other smoothing pool participants), which is more than the maximum penalty. Losing out on one reward period of smoothing rewards is an insignificant penalty in this scenario.
This is fundamental to any kind of smoothing pool and not an issue of this particular design. Smoothing is supposed to remove the luck component. As a direct consequence, if you do get lucky there is more that you are supposed to share and more that you can steal.