Lido Finance's Validator Fails: Over 20 ETH lost

Lido Finance experiences 20 slashing events due to infrastructure issues from Launchnodes. Loss estimated at $31k. Measures taken to prevent future occurrences.

Oct 12, 2023 - 17:31
Oct 19, 2023 - 14:34
Lido Finance's Validator Fails: Over 20 ETH lost
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On October 11, Lido Finance disclosed that its protocol experienced 20 slashing events. These events were attributed to infrastructure and signer configuration issues from validators operated by Launchnodes. The slashing, which took place on the Ethereum blockchain, resulted in an estimated loss of around 20 Ether (ETH), valued at approximately $31,000. Additionally, there were other penalties incurred while the validators were offline for troubleshooting, as well as inactivity penalties.

For those unfamiliar with the term, slashing is a mechanism in proof-of-stake consensus systems. When a validator violates the consensus rules of a blockchain, they face penalties, which can include the removal of the validator or the forfeiture of a portion of the staked ETH they provided as collateral.

Following the slashing events, Launchnodes acknowledged the issues and stated that the events were due to an infrastructure and signer configuration problem. The platform is actively investigating the matter and has taken measures to prevent any further occurrences. They are also working diligently to restore full service.

Lido Finance clarified that stakers on the protocol would not be significantly affected, except for a slight reduction in daily rewards, which would be evident in the subsequent rebase on October 12. To cushion the impact of the slashing events, Lido DAO has an insurance fund containing 6,230 Staked ETH (stETH), valued at $9.5 million. However, this fund doesn't activate automatically. Lido has assured that stETH holders will be compensated once an appropriate compensation method is determined. Furthermore, Launchnodes has committed to reimbursing all losses borne by Lido due to the slashing events.

Lido Finance stands as the biggest staking platform, featuring a total value locked (TVL) of $13.8 billion in its protocol. In comparison, the next largest protocol, Rocket Pool, has a TVL of $1.7 billion. It's worth noting that only 226 validators, which is a mere 0.04% of all validators, in the Ethereum ecosystem have been slashed since the inception of the Beacon Chain on December 1, 2020, until late February 2023.

Philip Bohmer Philip is a seasoned journalist that brings clarity to the complex world of cryptocurrencies through his articulate and insightful articles. His passion for blockchain technology fuels his writing, making him a trusted voice in the rapidly evolving digital currency landscape.