Lido Finance discloses 20 slashing events due to validator config issues

October 12, 2023 Coin Telegraph

The initial impact amounted to 20 Ether, worth $31,000, while the validator involved has now been taken offline.

Ethereum staking protocol Lido Finance has disclosed its protocol saw 20 slashing events due to a series of infrastructure and signer configuration issues from validators operated by Launchnodes.

The incident occurred on Oct. 11 at about 3:30 pm UTC, according to Launchnodes. In an Oct. 11 post on X, Lido said Launchnodes' validators nodes are now offline, and slashings have ceased while the root cause was being investigated.

The slashing took place on the Ethereum blockchain and Lido projected the impact to be around 20 Ether (ETH), worth $31,000, as well as additional penalties while the validators are offline for troubleshooting, along with inactivity penalties that the validators will accumulate.

20 slashings have occurred relating to validators operated by the @launchnodes node operators as a part of the Lido protocol.

Launchnodes and DAO contributors are investigating.

The validators are offline and slashings have ceased while the root cause is being investigated.
— Lido (@LidoFinance) October 11, 2023

Slashing is a process where a validator breaches a blockchain’s proof-of-stake consensus rules, which often results in the removal of that validator or slashing a portion of the staked-Ether that they provided as collateral.

In a post hours later, Launchnode said the slashing events occurred due to an infrastructure and signer configuration issue.

“We are investigating, and taking steps to prevent any further occurrences and restore full service,” the platform added.

Addressing the 5:30pm CET incident with Launchnodes' validator nodes for Lido protocol getting slashed: The issue is identified, and linked to an infrastructure and web3 signer configuration issue. We are investigating, and taking steps to prevent any further occurrences and…
— Launchnodes (@launchnodes) October 11, 2023

Lido said stakers on the protocol are not affected other than a reduction in daily rewards that will be reflected in the next rebase on Oct. 12.

The staking provider also confirmed that the Lido DAO has an insurance fund of 6,230 staked-ETH, worth $9.5 million, and will be used to mitigate the slashing impact — but by design it does not trigger automatically.

Lido added that stETH holders will be compensated once the “cover method” has been decided, while Launchnodes has pledged to reimburse all losses incurred to Lido.

The liquid staking protocol said the process isn’t automatic because it is impossible to know what the total losses will be ahead of time.

Lido is by far the largest liquid staking protocol, with $13.8 billion in total value locked on its protocol, according to DefiLlama. The next largest is Rocket Pool at $1.7 billion.

Only 226 validators (0.04% of all validators) in the Ethereum ecosystem have been slashed since the launch of the Beacon Chain on Dec. 1, 2020 up until late February 2023.

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Ether hits 11-month high as post-Shapella withdrawals pass 1M ETH

April 17, 2023 Coin Telegraph

Beacon Chain

Since the Shapella hard fork on April 12, Ether has seen a price gain of nearly 10%.

Over 1 million Ether (ETH) worth $2.1 billion has now been withdrawn from Ethereum’s Beacon Chain within the first four days of the Shapella hard fork and Ether has pushed over $2,100 for the first time in 11 months.

The 1.03 million ETH withdrawals have come from 473,7000 withdrawal requests, with Saturday, April 15 being the largest withdrawal day at 392,800 ETH according to data from beaconcha.in.

Of the active validators, nearly 87% or 469,000 of the 540,000 are now able to withdraw their staked Ether.

*April 15 to 16 saw the largest Ether withdrawals processed so far, with 392,800 and 280,400 Ether withdrawn respectively. Source:* *beaconcha.in*

While members of the Ethereum community were split on what impact Shapella would have on the price of Ether, the first four days have produced close to a 10% rise.

*ETH has increased about 9% since the Shapella upgrade took effect late on April 12. Source:* *CoinGecko*

The figures are of little “surprise” to Lachlan Feeney, chief executive of blockchain consulting and development firm Labrys, who explained to Cointelegraph that many validators are re-staking Ether back onto the Beacon Chain:

“Much of the stake that has been withdrawn over the last few days is actually going straight back into The Beacon Chain as validators are looking to compound their interest. So much so that net stake is currently increasing.”

