Lido Finance Experiences 20 Slashing Events, Assures Compensation and Steps for Future Prevention
Summary:
Ethereum staking protocol, Lido Finance, encountered 20 slashing events due to issues related to infrastructure and configuration on validators managed by Launchnodes. The incidents, which took place on the Ethereum blockchain, are estimated to have an impact of around 20 Ether ($31,000). Lido assured that stakers on the protocol would only experience a decrease in daily rewards, while stETH holders will be compensated once a plan has been decided. The leading staking protocol, Lido, also possesses an insurance fund of 6,230 staked-ETH ($9.5 million) to mitigate the slashing impact.
On October 11, Lido Finance, an Ethereum staking protocol, reported that it witnessed 20 slashing occurrences due to a range of issues related to infrastructure and signer configuration on validators managed by Launchnodes. As per the information from Launchnodes, the incident happened at around UTC 3:30 pm. Lido clarified in a post made on October 11 that the nodes of validators under Launchnodes are currently offline, effectively ending the slashing events until the core issue is fully understood and rectified. The violations took place on the Ethereum blockchain, and the estimated impact is thought to be around 20 Ether (ETH), with an equivalent value of $31,000. Along with this, Lido also anticipates additional fines due to the downtime needed for investigation and any inactivity penalties that the validators are likely to incur.
A validator infringing a blockchain's proof-of-stake consensus rules leads to a process known as slashing. Under such circumstances, validators risk either being removed or slashed, forfeiting a proportion of the Ether they staked as collateral. Hours following the incident, Launchnode confirmed that the slashing incidents happened on account of issues related to infrastructure and signer configuration. They assured they are thoroughly investigating the event and taking appropriate steps to prevent such incidents in the future and to re-establish full service.
Members who stake on Lido protocol will only be affected by a decrease in their daily rewards, which will be reported in the next rebase on October 12, Lido asserted. They also disclosed that Lido DAO is in possession of an insurance fund of 6,230 staked-ETH, approximately worth $9.5 million, which will be utilized to offset the implications of the slashing incident, albeit the fund does not get triggered by auto-default. Lido mentioned that a decisive plan is being worked out for compensating the stETH holders, and Launchnodes have committed to reimburse all losses incurred by Lido.
The liquid staking protocol denied any automatic process for compensation as it is uncertain to predict the total losses beforehand. As per the data obtained from DefiLlama, Lido is the largest liquid staking protocol with a total value locked on its protocol measured at $13.8 billion, followed by Rocket Pool that amounts to $1.7 billion. Since the launch of the Beacon Chain on December 1, 2020, till late February 2023, only 226 Ethereum validators (equivalent to 0.04% of all validators) have faced slashing in the Ethereum ecosystem.
Published At
10/12/2023 12:36:00 AM
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