Chainproof Addresses Ethereum ‘Slashing’ Losses Through Guaranteed Annual Income

Slashing events, though infrequent, pose a significant threat to Ethereum validators who stake their tokens to secure the network. To address this, Chainproof has unveiled a new insurance product that protects stakers against slashing losses while guaranteeing a minimum annual return.

Slashing is an Ethereum protocol feature designed to penalize validators by confiscating a portion of their staked ETH if they submit faulty or malicious data. The majority of slashing incidents are caused by software bugs or human mistakes, not deliberate attacks.

Through a partnership with IMA Financial Group, Chainproof’s insurance guarantees that if a validator’s annual staking yield falls below the Composite Ether Staking Rate (CESR)—a benchmark that tracks the average yield of all Ethereum validators—the policy will make up the difference.

The CESR metric, created by CoinDesk Indices and CoinFund, serves as an industry standard for assessing staking performance. Chris Perkins, President of CoinFund, emphasized the importance of such protections: “With staking increasingly integral to ETFs and institutional investment products, yield guarantees will be essential to attract large-scale investors.”

Currently, Ethereum staking offers returns of around 3.5% annually, rewarding users who lock up their tokens to validate transactions.

Slashing: A Rare But Serious Concern

Since Ethereum’s staking launch in 2020, there have been 474 recorded slashing events, according to beaconcha.in. One notable incident occurred in 2023 when Bitcoin Suisse lost nearly $200,000 after 100 validators were slashed.

While slashing losses are modest compared to hacks or DeFi vulnerabilities, the risk of a massive, simultaneous slashing event remains a worry for security experts.

Chainproof’s insurance differs from existing products like Nexus Mutual, which provide coverage on a per-slashing-event basis but do not guarantee overall yield protection.

Chainproof promises to reimburse between 95% and 98% of the CESR benchmark over a 12-month period. If slashing causes staking rewards to dip below this range, stakers receive automatic compensation, providing a safety net for institutional participants.

Don Ho, Chainproof’s CEO and co-founder, noted that yield assurance is a critical step toward broader institutional adoption of crypto staking.

The product is scheduled for launch on June 1, with early access available to major validators and institutional staking service providers.

Several prominent staking platforms—including Blockdaemon, Pier One, Globalstake, and P2P—have announced plans to offer Chainproof’s insurance to their clients, further reinforcing confidence in Ethereum staking.