Skip to main content

Validator Overview

This guide explains the two systems validators interact with when partnering with FastLane Labs: shMonad (the liquid staking protocol) and the MEV Protocol (the auction and bundle routing system). Understanding these as distinct but complementary systems is important context for everything that follows.

What is shMonad​

shMonad is a liquid staking protocol built on Monad. It allows users to deposit MON and receive shMON, a yield-bearing liquid staking token.

For validators, the key points are:

  • shMonad delegates stake to validators through the Stake Allocation Mechanism, which distributes delegation based on each validator's relative revenue contribution
  • Validators earn revenue from three sources: staking rewards, priority fees, and MEV rewards
  • All revenue flows through a Coinbase Contract deployed for each validator, which automatically splits earnings between the validator's commission and shMON staker yield
  • Rewards auto-compound every epoch (~4-5.5 hours) — no manual claiming needed by validators or stakers

shMON is not pegged 1:1 to MON. Its exchange rate increases over time as staking rewards, MEV revenue, and atomic unstaking fees accrue to the protocol.

What is the MEV Protocol​

The MEV Protocol is a separate system that captures Maximal Extractable Value from transaction ordering on Monad and distributes it to validators and stakers. It consists of two components:

Auction Handler​

The Auction Handler is an on-chain smart contract where searchers submit MEV bids. When a searcher identifies a profitable transaction ordering opportunity, they submit a bid to the Auction Handler, which:

  1. Collects the bid payment
  2. Retains a 10% protocol fee — of which 7.5% boosts shMON staker yield and 2.5% goes to FastLane Labs
  3. Forwards the remaining 90% to the validator's Coinbase Contract as MEV revenue

The Auction Handler is the mechanism through which MEV rewards enter the shMonad ecosystem. For the contract interface and searcher integration details, see the Searcher Documentation.

FastLane Sidecar​

The FastLane Sidecar is software that validators run alongside monad-bft on the same machine. Starting from monad-bft v0.12.6, the node exposes its local transaction mempool to external applications. The sidecar:

  • Inspects pending transactions and scores them for MEV potential
  • Routes MEV bundles from searchers to the validator's node
  • Operates as a separate process — if it crashes or stops, the validator continues operating normally with no impact to consensus

Running the sidecar is the single most impactful action a validator can take to increase revenue. Validators with the sidecar active consistently earn more MEV rewards and receive proportionally more stake through the allocation mechanism.

Without the sidecar, a validator can still receive MEV rewards if a searcher's Auction Handler transaction happens to land in one of their blocks, but revenue will be significantly lower.

The sidecar is source-available: github.com/FastLane-Labs/fastlane-sidecar.

Monad Foundation Compatibility​

The shMonad MEV protocol is compatible with the Monad Foundation's Validator Delegation Program (VDP). The Monad Foundation has confirmed that use of the FastLane Sidecar, in its current form, does not violate the VDP guidelines.

Category Labs has integrated the MEV protocol directly into the official monad-bft client, ensuring validators can participate without any conflict with foundation delegation requirements.

tip

Running the MEV sidecar does not affect eligibility for foundation delegation. See the Monad Foundation's announcement in the Monad Node Announcements Telegram channel for the full statement.

Next Steps​

Now that you understand the components:

  • Estimated Stake Allocation — How much delegation to expect based on your revenue contribution
  • Coinbase Contract — How your earnings flow, configurable parameters, and the contract interface
  • Onboarding — Step-by-step setup: beneficiary address, fullnode configuration, and sidecar installation