The bespoke coverage Nexus Mutual designed for Liquid Collective, alongside the Slashing Coverage Treasury and Node Operator Commitment, aims to address a significant risk for institutional staking participants, leading to greater adoption and growth of staking to secure proof of stake networks. Liquid Collective's Slashing Coverage Program provides web3-native slashing coverage to every participant staking through the Liquid Collective protocol. With the rise of institutional participation in staking, slashing coverage is a risk mitigation consideration for enterprises and institutions. Instead, the LsETH conversion rate programmatically adjusts to reflect the underlying ETH deposits (e.g., the LsETH conversion rate may weaken if a slashing incident occurs, but conversely strengthen when the protocol accepts a reimbursement deposit). Another benefit of the cToken model is that users' LsETH is not slashed. In either case, when a deductible or claim is reimbursed, the reimbursed ETH is deposited to the protocol without minting LsETH. In this case, 0.75 ETH (1 validator x 0.75 ETH). The Nexus Mutual coverage reimburses the remaining loss, up to the coverage limit.The node operator fulfills their Node Operator Commitment and posts a 0.25 ETH deductible, which is redeposited to the Liquid Collective protocol.In the case of a node operator slashable event, e.g., a misconfiguration in validator infrastructure that leads to a 1 ETH loss for a single node operator: In this case, 3.75 ETH (5 validators x 0.75 ETH).Įxample 2. The Nexus Mutual coverage reimburses the remaining loss, up to the coverage limit. In this example, the Slashing Coverage Treasury would reimburse the protocol 1.25 ETH (5 validators x 0.25 ETH). Deductibles are calculated as a maximum of 0.25 ETH per affected validator.Because this was a network-wide event, and did not result due to the fault/inaction of any specific node operator, deductibles towards the Nexus Mutual coverage are paid from the Slashing Coverage Treasury.In the case of a network-wide slashable event, e.g., a client bug that leads to a 5 ETH loss across 5 active validators: More validators mean more diversified risk, so we lower the cover per validator as Liquid Collective grows to provide the perfect balance between cost and coverage.”Įxample 1. “Nexus Mutual's coverage dynamically adjusts the cover amount as more ETH is staked to reflect the change in risk. Deductibles will be paid by either the responsible node operator or the Slashing Coverage Treasury. Nexus Mutual provides dynamic umbrella coverage up to 2.0 ETH per validator, and the deductible is assigned between the Node Operator Commitment and the Slashing Coverage Treasury, depending on the cause of the incident. How does slashing coverage work in different scenarios? Liquid Collective's Slashing Coverage Program is designed to mitigate the risks of both types of incidents. Slashing incidents may result from a node operator's specific fault/inaction as well as from network-wide events broadly (e.g., client bug, natural disaster). Node Operator Commitment: providing coverage for deductibles, up to a cap, against slashing incidents and missed rewards incurred due to the fault of node operators' infrastructure.Slashing Coverage Treasury: representing a percentage of all network rewards allocated to slashing coverage deductibles on network-wide slashing incidents.Nexus Mutual Coverage: fully scalable cover that dynamically adjusts with the protocol's assets on platform (“AoP”) with umbrella coverage of up to 2.0 ETH per validator.The program will offer three layers of protection to all participants staking through the Liquid Collective protocol. Liquid Collective's innovative coverage program is designed to mitigate risks of slashing incidents from node operator's specific fault/inaction (e.g., downtime, double-signing) and network-wide events (e.g., client bug, natural disaster). What is the Liquid Collective Slashing Coverage Program? Through this unique collaboration, Liquid Collective - the liquid staking protocol built and run by a collective of web3 teams like Coinbase, Kraken, Figment, and Kiln - is providing all of the protocol's participants with comprehensive slashing coverage through a multi-tiered program focused on protecting against slashing events. We're thrilled to announce the launch of Liquid Collective's Slashing Coverage Program in collaboration with Nexus Mutual, a prominent industry leader that provides decentralized crypto-native protection.
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