Slashing
Last updated
Last updated
Slashing is a penalty mechanism within the ICN ecosystem, designed to ensure that Hardware Providers (HPs) maintain high levels of service and performance. When an HP fails to meet the expected service levels, part or all of their collateral is subject to slashing. This system ensures that HPs have "skin in the game" and are motivated to adhere to their obligations, thereby protecting the network's reliability and security.
Slashing occurs when an HP is found to be underperforming or violating the terms of their service agreements. The key events that trigger slashing typically include:
Service Downtime: If an HP fails to provide the required uptime or experiences frequent outages.
Poor Performance: Inadequate service quality, such as failure to meet data storage or compute obligations.
Breach of SLA: Violations of the Service Level Agreement (SLA) monitored by SLA Oracles.
When one of these violations occurs, the collateral locked by the HP is partially or fully slashed, and the penalties are enforced automatically by the ICN protocol.
When slashing is triggered, the penalty is first applied to the HP’s own locked collateral. This means the HP is primarily responsible for covering the penalties, as they are the ones providing the services.
Primary Collateral Slashing: If an HP fails to meet the service requirements, the collateral locked by the HP is slashed first.
Delegated Collateral: If the HP has collateral delegated from external token holders, the HP's own collateral is slashed before any delegated collateral is affected. This ensures that the HP bears the majority of the risk, not the delegators.
In cases where an HP's own collateral is insufficient to cover the penalties, delegated collateral (from external investors) may be slashed next. This is a key risk for delegators, as they may lose part of their collateral if the HP they have supported is slashed for underperformance.
Risk for Delegators: If slashing occurs, the risk is borne first by the HP and then by the delegators. Delegators must carefully choose which HPs to support to mitigate the risk of collateral loss.
Slashed collateral is transferred to the ICN Protocol Treasury. The treasury can use these funds for various purposes, such as:
Incentivising Replacement Nodes: In case of service disruptions, slashed collateral can be used to quickly incentivise other HPs to spin up new nodes and restore service.
Network Maintenance: The slashed collateral may also be used for general network maintenance and development.
The slashing mechanism ensures that HPs provide the highest possible service quality by enforcing penalties for failures. This helps protect the network from downtime and underperformance, creating a more reliable and decentralised cloud infrastructure.
For more information on collateral requirements and delegation risks, visit the Collateral and Delegation pages.
