What Is Slashing in Staking?

The exponentially growing popularity of blockchain and cryptocurrencies has left the world ablaze. One of the most significant flaws of the current business of blockchain and staking as a whole has been the lack of reliability.

While the incentives to keep the network running without any compromise are luring, that is not the only factor keeping the community in check. Even though consensus algorithms ensure that the community stays true, the need for additional measures is always felt to ensure the integrity of the network.

The process of validating the block and adding it to the chain is crucial for a network’s authenticity as well as scalability. In Proof-of-Stake (Pos), only holders of the native tokens who stake their own coin in the network become a validator to make this process more reliable. The PoS blockchain algorithm generally operates on a reward and penalty mechanism. While the network rewards good conduct, the bad is penalised. This means any illicit activity with an attempt to tamper with the network or inactivity of the validator makes them subject to a penalty called Slashing. 

Specifics of slashing change from protocol to protocol. Some protocols have a predefined penalty ratio from a validator’s stake, some slash the whole amount, and some impeach the validators from the network altogether. 

What Triggers Slashing?

Slashing can primarily happen due to two reasons – double signing and downtime. For the latter, most blockchains have an expected activity ratio of validators. Any downtime accounts for the inactivity of a validator to sign transactions, which can be quite problematic for its users and deem it unreliable.

Double signing happens when a validator tries to sign two blocks at the same time. Validators often have a backup node running with their primary node to avoid downtime. However, this is also one of the reasons why double signing happens in the first place. 

What Are the Consequences of Slashing?

Ethereum network has a few underlying issues with network congestion leading to high gas fees and network congestion. The shift from existing Proof-of-Work (PoW) to PoS is an attempt to address these issues. Ethereum 2.0 is progressing towards the execution of the Sharding process, which will have 64 smaller chains running with the Beacon chain. In the end, a validator’s honesty will be an essential part of the beacon chain. 

Bad conduct on the network can lead to two things: penalties and punishments. While a penalty is less severe; it can lead to a reduction in a validator’s rewards. At the same time, punishments can even lead to impeaching the validator from the network. And complying with the rules of the beacon chain is the only way not to get slashed. 

The Beacon Chain Ethereum 2.0 explainer you need to read first | ethos.dev
Courtesy of ethos.dev

While most blockchains have different considerations for slashing a validator, networks like Ethereum 2.0 and Polkadot are amongst the networks that use correlated slashing to incentivise security in the network. Correlated slashing follows a ratio of total validators versus the ratio of validators with bad behaviour and escalated penalties according to this ratio.

Perks of Good Conduct as a Validator

Although the rules can get a little harsh to save the network with slashing, it rewards the validators for their good conduct. If a validator finds out about any such activities and reports them to the network, the network rewards the validator for reporting the malicious activity. 

While there exist many complex concepts that ensure a Blockchain-based decentralized network maintains its integrity, slashing is one of the crucial parts of this ecosystem. Since more blockchain platforms are adopting Proof of Stake, slashing helps define the punishment or consequences of the bad behaviour. 

When it comes to choosing a validator, it’s important to find one that is reliable, secure and safe. We at RockX have provided a safe and secure technology infrastructure to support the most innovative protocols in the market. As such, we have over $400M assets staked, providing $40M in annual yield.

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