Slashing

Slashing is a mechanism in many proof-of-stake blockchains that confiscates and usually destroys some of the tokens a validator has staked if it can be proved to have acted against the protocol, for example by signing two different blocks for the same slot. It is the main way such networks make dishonest behaviour costly: in place of the electricity and hardware a miner risks under proof of work, a validator puts its own capital at stake.

Slashing differs from ordinary penalties for being offline, which are usually small and gradual. Not every proof-of-stake network uses it; Cardano and Algorand's original design, for example, rely on other incentives. Where it exists, slashing also affects people who delegate or stake through a provider, so it is a key risk to understand in staking, liquid staking and restaking.

Imagine referees at a tournament who must each hand over a large deposit before they are allowed to officiate. If a referee is caught signing two different score sheets for the same match, trying to make both teams the winner, part of the deposit is taken and the referee is sent home. Referees who simply miss a match lose a small fee instead.

Because the deposit is large, cheating is far more expensive than any bribe a team could offer. That is the logic of slashing: honest work pays a little, provable cheating costs a lot.

The offences are defined by each protocol, but they generally involve signing contradictory messages, which can be proved with the validator's own signatures. On the Ethereum blockchain the slashable offences are:

• Double proposal. Proposing two different blocks for the same slot.
• Double vote. Making two different attestations for the same target, which could help finalise conflicting histories.
• Surround vote. Making an attestation that surrounds or is surrounded by an earlier one in a way that contradicts it.

Any participant who spots such evidence can submit it to the chain, and the whistleblower and block proposer receive a small reward. Being offline, by contrast, leads only to missed rewards and small penalties, except during long periods when the chain cannot finalise, when an "inactivity leak" steadily drains offline validators.

On Ethereum a slashed validator suffers an immediate penalty, is forced to exit and cannot withdraw its funds for a period of about five weeks. Midway through that period it faces a further "correlation penalty" that grows with the total amount of stake slashed around the same time. A single validator making an isolated mistake loses relatively little, while a large group slashed together, as would happen in a coordinated attack, can lose most or all of its stake. This design punishes attacks far more heavily than accidents. The exact penalty parameters have been adjusted in network upgrades, and other chains use their own rules: Chains built in the Cosmos ecosystem, for example, typically take a set percentage of stake for double-signing and a much smaller one for long downtime, and may "jail" the validator.

Many people stake through exchanges, pools or delegated staking rather than running their own validator. On networks where delegated stake can be slashed, delegators share the loss when their chosen validator misbehaves. Large staking providers spread stake across many machines and clients and may offer insurance or cover losses themselves. Liquid staking tokens can fall in value if the underlying validators are slashed. Restaking protocols add further slashing conditions, so the same stake may be exposed to penalties on several services at once, which increases risk.

Most real slashing events have not been attacks. They usually come from operational mistakes:

• Duplicate keys. Running the same validator key on two machines, often in a misconfigured backup set-up, so both sign different messages.
• Migration errors. Moving a validator to new hardware without making sure the old one has stopped.
• Software bugs. Faults in validator clients or remote signing tools.

Tools called slashing protection databases record what a validator has signed, so it refuses to sign anything contradictory, and distributed validator technology spreads a key across several machines to reduce single points of failure.

Supporters see slashing as essential to proof-of-stake security, because it lets the network identify and punish those who try to rewrite history. Critics argue that the risk of losing funds through honest configuration mistakes pushes ordinary users towards large professional operators, adding to centralisation. Others point out that designs without slashing, such as Cardano's, have operated without major security failures, though they rely on different assumptions. The balance between deterring attacks and forgiving errors is a recurring design question, along with the related problem of validator collision.

• ethereum.org: Proof-of-stake rewards and penalties