Ethereum

Lido Finance Discloses 20 Slashing Events Due To Validator Issues

Lido Finance Discloses 20 Slashing Events Due To Validator Issues

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Ethereum staking protocol Lido Finance has revealed that its protocol witnessed 20 slashing events thanks to a series of infrastructure and signer configuration issues in connection with validators operated by Launchnodes. 

Lido revealed the initial impact was around 20 ETH, worth $31,000. The validator involved has been taken offline. 

20 Slashing Events 

According to an update by Lido Finance on the 11th of October, the protocol stated that all Launchnodes validators have been taken offline, and the slashings have stopped. The protocol also looked into the root cause of the slashing events. According to Launchnodes, the slashing incident occurred on the 11th of October at around 3:30 p.m. UTC. 

Lido Finance stated that the slashing events took place on the Ethereum blockchain and predicted the projected impact of the slashings to be around 20 ETH, worth $31,000, along with additional penalties. At the same time, the validators are offline for troubleshooting. Additionally, the validators will also be accumulating inactivity penalties. 

“20 slashings have occurred relating to validators operated by the @launchnodes node operators as a part of the Lido protocol. Launchnodes and DAO contributors are investigating. The validators are offline, and slashings have ceased while the root cause is being investigated.”

Launchnodes Discloses Reason Behind Slashing Events 

Slashing occurs when a validator violates a blockchain’s Proof-of-Stake (PoS) consensus mechanism rules. This breach often results in the removal of the validator or the slashing of a portion of the staked ETH that they put as collateral. A few hours after Lido Finance’s statement, Launchnode issued an update, stating that the slashing events occurred due to an infrastructure and signer config issue. The update also shared that Launchnodes was investigating the issue. 

“Addressing the 5:30 p.m. CET incident with Launchnodes’ validator nodes for Lido protocol getting slashed: The issue is identified and linked to an infrastructure and web3 signer configuration issue. We are investigating and taking steps to prevent any further occurrences and restore full service.”

Other Stakers Not Impacted 

Lido Finance stated that stakers on the protocol were not impacted other than a reduction in daily rewards. This reduction would be reflected in the next rebase on the 12th of October. The staking provider also confirmed the Lido DAO has an insurance fund of 6,230 Staked ETH (stETH) worth around $9.5 million. Lido will be using these funds to mitigate the impact of the slashing events. However, by design, the insurance fund does not trigger automatically. 

Lido also revealed that stETH holders will be compensated adequately once the “cover method” has been decided. Meanwhile, Launchnodes has also promised to reimburse Lido for all losses incurred. The liquid staking protocol added that the process is not automatic because it is impossible to know how much the losses would be ahead of time. Lido is the largest liquid staking protocol, with around $13.7 billion in total value locked, according to data from DeFiLlama. The next largest liquid staking protocol is Rocket Pool, with a total value locked of $1.7 billion. 

Since the launch of the Beacon Chain on the 1st of December 2020, until February 2023, only 226 validators (0.04% of all validators) in the Ethereum ecosystem have been slashed. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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