Given the current macroeconomic climate, Feeney explained that many early stakers wanted to liquidate after what has been nearly a 30-month wait for some.

Over the mid to long-term, Feeney believes the Shapella hard fork will only increase the amount of Ether staked, which of course will only strengthen Ethereum at the consensus level:

“Because Shapella is a massive de-risking event, over the medium to long-term more, not less, ETH will be staked. We anticipate that in the not too distant future, we will reach a record high of Ether being staked.”

Markus Thielen, the head of research at digital asset platform Matrixport explained to Cointelegraph that the closure of crypto exchange Kraken’s staking services may have contributed to the higher figures:

“It appears largely due to the Kraken's staking business being unwound. This will only have a temporary effect as we are also seeing a significant demand from investors who now are able to stake with more visibility on the liquidity of staked positions.”

Thielen said he expects a large amount of un-staked Ether from Kraken to be “recycled” back into the Beacon Chain through other entities.

While Thielen anticipates the positive price action to cool off this week amid increased selling pressure, he thinks Shapella will ultimately attract more institutional investors to stake on Ethereum.

The 1 million milestone is a 500% increase from an April 11 prediction by blockchain intelligence firm Glassnode, which estimated only 170,000 Ether to be un-staked after the first week of Shapella.

On-chain analytics firm Nansen slightly overshot the mark, predicting 1.4 million Ether would be withdrawn after the first few days of Shapella.

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Less than 1% of staked ETH estimated to sell after Shanghai upgrade: Glassnode

April 12, 2023 Coin Telegraph

Beacon Chain

The analytics firm backed up its prediction, stating only 253 validators have signed up to fully exit their staked Ether position.

An estimated 170,000 Ether (ETH) of the total 18.1 million ETH staked on the Beacon Chain will be unlocked within the first week of the Shanghai hard fork being executed on Ethereum, Glassnode has predicted.

The figure will comprise 100,000 Ether ($190 million) staking rewards and 70,000 ETH in staked Ether ($133 million) hitting the market the on-chain intelligence platform predicted in its April 11 report.

Glassnode backed up its prediction by explaining that only 253 depositors are waiting to exit their stake and that a few mechanisms are in place to prevent a flood of Ether supply from hitting the market all at once.

The highly anticipated Shanghai/Capella hard fork is scheduled to take place on 12-April-2023, enabling the withdrawal of staked #Ethereum.

In this extended edition of the Week On-Chain, we shall evaluate the overall Ethereum staking landscape, develop a framework to establish… pic.twitter.com/EVgsz3s6GG
— glassnode (@glassnode) April 11, 2023

The 253 exiting depositors own a total of 1,229 validators, while another 214 slashed validators will be forced out as soon as Shanghai is activated on Ethereum with Glassnode confident the hard fork will not have a "dramatic" impact on Ether's price action:

“Even in the extreme case where the maximum amount of rewards and stake are withdrawn and sold, the sell-side volume still falls within the range of the average weekly exchange inflow volume.”

“Therefore, we conclude that even the most extreme case will have an acceptable impact on the price of ETH,” the firm added.

Data shared by Glassnode found that only 22% of the 253 exiting depositors are currently in profit too.

*The types of organizations, size, age and profitability of each of the 253 exiting Ethereum validators. Source:* *Glassnode*

Glassnode expects a large amount of Ether to be withdrawn from the crypto exchange Kraken after the legality of its staking services was challenged by the United States Securities and Exchange Commission (SEC).

It also anticipated that crypto lending platform Celsius may withdraw a large amount to sell its staked Ether as part of its bankruptcy proceedings.

However, it is unlikely that Kraken and Celsius will make these withdrawals as soon as Shanghai is activated, it said.

