⚔️Slashing

An overview of the slashing module.

Overview

The slashing module is a mechanism to penalize validators for a violation of protocol rules by slashing their bonded tokens. Penalties under the slashing module include burning a portion of a validator’s bonded tokens and/or temporarily removing their ability to vote on future blocks.

Summary

• Signing Info

• Liveness Tracking

• Messages

• Social Slashing

Key Concepts and Definitions

• States: In the state machine, a variable number of validators are registered, and during each block, the top max_validators (defined in the Staking module) who are not jailed become bonded and can propose and vote on blocks, with a ValidatorSigningInfo record tracking their liveness and potential protocol faults.

• Double Signing: When a validator is proven to have signed two blocks at the same height, causing conflicting blocks or transactions on multiple branches of the dYdX Chain.

• Downtime: When a validator does not vote on a dYdX Chain block for a period of time.

• Jailed: A period of time when a validator is not allowed to rejoin the Active Set due to a violation of protocol rules.

• Staking Tombstone: When a validator is permanently removed from the Active Set due to a double signing infraction. More information about Staking Tombstone is available here.

More information about the slashing module is available here.

Parameters

These parameters may be adjusted by the dYdX Community with an on-chain governance proposal.

Title	Value	Definition
signed_blocks_window	8192 ~ 3 hours 11 minutes (assuming 1.4s block time)	The window in terms of the number of blocks for which a validator's signing activity is monitored.
min_signed_per_window	0.2	The minimum of blocks in the signed_blocks_window that a validator must sign to avoid being jailed.
downtime_jail_duration	7200s 2 hours	The length of time a validator is temporarily removed from the Active Set.
slash_fraction_double_sign	0.0	The fraction of a validator's staked tokens that will be slashed in the event of a double signing violation.
slash_fraction_downtime	0.0	The fraction a validator will be slashed by if they miss a fraction (min_signed_per_window) of blocks within a sliding window (signed_blocks_window).

Signing Info

In every block, validators contribute to a set of precommits for the previous block, forming the LastCommitInfo in CometBFT. This LastCommitInfo is valid if it includes precommits from +2/3 of the total voting power.

If a validator fails to be included in the LastCommitInfo for a certain number of blocks, they will be automatically jailed, slashed or unbonded.

Liveness Tracking

dYdX Chain stores Information about validator's liveness activity on ValidatorSigningInfo. At the start of each block, the ValidatorSigningInfo for each validator is updated, and their liveness status over signed_blocks_window is checked.

The sliding window is defined by signed_blocks_window and the index is determined by the IndexOffset in each validator’s ValidatorSigningInfo. The IndexOffset is incremented with each block whether the validator signed or not, and the MissedBlocksBitArray and MissedBlocksCounter are updated accordingly once the index is determined.

To make sure whether a validator falls below the liveness threshold, the maximum number of blocks missed (maxMissed) and minimum height of liveness threshold (minHeight) are retrieved.

maxMissed = signed_blocks_window - min_signed_per_window * signed_blocks_window

If the current block is past minHeight and the MissedBlocksCounter exceeds maxMissed, the validator is slashed by slash_fraction_downtime, jailed for downtime_jail_duration, and has their MissedBlocksBitArray, MissedBlocksCounter, and IndexOffset reset.

Note, slashing due to liveness tracking failure does not lead to tombstoning.

Messages

• Unjail

Should a validator want to return and potentially rejoin the Active Set after being removed due to Downtime, they must send a MsgUnjail.

message MsgUnjail {
string validator_addr = 1;
}

Social Slashing

The MEV (Maximal Extractable Value) extraction by validators can undermine a fair and transparent trading environment. MEV refers to the profit a dishonest validator can gain by censoring and/or re-ordering orders and cancellations to their advantage. Validators could take advantage of the architecture of the dYdX Chain - an in-memory orderbook design - to manipulate, re-order, or censor trades before suggesting a new block for profit extraction, resulting in trades executing at worse prices relative to the best price possible and cancellations potentially being ignored.

To show how much MEV value could be extracted by each validator, dYdX Trading, Inc. ("dYdX Trading") and Skip Protocol have collaborated to create a dashboard that displays data on orderbook discrepancies.

Currently, there is no protocol-level solution to mitigate MEV on the dYdX Chain, despite MEV extraction being considered a harmful validator behavior. However, the dYdX community, through a governance vote, could approve the implementation of a social slashing framework to penalize validators engaged in MEV extraction.