Every Proof of Stake blockchain relies on validators to store blockchain data, validate transactions, and create blocks. In return, they earn staking rewards. However, if validators fail their duties or harm the network’s integrity—intentionally or not—they face penalties through a slashing mechanism, losing a portion of their stake.
Why Does Slashing Exist?
Validators are crucial for any PoS blockchain, performing tasks like maintaining the blockchain and verifying transactions. To ensure honest behavior, the network incentivizes them with staking rewards and transaction fees. Slashing acts as a deterrent, penalizing actions such as missing blocks or validating false transactions. This system ensures network stability by discouraging misconduct.
For example, in 2023, over 100 Ethereum validators were slashed for 1 ETH each for errors. While unintentional mistakes result in modest fines, repeated or malicious actions can lead to severe penalties like losing all ETH staked.
How Slashing Works in TON
TON's validation process occurs in three stages:
- Election: Validators are selected for the cycle.
- Validation: Validators process transactions and create blocks.
- Hold: Validators’ stakes and rewards are temporarily frozen. During this phase, validators review each other’s performance, filing slashing complaints for misconduct like block missing or cheating.
Block missing refers to a validator’s failure to produce the required blocks, while cheating involves malicious activities like creating forks. If 2/3 of validators agree on a complaint, the misbehaving validator is fined.
Currently, slashing penalties in TON amount to 101 TON for both idling and cheating. While there are mechanisms to increase fines for repeat offenders, such incidents are rare due to the high standards maintained by TON validators.
How Tonstakers Protects Users from Slashing
Tonstakers pools user funds and delegates them to validators. Unlike many liquid staking services, Tonstakers has implemented robust safeguards to ensure its users are unaffected by slashing events.
Validator Selection: Tonstakers collaborates only with trusted validators with proven operational excellence and reliable infrastructure, minimizing risks of misconduct.
Slashing Protection Mechanism: Validators are contractually obligated to return the full amount of TON provided for staking, along with agreed-upon rewards, regardless of slashing incidents.
For example, if Tonstakers provides 699,999.99 TON to a validator with a commitment to return 700,098.25 TON, this agreement remains binding even if the validator is penalized. In such cases, validators cover the losses from their own funds, ensuring Tonstakers users are never affected.
This approach contrasts with services like Lido, which faced a loss of 20 ETH in a slashing event. Lido opted to introduce an insurance fund, whereas Tonstakers preemptively safeguards users through its innovative system.
Upcoming Changes to TON Slashing
TON developers are working on slashing optimization, which includes:
- Improved Detection: Validators will use automated tools to identify poor performance and file complaints efficiently.
- Adjustable Penalties: Fines may become proportional to the validator's stake or escalate for repeated violations.
- Stake-Based Penalties: Instead of deducting fines from rewards, future updates may slash validators' stakes directly, making penalties more impactful.
While these changes may slightly reduce median liquid staking APYs, they will enhance network stability by rewarding responsible validators and discouraging misconduct. Tonstakers’ careful validator selection will ensure its users remain unaffected.
Conclusion
Validation is critical for any PoS blockchain, and slashing ensures validators act responsibly. Unlike some networks where liquid staking users risk losses from slashing, Tonstakers offers a unique safeguard: validators must return a fixed amount of TON and rewards, even in the event of slashing.
This protection, combined with a rigorous validator selection process, makes Tonstakers a reliable and secure choice for liquid staking.