*Approximately 11.2% of the Ether staked on the Beacon Chain is operated by Kraken’s staking service. Source:* *Glassnode*

The average deposit price across all staked ETH is $2,136, down 12.7% from Ether’s current price of $1,865, which equates to a net unrealized loss of $4.7 billion, Glassnode said:

“After the peak unrealized loss of $16B in July 2022, the net unrealized loss now amounts to $4.7B. It is mainly carried by the Whale sized depositors, who hold a 76% share of the unrealized losses.”

Global financial firm Fidelity Investments is also of the view that Shanghai won’t have too much of an impact on Ether's price action.

It explained in an April 5 report that “selling pressure will be muted due to the likelihood of partial withdrawals being re-staked as well as the length of time the withdrawals will take.”

The Shanghai upgrade is set to take effect on April 12, 10:30 pm UTC according to blockchain infrastructure firm Blocknative.

The unlocking of staked Ether will be enabled by Ethereum Improvement Proposal-4895.

Of the five EIPs that will be activated by Shanghai, it is by far the most anticipated one as it will move Ethereum one step closer to a fully functional proof-of-stake system.

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Ethereum validator cashes in 689 ETH from MEV-Boost relay

April 10, 2023 Coin Telegraph

Beacon Chain

The 689 Ether, worth nearly $1.3 million, is the largest reward received since the 691 Ether reward on March 20 paid to Lido.

A 689 Ether (ETH) reward worth $1.28 million has been paid from a single Miner Extractable Value (MEV)-boost relay block on the Ethereum Beacon Chain in one of the largest rewards in recent months.

Ethereum liquid staking solution Lido was paid the reward from block number 17007842 on the Beacon Chain — which was finalized on April 9, contained 47 transactions and was built by beaverbuild.org, according to transaction data.

High Proposer Payment Alert!
Validator 0x388c... received 689.02 ETH.
Block built by a @beaverbuild builder (0x96a59d...)‍
Slot: 6,181,978.
Received through the @GnosisDAO relay.https://t.co/Pv3bqfZMrU
— MEV-Boost Bot (@mevproposerbot) April 9, 2023

The reward almost matched Lido’s most recent high of 691 Ether on March 20.

The figure raised the eyebrows of Martin Köppelmann, the co-founder and CEO of Ethereum-based infrastructure platform Gnosis, who suggested Ethereum users should use a service like MEVBlocker to prevent their transactions from being exploited.

More than 90% of the MEV currently being paid to validators could go to users if all users or wallets would use services like https://t.co/ijeJy3LwBl https://t.co/DHlp6tUz7J
— Martin Köppelmann (@koeppelmann) April 9, 2023

According to MEVBlocker, MEV bots have extracted more than $1.38 billion from Ethereum users attempting to trade, provide liquidity and mint nonfungible tokens (NFTs).

These centralized MEV-boost relays are able to extract value by aggregating blocks from multiple builders in order to select the one with the highest fees.

One of the most common types of MEV exploits is the “sandwich” attack, which occurs when an attacker places a large trade on either side of a target's transaction, manipulating the price and profiting from the price change.

MEV-boost relays stem from the concept of Proposer-Builder Separation (PBS), which was introduced by the Ethereum research organization Flashbots in 2021 in the lead-up to Ethereum’s transition to proof-of-stake in September.

Separating the role of proposers from block builders is intended to promote more competition at the consensus level, further decentralize the Ethereum network and strengthen censorship resistance.

However, Ethereum has encountered several censorship issues since The Merge took place, namely compliance with standards laid down by the Office of Foreign Assets Control (OFAC), although the number of compliant blocks has since fallen.

There are currently 10 active relays, with Flashbots responsible for relaying more than 50% of the MEV-boost blocks since MEV was introduced in 2021, according to MEVBoost.org.

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‘Withdrawals are coming!’ — Ethereum devs confirm epoch for Shapella fork

March 29, 2023 Coin Telegraph

Beacon Chain

Shapella will take effect at epoch 194,048, which is scheduled for 10:27:35pm UTC on April 12.

