▶️Risk Socialization

Validators in the Cosmos ecosystem have different risk profiles due to various factors such as their hardware and software configurations, the experience and priorities of the teams running them, and their overall independence. To ensure fungibility of qAssets, the Quicksilver protocol incorporates a risk socialization mechanism.

In the event of a slashing event affecting one validator, the impact is shared by all holders of the related qAsset through a negative adjustment in the Asset:qAsset redemption rate. This means that the consequences of a validator's misbehavior or failure are distributed among all holders equally, rather than being concentrated on those who delegated to the specific validator.

However, the effect of a slashing event can be effectively mitigated through sufficient decentralization across validators. By spreading delegations across multiple validators, the impact of any single validator's failure is minimized.

Slashing Events and Redemption Rate Impact

The severity of a slashing event's impact on the redemption rate depends on the type of infraction and the size of the validator:

  • In the case of a double-sign slash (5%) for an average validator (managing 1% of the total supply), the redemption rate will be reduced by 0.05%.

  • For the same validator being jailed due to downtime (0.1%), the redemption rate will decrease by 0.001%.

Protocol Response to Double-Sign Infractions

When a validator is tombstoned (permanently removed) due to a double-sign infraction, the Quicksilver protocol will take action to maintain the health and security of the network. Subject to redelegation limitations, the protocol will move the delegation from the tombstoned validator to the validator that replaces it in the active validator set. This ensures a smooth transition and minimizes disruption to the network.

Last updated