StaFi ETH Validator Slashing Insurance
- Platform: Tidal
- Pool Proxy Address: 0x8B5D51EdE7b5844d764B1BeF0721e504D1795897 (opens in a new tab)
Slashing loss refers to penalties that validators face on proof-of-stake networks like Ethereum 2.0 if they misbehave. These penalties can range from 0.01% of stake for minor offences up to 100% slash for severe violations like deliberate collusion. While minor 0.01% slashes are common, loss of over 3% of stake per incident is rare. On average, slashing results in less than 0.1% loss of staked assets for diligent validators.
To mitigate this risk that validators face, StaFi is launching an insurance pool through Tidal Finance that will help compensate users in case their validators get slashed. When a slash event occurs due to validator misbehavior or negligence, the associated losses will be covered by the insurance pool up to a capped amount per user. This adds a layer of protection on top of StaFi's existing proactive measures to select and monitor good validators. By leveraging Tidal's platform, StaFi can offer insurance coverage tailored to slashing events while pooling funds in a decentralized manner.
Initially, StaFi will allocate a portion of its own resources to fund coverage for users against slashing losses. But users will also be able to purchase additional slashing insurance at a low cost to boost their coverage. This allows the insurance pool to grow collectively larger, enabling us to protect more users from losses arising due to infrequent but potentially high-impact slashing incidents.
The insurance coverage can be purchased through Tidal Finance's platform for only 0.3% of the staked asset value annually. Compared to earning over 5% APR on ETH staking rewards, getting protection against slashing risks costs just a small fraction of the yield. This makes participating in the insurance pool highly attractive for StaFi users looking to minimize risks. The initial coverage focuses on insuring against losses specifically for ETH stakers.
By launching insurance coverage against slashing risks, StaFi is taking user protection to the next level. Stakers can now deposit ETH with the added confidence of knowing their funds have an extra safeguard against penalties imposed on validators. We invite the community to participate in securing the insurance fund's growth as we work together to mitigate staking risks on Ethereum 2.0.