Ethereum validators will soon be able to withdraw their Ether (ETH) from the Beacon Chain, with the Shapella hard fork set to be activated on the Ethereum mainnet on April 12.

Shapella will take effect at epoch 194,048, which is scheduled for 10:27 pm UTC on April 12, Ethereum core developers confirmed.

The withdrawals will be enabled by Ethereum Improvement Proposal EIP-4895 by “pushing” staked Ether from the Beacon Chain to the Ethereum Virtual Machine (EVM), otherwise known as the execution layer.

It's happening

Shapella is scheduled on mainnet for epoch 194048, scheduled for 22:27:35 UTC on Apr. 12, 2023

Client releases compatible with the upgrade are listed in the announcement below https://t.co/I0hSv9lnjz
— timbeiko.eth ☀️ (@TimBeiko) March 28, 2023

The epoch, slot, and time were confirmed following a week-long deliberation between members of the Ethereum Foundation, which was led by Ethereum core developer Tim Beiko.

*Tim Beiko suggested three epoch, slot and time combinations to members of EF two weeks ago. Source: Ethereum.org*

While the hard fork will allow for partial and full withdrawals, several mechanisms are set in place to ensure a flood of Ether supply doesn’t disrupt the market.

There are now 17.81 million Ether staked on the Beacon Chain. At a current price of $1,776, which means $31.6 billion can be incrementally unlocked over time.

*Staked Ether added to the Beacon Chain since it launched in December, 2020. Source:* *Beaconcha.in.*

While the Ethereum Foundation described the last testnet run on Goerli as “smooth,” there was a notable delay in activation time due to many validators not updating their client software.

However, Beiko is confident it won’t be an issue this time, as Ethereum validators will be economically incentivized to make the update for the Mainnet.

Ethereum’s key hard forks

Because of EIP-4895, Shapella is considered the most significant hard fork on Ethereum since Paris (The Merge) changed the network consensus mechanism from proof-of-work to proof-of-stake on Sept 15.

Prior to that, London introduced EIP-1559 in August, 2021, which introduced a base fee that users must pay instead of the old price auction method. While the validators still receive a block reward and tip, the base fee is burned, which is intended to make Ether deflationary over time.

Berlin optimized gas costs for some EVM actions in April 2021, while Beacon Chain Genesis marked the first block that was produced on the proof-of-stake chain on Dec. 1, 2020.

Finally in December 2019, Istanbul served to improve denial-of-service attack resilience and make layer-2 scaling solutions based on SNARKs and STARKs more performant.

If you want to watch as the upgrade happens, you can join @ethStaker, @EthCatHerders, myself and others during the Shapella watch party here https://t.co/ZHWQfMemZc
— timbeiko.eth ☀️ (@TimBeiko) March 28, 2023

The Ethereum Foundation also announced last week that it doubled rewards for any bugs found in the Shapella code. Successful bounties may receive a reward anywhere between $2,000 and $250,000, depending on how “critical” the bug is.

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Breaking: Shanghai upgrade executed on testnet but not without issues

March 15, 2023 Coin Telegraph

Beacon Chain

Ethereum validators are now one step away from being able to unstake their Ether from the Beacon Chain.

The Shapella hard fork has been executed on the Goerli testnet — the last test run before Ethereum validators will be able to withdraw their Ether (ETH) from the Beacon Chain.

There were, however, issues with the hard fork. Ethereum core developer Tim Beiko noted that while deposits were being processed, the process didn’t run as smoothly as it could have because several testnet validators didn’t upgrade their client software before the Goerli fork.

Deposits are being processed (https://t.co/CxYtPcGMCp), but it seems like several validators haven't upgraded. Looking into it

One challenge with testnet validators is that given the ETH is worthless, there's less incentive to run a validator/monitor it.
— timbeiko.eth (@TimBeiko) March 14, 2023

He blamed it on testnet validators having “less incentive” to make the upgrade given that the Goerli “ETH is worthless” but expects validators to make proper adjustments ahead of the fork on the Ethereum mainnet.

