Slashing risks, Kiln's anti-slashing strategy, and Kiln's insurance

Last updated: December 23, 2024

  1. Slashing occurs when a blockchain network imposes penalties due to validator misbehavior, unavailability, or incorrect operation. According to the Kiln Master Technology & Staking Agreement:

    • In the event of slashing caused by Kiln’s gross negligence, willful misconduct, or fraud, Kiln will assume full liability for 100% of the loss, without any liability cap applied.

    • If slashing occurs without Kiln’s gross negligence, willful misconduct, or fraud, Kiln’s liability will be limited to the agreed liability cap specified in the agreement between Kiln and its customers.

    • Correlated slashing from non-Kiln validators or failures caused by external factors (e.g., protocol-wide issues, software bugs) is explicitly excluded from liability.

Kiln has never experienced a slashing event due to our proactive "better down than slashed" operational strategy. This approach prioritizes network security by opting for temporary service downtime rather than risking validator misbehavior, ensuring maximum protection for staked assets.

  • The "better down than slashed" strategy emphasizes that planned downtime is a safer and more responsible approach than risking slashing penalties. This principle is grounded in the following rationale:

    • Mitigating risks through planned downtime controlled maintenance windows are preferable to unexpected emergency situations that could compromise validator performance and lead to slashing penalties. By proactively managing downtime, Kiln ensures operational stability and minimizes the potential for critical failures.

    • Ensuring reliability through testing scheduled updates and planned downtime provide an opportunity for thorough testing and system improvements. This approach reduces the likelihood of unexpected disruptions or vulnerabilities that could harm both Kiln and its clients.

    • Minimizing financial impact: The cost of brief planned downtime is significantly less damaging than the financial and reputational risks associated with slashing penalties. For high APR stakes, the consequences of slashing—lost funds and diminished rewards—are far greater than those of a well-executed maintenance window.

  • Our approach ensures that any rare incidents of downtime are mitigated with a strategic focus on maximizing customer rewards over the long term.

2.  The slashing insurance policy is designed to cover Kiln's liability, ensuring we can meet our obligations to customers in the unlikely event of a slashing incident caused by technical or operational failures on our end. In other words, if a slashing event arises, Kiln can make a claim under this insurance, ensuring we can meet our obligations to customers. In the event of a slashing incident, Kiln can file a claim under its insurance policy, reinforcing our ability to fulfill our commitments and provide financial protection to our customers. Once we have a MNDA in place, we'll happily share our insurance overview PDF.

3. The primary risk beyond slashing is related to cybersecurity incidents, including potential hacking attempts. To mitigate these risks, Kiln maintains a comprehensive cyber insurance policy, ensuring that even in the unlikely event of a cyberattack, we are equipped to meet our obligations to customers.
For more details, please refer to our Insurance Overview.
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