Lido Finance Reveals 20 Slashing Events Attributed to Validator Configuration Issues

Lido Finance discloses 20 slashing events due to validator config issues

Ethereum Staking Protocol Lido Finance Reveals 20 Slashing Events Due to Validator Configuration Issues

Lido Finance, the prominent Ethereum staking protocol, recently disclosed a significant event where its protocol experienced 20 slashing events, all attributed to a series of infrastructure and signer configuration issues originating from validators operated by Launchnodes.

This incident took place on October 11th, around 3:30 pm UTC, as confirmed by Launchnodes. In an official statement on October 11th, Lido Finance acknowledged that the validators operated by Launchnodes had been taken offline, and the slashing events had been halted to allow for an investigation into the root cause.

The slashing incidents occurred within the Ethereum blockchain, and Lido Finance estimated the impact to be approximately 20 Ether (ETH), equivalent to $31,000, in addition to extra penalties while the validators remained offline for troubleshooting, along with potential inactivity penalties that could accumulate.

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Slashing is a process that transpires when a validator violates a blockchain’s proof-of-stake consensus rules, often leading to the removal of that validator or the reduction of a portion of the staked Ether used as collateral.

Subsequently, Launchnodes disclosed that the slashing events were the outcome of infrastructure and signer configuration issues and stated they were actively investigating the situation, taking measures to prevent future occurrences and restore full service.

Lido Finance assured its stakers that they would not be directly affected, except for a reduction in their daily rewards, which would be reflected in the next rebase scheduled for October 12.

The staking provider also confirmed that the Lido DAO maintains an insurance fund consisting of 6,230 staked ETH, valued at $9.5 million, which would be used to mitigate the impact of the slashing events. However, it should be noted that this insurance fund does not trigger automatically by design.

Lido Finance also mentioned that stETH holders would receive compensation once the “cover method” had been determined, and Launchnodes pledged to reimburse all losses incurred by Lido.

It’s important to emphasize that the process of managing slashing incidents is not automatic due to the uncertainty surrounding the total losses.

Lido Finance stands as the largest liquid staking protocol, with a total value locked of $13.8 billion, according to DefiLlama, significantly ahead of its closest competitor, Rocket Pool, with $1.7 billion in total value locked.

To provide context, only 226 validators (0.04% of all validators) in the Ethereum ecosystem have experienced slashing events from the launch of the Beacon Chain on December 1, 2020, up until late February 2023.

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