Ethereum Staking Protocol Lido Finance Faces 20 Slashing Events
Lido Finance, an Ethereum staking protocol, experienced 20 slashing events due to infrastructure and signer configuration issues with validators operated by Launchnodes. The initial impact resulted in the loss of approximately 20 ETH, valued at $31,000. The responsible validator has been taken offline.
Investigating the Slashing Events
Lido Finance has reported that all Launchnodes validators have been deactivated, effectively halting the slashings. The protocol has also begun investigating the root cause of these incidents. According to Launchnodes, the slashing events occurred on October 11th at around 3:30 p.m. UTC.
Lido Finance estimates that the slashings resulted in a loss of around 20 ETH, along with additional penalties. Troubleshooting is currently underway as the validators remain offline and face inactivity penalties.
“Twenty slashings have occurred involving validators operated by Launchnodes within the Lido protocol. Launchnodes and DAO contributors are conducting an investigation. The validators are offline, and further slashings have ceased while we determine the root cause.”
Launchnodes Addresses the Slashing Events
Launchnodes provided an update shortly after Lido Finance’s statement, explaining that the slashings were a result of infrastructure and signer configuration issues. They assured that investigations are ongoing to prevent future occurrences and restore full service.
“Regarding the slashing of Launchnodes’ validator nodes for Lido protocol at 5:30 p.m. CET: The issue was identified as an infrastructure and web3 signer configuration problem. We are currently investigating and implementing measures to prevent any further incidents.”
No Impact on Other Stakers
Lido Finance confirmed that stakers on the protocol, aside from a decrease in daily rewards, were not affected by the slashings. The reduction in rewards will be reflected in the next rebase on October 12th. The protocol also mentioned having an insurance fund of 6,230 stETH (staked ETH) worth approximately $9.5 million, which will be used to mitigate the slashing events’ impact.
Compensation for stETH holders will be determined once the “cover method” is established. Launchnodes has also committed to reimbursing Lido for any losses incurred. However, the process is not automatic as it is impossible to estimate the exact amount of losses beforehand.
Lido Finance holds the title of the largest liquid staking protocol, with a total value locked of around $13.7 billion. The second-largest liquid staking protocol is Rocket Pool, with a total value locked of $1.7 billion.
Since the launch of the Beacon Chain in December 2020 until February 2023, only 226 validators (0.04% of all validators) in the Ethereum ecosystem have experienced slashing events.
Hot Take: Lido Finance Addresses Slashing Events and Ensures Compensation for Stakers
Lido Finance, an Ethereum staking protocol, faced 20 slashing events due to infrastructure and signer configuration issues with Launchnodes validators. These incidents resulted in a loss of approximately 20 ETH valued at $31,000. Lido Finance has taken immediate action by deactivating the validators and investigating the root cause. Launchnodes has acknowledged its responsibility and is working towards preventing future occurrences while compensating Lido for losses incurred. Stakers on the protocol, aside from reduced rewards, were not affected. Lido Finance will utilize its insurance fund to mitigate the impact of the slashings and compensate stETH holders accordingly. This incident highlights the importance of robust infrastructure and configuration in maintaining the security and stability of staking protocols.
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