Slashing Risks and Validator Diligence

Staking rewards do not come without risks. The proof-of-stake security model rewards honest validators, but it also punishes dishonest or lazy validators and their delegators! The Cosmos Hub recently slashed a validator for double-signing, providing a glimpse into best practices and questions you should ask your validator.

What happened? proposed two different blocks at height 848,186. This is known as double-signing, or equivocation, and is a threat to chain security. As a result, the Cosmos Pool validator was removed as a validator (“jailed”) and 5% of all the ATOMs delegated to their node were slashed.

How did it happen? Cosmos Pool simultaneously ran two different nodes using the same validator key. At first glance, this seems like a reasonable idea: run a primary node and a backup node to ensure uptime if the primary node (or its data center) fails. Though, it is critical to get the aforementioned type of setup right. In this instance, the primary node failed temporarily, and the backup came online. Sounds good, until it went awry. Details are a little fuzzy, but somehow the primary node came back online and both nodes proposed a block at the same height. Bam! The validator was removed and all of its delegators lost 5% of their holdings.

Is there a better approach? We take great pride in our uptime and run across multiple cloud providers to ensure we are always up. Regardless, the penalties of double-signing are so severe that caution is required. If in doubt, it’s better to accept short downtime rather than risk customer assets. It’s one of the reasons we introduced our 100% uptime SLA. It allows us to take the time required for maintenance without impacting our customers. More recently, we’ve introduced a signing broker to allow multiple nodes to run simultaneously while ensuring only a single block gets broadcasted to the network.

Lessons Learned? Remember: you can lose 5% of your delegation if you choose a validator with a sloppy setup. This is the first double signing and slashing to occur in a large proof of stake-based crypto network, but it won’t be the last. Ethereum also plans to implement slashing penalties for bad behavior, as included in most proof-of-stake networks. Slashing is a major risk for validators that run poor technology setups.

To learn more about choosing Staked as your staking infrastructure provider, please visit our website.

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Staked helps institutional investors reliably and securely compound their crypto by 5% — 100% annually through staking and lending. Staked runs validation nodes for proof-of-stake currencies and offers access to on- and off-chain lending options that provide an annualized yield of in-kind currency.

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Staked operates highly available and highly secure, institutional grade staking infrastructure for all of the leading proof-of-stake (PoS) protocols.

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