Through Ethereum Investment Proposal EIP-4895, staked ETH from the Beacon Chain will be “pushed” to the execution layer.

While the Shapella upgrade comprises five different EIPs, EIP-4895 has been by far the most anticipated one, as it moves Ethereum one step closer to a fully functional proof-of-stake system.

Shapella is now expected to take effect on the Ethereum mainnet in early April.

The execution on Goerli was shared in a March 15 live stream by EthStaker on YouTube.

We're going LIVE in ~10 minutes to discuss the Goerli Shapella Upgrade

Watch here https://t.co/PDFvmqyFGM
— r/EthStaker (@ethStaker) March 14, 2023

This is a developing story, and further information will be added as it becomes available.

Only 0.04% of Ethereum validators have been slashed since 2020, says core dev

February 23, 2023 Coin Telegraph

Attestation Violation

Only 226 validators have been slashed since Ethereum staking began, with 75 of those coming from a single event in February 2021.

The Ethereum ecosystem has seen only 226 validators slashed since the launch of the Beacon Chain on Dec. 1, 2020 — amounting to just 0.04% of 524,060 validators, according to an Ethereum core developer.

Slashing is a process where a validator breaches the proof-of-stake consensus rules, which often results in the removal of that validator from the network and slashing a portion of the staked Ether (ETH) that the validator provided as collateral.

Such slim odds of being slashed were highlighted by Ethereum core developer “Superphiz” in a Feb. 23 Twitter post, which suggests that people shouldn’t be concerned about staking ETH for that particular reason.

226 out of 523,000 validators on the beacon chain have been slashed. This is nothing to lose sleep over. Many slashings have occurred during failed system migration. Here are four emerging best practice tips to avoid this:https://t.co/wleR4YQmDD
— superphiz.eth (@superphiz) February 22, 2023

The developer also explained “four emerging best practices” to reduce those odds even further.

One of these practices was to wipe any existing chain data on old staking machines and to reinstall and reformat the validator where necessary, said Superphiz, noting that many slashings occur due to “failed systems migrations.”

Superphiz then suggested using “doppelganger detection,” which checks whether the validator’s keys are active before starting the validation process.

While this can impact validator uptime, he explained that “perfect uptime” isn’t worth getting slashed in the grand scheme of things:

“It's wise to throw away $0.06 to save $1700. (A slashing costs about 1 Ether).”

The developer said it is also worth watching buffers and logs on the Beacon Chain to become aware of any potential problems that may arise.

*Log of the slashed validators on the Beacon Chain.* *Source: Beaconcha.in*

If something feels wrong, Superphiz suggested “unplugging everything” and to “come back” when the problem has been identified and a proposed solution is set in place.

The developer also noted that over 150 of the 226 slashings have been caused by services rather than “home stakers.”

*Staked ETH and number of active validators on the Beacon Chain. Source: Beaconcha.in*

Slashing can occur due to an “attestation” or a “proposal” violation, according to the Ethereum Foundation.

An attestation violation is one where a malicious validator attempts to change the history of a block or “double votes” by attesting two candidates for the same block.

A proposal violation occurs when a validator proposes and signs two different blocks for the same slot.

The majority of slashing events have come from attestation violations, according to data from beaconcha.in.

One of the largest slashing events occurred on Feb. 4, 2021, when staking infrastructure provider “Staked” had 75 of its validators slashed for producing competing blocks. Staked said the attestation violation came about due to a “technical issue.”

Since the Beacon Chain merged with the Ethereum proof-of-work chain on Sept. 15, only 35 of the total 226 slashings have taken place, according to beaconcha.in, which suggests that the Merge has not had a profound impact on slashing rates.

With about 16.7 million ETH staked (according to beaconcha.in) out of 120.4 million ETH currently in circulation (according to CoinGecko), the percentage of ETH staked is about 13.9%.

ETH can be staked via a centralized exchange, by delegation to a third-party validator network, or by running on an independent node, which requires 32 ETH.

Beacon Chain

Ethereum’s key hard forks

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