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 $1,564 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 ETH 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 Lido DAO has an insurance fund of 6,230 Staked ETH (stETH), 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 by 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 in 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.

Source: Cointelegraph.