No Risk, No Loss: How Tonstakers Protects its Users From Slashing

Key Takeaways

• Slashing deters validator misbehavior by penalizing those who miss blocks or attempt to cheat the network.
• TON’s slashing mechanism is evolving to improve detection, adjust penalties, and ensure greater network security.
• Tonstakers protects users from slashing by carefully selecting validators and ensuring they return the full staked amount plus rewards.

Tonstakers provides a secure liquid staking solution where users are fully protected from slashing penalties. Our system ensures validators are responsible for covering any penalties, so your staked TON and rewards remain unaffected.

Every Proof of Stake blockchain has validators who do the most important tasks: store blockchain, validate transactions, and create blocks. For working honestly they receive staking rewards, and for missing their work they get what? They lose a part of their stakes through the slashing mechanism. Harming network’s integrity, intentionally or not, is punishable with fines.

Tonstakers pools users TON and provides it to validators to stake. So, if one validator gets slashed, will it affect Tonstakers staking rewards or even bring loses to its users? You can relax: Tonstakers users are safe from slashing and in this article we’ll explain how we achieve this.

Why Does Slashing Exist?

Validators are the backbone of any PoS blockchain network. They are doing the most important tasks like storing the blockchain and defining the network’s state. You can find more information about their responsibilities in our recent post.

A blockchain network needs validators, because it can’t work without them. Network incentivizes them for their honest works with staking rewards and allowing them to take transaction fees.

Dishonest behaviour has to be exposed quickly and punished, as missing block creation or confirming invalid transaction might disrupt the network. Slashing is the optimal punishment: a fine is sufficient but not excessive for an accidental mistake and is devastating for continuous misbehavior. E.g in 2023 more than 100 Ethereum validators were slashed for 1 ETH for mistakenly posting incorrect data but should they continue, they could have lost all ETH staked.

Staking rewards and slashing is a carrot and stick system and is present in all PoS chains: from the first ever Proof-of-Stake blockchains to the modern ones like TON.

How Slashing Works in TON?

In TON, the validation cycle consists of three periods:

1. Election: the protocol chooses validators to participate in the cycle.
2. Validation: elected validators validate transactions and create blocks.
3. Hold: validators stakes and rewards are temporarily frozen. During this period, validators check each others’ actions in current cycle to notice misbehaviors and apply slashing to dishonest ones if needed.

There are two punishable activities in TON: block missing and cheating.

Block missing is about the validator idling instead of producing the blocks. The number of blocks to be produced by each validator is known so validators simply check on each other if they created enough blocks or not. If a bad validator does not hit the block creation goal, the validator who noticed it will publish a complaint about it and send it to other validators.

Validator cheating is a general description for creating forks, like proposing and signing two blocks with the same height but with different transactions inside. When the cheater is detected, other validators ignore its blocks and file the same slashing complaint.

Complaints are reviewed automatically with special scripts like mytonctrl. Validators launch them to monitor the network’s activity, file slashing complaints with proofs attached, and vote for existing complaints.

If 2/3 of active validators vote for the complaint, the bad validator is slashed — the network deducts a fine from its staking rewards.

The current slashing amount is 101 TON both for being idle and cheating. In the current version, TON supports slashing modifications like making the fine proportional to the validator’s stake or multiplying the fine for several violations during one validation cycle. Currently, all validators work honestly and slashing is applied rarely, so there’s no need to raise the punishment.

How Tonstakers Protects Users From Slashing?

Liquid Staking services connect users and validators with receipt for their share in staking pool. Validators get additional token to stake, earn more and share their extra rewards with liquid staking users.

Getting slashed means losing tokens and in the worst case it means losing users’ tokens. Many Liquid Staking services aren’t protected from slashing: Lido, the biggest ETH liquid staking service, lost 20 ETH due to one bad validator in its pool. To protect users Lido decided to launch insurance fund but Tonstakers went other way and fully safeguarded its users from such punishment.

The first Tonstakers measure to safeguard the users from slashing is by carefully selecting the validators to work with. Big validators with a proven record of operations and good infrastructure are less likely to go offline or try to cheat the network.

The second measure is Tonstakers liquid staking workflow. The liquid staking mechanism is organised in a way for the validator to provide protection from slashing. If such an event occurs, users’ stakes aren’t affected.

Here’s a real example: a validator asks Tonstakers to provide 699,999.99 TON and specifies that it will return 700,098.25 TON after the validation cycle ends: the original TON plus staking rewards.

Regardless if the validator was slashed or not, it is obliged to return the provided sum and rewards, even if it would need to give a part of their own. This is how Tonstakers users are safe from slashing consequences and will always receive the staking rewards.

How TON Slashing Will Change in the Future?

TON developers have Slashing Optimization stated in their roadmap. It will change a few aspects of the slashing mechanism.

First, the poorly performing validators detection will get better. Now validators have to run separate scripts to check other validators’ performance, publish complaints, and vote for them.

Second, the penalties will change. Currently, validators are slashed for 101 TON — devs will probably increase this amount or make it adjustable, so the validator who was blatantly cheating will be fined more than a validator who missed a few blocks because of the network outage.

Third, the way the penalties are applied will change too. Now the slashing is applied only to the staking rewards. Let’s say the validator made 120 TON through a cycle but missed some blocks and now the network will deduct 101 TON from his rewards. The validator will still make 19 TON.

In the future, the stake will be slashed instead of rewards, so the punishment will be more tangible. This change will affect liquid staking, as the TON provided by liquid staking pools will be slashed too, so the validators will return less TON than they took.

In general, the last change to slashing might slightly decrease the median liquid staking APY. The good thing is that liquid staking pools who take care on selecting trustworthy validators won’t be affected. This measure will slowly redirect staked TON to the best validators and improve the whole network stability.

The point of the slashing optimization is to decentralize the staking mechanism further and make all staking participants responsible for the validation process. It will socialize the penalties and make The Open Network more secure.

Conclusions

Validation is the most responsible task in any Proof-of-Stake network. Validators should be rewarded for doing their job responsibly and penalized for hurting the network — this is what slashing is for.

In other networks like Ethereum, liquid staking users can suffer from slashing because the validator loses a portion of their funds. To protect users, these networks introduce insurance funds to cover the losses.

Tonstakers liquid staking users are protected from slashing because the mechanism requires validators to return a specified amount of TON at the end of the cycle. Even if one of our carefully selected validators is subjected to slashing, our users won’t lose anything.

Stake with Tonstakers — it’s the safest place for your TON!