Lido Finance Faces 20 Slashing Events Due to Validator Config Issues

Lido Finance, the Ethereum staking protocol, has recently revealed that it experienced 20 slashing events caused by infrastructure and signer configuration issues from validators operated by Launchnodes. The incident took place on October 11, resulting in a temporary halt of the validators and slashing of approximately 20 Ether (ETH) worth $31,000.

The Impact of Slashing on Staking Protocols

Slashing refers to when a validator violates a blockchain’s proof-of-stake consensus rules, leading to penalties such as the removal of the validator or a reduction in the amount of staked ETH they provided as collateral. In this case, the slashing events occurred due to an infrastructure and signer configuration issue.

Lido Finance assures its stakers that they will not be directly affected, except for a decrease in daily rewards, which will be reflected in the next rebase on October 12. The protocol’s DAO has an insurance fund of 6,230 stETH, equivalent to $9.5 million, which can be used to mitigate the impact of slashing. However, the fund does not automatically trigger compensation.

Once the “cover method” has been determined, stETH holders will be compensated for their losses. Furthermore, Launchnodes, the validator operator, has committed to reimbursing all losses incurred by Lido Finance.

Lido Finance and Launchnodes’ Response

Lido Finance and Launchnodes are actively investigating the root cause of the slashing events and taking measures to prevent any future occurrences. Launchnodes expressed its commitment to restoring full service and preventing similar incidents.

Despite the setback, Lido Finance remains the largest liquid staking protocol, with a total value locked of $13.8 billion in its protocol, according to DefiLlama. Rocket Pool is the second-largest protocol, with $1.7 billion locked in value.

Security and Slashing in the Ethereum Ecosystem

The recent slashing events affecting Lido Finance’s validators are relatively rare in the Ethereum ecosystem. Since the launch of the Beacon Chain on December 1, 2020, until late February 2023, only 226 validators, comprising just 0.04% of all validators, have been slashed.

Preserving Moments in History with NFTs

This incident and the subsequent response from Lido Finance and Launchnodes serve as a reminder of the importance of security in decentralized finance. The rapid growth and development of the crypto space require continuous efforts to ensure the safety of users’ funds.

If you want to commemorate this moment in history and show your support for independent journalism in the crypto space, consider collecting this article as an NFT (Non-Fungible Token).

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