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Calculations for Exchange Rate

Exchange rate refers to the NAV of dETH in terms of the initial deposit. With each epoch, the validators earn more Consensus layer rewards, which further translates to dETH being minted for the validator. Consequently, dETH raises the exchange rate for the validators. Since the validator has separate balances of dETH on the Consensus layer and execution layer, we effectively have two different exchange rates:

Consensus layer Exchange Rate - This is the exchange rate based on a validator’s positive earnings on the Consensus layer, which may contain unreported dETH Rewards as well:

Exchange Rate = Cumulative Positive Earnings From ETLInitial Deposit (24)Exchange\ Rate\ =\ \frac{Cumulative\ Positive\ Earnings\ From\ ETL}{Initial\ Deposit\ (24)}

Execution Layer Exchange Rate - This is the Exchange rate based on a validator’s dETH rewards from its last balance report. This takes into account the reported balance of the validators:

Exchange Rate = Initial Deposit (24) + dETH Rewards MintedInitial Deposit (24)Exchange\ Rate\ =\ \frac{Initial\ Deposit\ (24)\ +\ dETH\ Rewards\ Minted}{Initial\ Deposit\ (24)}