20 Validator Config Issues Lead to Slashing Events in Crypto Finance

Crypto Events: Lido Finance Suffers from Slashing

On Oct. 11 at about 3:30 pm UTC, crypto events saw the Ethereum staking protocol Lido Finance suffer from a series of infrastructure and signer configuration issues from validators operated by Launchnodes. The incident resulted in 20 slashing events on the Ethereum blockchain and Lido estimated the impact to be around 20 Ether (ETH), worth $31,000.

Slashing is a process where a validator breaches a blockchain’s proof-of-stake consensus rules, which often results in the removal of that validator or slashing a portion of the staked-Ether that they provided as collateral. Launchnodes’ validators nodes are now offline, and slashings have ceased while the root cause is being investigated.

In addition, validators will accumulate inactivity penalties while offline for troubleshooting. Crypto now live is showing the latest updates on the incident, and best place for crypto reddit is a great source for additional information.

Crypto Events Trigger Slashing Events

Crypto events on Launchnode led to slashing events later that day, according to a post from the platform. Infrastructure and signer configuration issues were identified as the cause of the events.

“We are taking all necessary steps to prevent any further occurrences and restore full service,” the platform stated.

The staking provider Lido noted that stakers on the protocol were not affected other than a reduction in daily rewards that will be visible on the Oct. 12 rebase. Additionally, the Lido DAO has an insurance fund of 6,230 staked-ETH, worth $9.5 million, which can be used to mitigate the slashing impact, although it does not trigger automatically.

Crypto Events and Liquid Staking Protocols

Lido announced that holders of stETH will be compensated when the “cover method” is determined, with Launchnodes vowing to reimburse any losses incurred by Lido. However, the liquid staking protocol clarified that the process won’t be automatic as it is impossible to predict the total losses in advance.

At present, Lido is the largest liquid staking protocol in the crypto space, with $13.8 billion in total value locked on its platform, according to DefiLlama. Rocket Pool follows closely behind with $1.7 billion.

Since the launch of the Beacon Chain on Dec. 1, 2020 to late February 2023, only 226 validators (0.04% of all validators) in the Ethereum network have been slashed.