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.
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.
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. — Lido (@LidoFinance) October 11, 2023
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.
Addressing the 5:30pm 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… — Launchnodes (@launchnodes) October 11, 2023
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.