To ensure reliability and security in Veno, our team has implemented a mechanism to help mitigate the impact of slashing penalties.
What is Slashing Penalty?
Slashing penalty occurs if a node encounters a double-signing fault; typically caused by an operational failure, where a backup node (with the same validator key) is enabled accidentally, and joins the network. Although it rarely happens, the impact of slashing penalties is huge because 5% of all staked CRO/ATOM within that node including unbonding users’ staked CRO/ATOM and the node itself will be depreciated. The impacted validator will also be blacklisted.
When a slashing penalty event happens, as known as the Drought Event, all protocol revenue allocated to the reservoir will be paused. Accrued treasury revenue and future protocol revenue will be used to repay LCRO/LATOM holders / unbonding users. Once the entire damage to users is paid out, this vault will resume its service as normal.