Leading liquid staking protocol Lido Finance revealed on Wednesday that 20 Ethereum validators linked to one of its infrastructure partners have had their ETH holdings reduced.
The company said its fines already amount to 20.04 ETH, which is currently worth $30,900.
What is “shredder”?
In an update via Twitter, Lido said that the problematic validators — which are connected to the “enterprise-grade” Ethereum node provider Launcnodes — have already been taken offline.
The next day, Lido claimed To determine the “root cause” of the cutting, an “anatomy” of which will be published in the coming days. “Small details” are still under investigation.
“Lido DAO has a hedge fund of approximately 6,200 stETH to help mitigate the choppy impact, but it is not automatically activated,” Lido wrote. “In all previous cases, the damages were covered by the operator(s) concerned, or by this fund.”
The role of a validator is to propose new blocks for the Ethereum blockchain, and certify blocks proposed by others to ensure their authenticity. Validators are more likely to be selected by the network for the previous role if they own more ETH, and will be rewarded with more ETH over time as a result.
On the other hand, a cut occurs when an Ethereum validator does not fulfill its responsibilities properly. An example could include proposing more than one block at the same height as a network block, or other ways to contradict their previous announcements on the network.
Cutting off penalties
Reduced penalties can also be imposed on auditors who remain inactive for long periods of time. Lido estimated that its penalties would reach 23.06 ETH before it could withdraw ETH from withholding validators.
“IR downtime penalties and total lost rewards (excluding EL rewards) amount to 5,663 ETH (including discounted validators).” Ledo added.
The contract has already been launched Cashing 25,663 ETH to compensate reduced stake holders, and they will contribute more ETH if the final penalty accumulates afterward.
Lido currently controls $13.7 billion worth of ETH on behalf of its stakeholders, according to Devillama – More than 25% of the total value bet on Ethereum.
Last month, a Bitcoin mining company, Marathon Digital, mined an invalid Bitcoin block, causing the loss of newly minted Bitcoin — the Bitcoin-based equivalent of a severance event. Analysts later confirmed that the company had incorrectly ordered its transactions within the block.
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