© Reuters.
Lido Finance, a prominent liquid staking protocol, experienced a significant slashing event on Thursday, affecting 20 validators associated with its partner, Launchnodes. The incident led to penalties amounting to 20.04 ETH ($30,900). Validators, who propose new blocks to the Ethereum blockchain, fail their duties resulting in this penalty.
This surpasses the previous major slashing event that took place on August 26, when 12 validators faced less than 1.10 ETH in penalties each. The validators involved in the recent incident face a slashing penalty of 1/32 ETH each, totaling an initial loss of 20 ETH, and can only exit after November 17.
The validators were slashed due to “infrastructure and web3 signer configuration issues.” As a response to the incident, Launchnodes has already compensated with 25.663 ETH and pledged to additional contributions if necessary.
Lido controls $13.7 billion in ETH for its stakes, accounting for over 25% of all Ethereum value staked. The firm holds a “cover fund” of approximately 6,200 stETH to mitigate such incidents. The estimated penalties could potentially reach up to 23.06 ETH before recovery from the slashed validators is possible.
Lido and Launchnodes are currently investigating the root cause of the event, with a post-mortem report pending. In previous instances, damages were covered by the relevant operators or through this fund. However, the usage of this fund is decided by the community.
Ethereum developer Evan Van Ness expressed concern over Lido’s dominance in the market. Both Lido and Launchnodes have yet to comment on Decrypt’s request for a statement regarding the incident.
This event mirrors miner Marathon Digital (NASDAQ:)’s recent loss due to an invalid Bitcoin block, which is considered the Bitcoin equivalent of a slashing event.
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