The case against slashing? posted last month

On the A16Z's blog, Sreeram Kannan and Soubhik Deb wrote a great article on the cryptoeconomics of slashing.

If you didn't know, slashing is the act of punishing malicious validators in BFT consensus protocols by taking away tokens. Often tokens that were deposited and locked by the validators themselves in order to participate in the consensus protocol. Perhaps the first time that this concept of slashing appeared was in Tendermint? But I'm not sure.

In the article they make the point that BFT consensus protocols need slashing, and are less secure without it. This is an interesting claim as there's a number of BFT consensus protocols that are running without slashing (perhaps a majority of them?)

Slashing is mostly applied to safety violations (a fork of the state of the network) that can be proved. This is often done by witnessing two conflicting messages being signed by the same node in the protocol (often called equivocation). Any "forking attack" that want to be successful will require a threshold (usually a third) of the nodes signing conflicting messages.

Slashing only affects nodes that still have stake in the system, meaning that forking old history to target a node that’s catching up (without a checkpoint) doesn’t get affected by slashing (what we call long-range attacks). The post argues that we need to separate the cost-of-corruption from the profit-from-corruption and seem to only assume that the cost-of-corruption is always the full stake of all attackers, in which case this analysis only makes sense in attacks aiming at forking the tip/head of the blockchain.

The post present a new model, the Corruption-Analysis model, in order to analyze slashing. They accompany the model with the following table that showcases the different outcomes of an attack in a protocol that does not have slashing:

Briefly, it shows that (in the bottom-left corner) failed attacks don't really have a cost as attackers keep their stake (S) and potentially get paid (B1) to do the attack. On the other hand it shows that (in the top-right corner) people will likely punish everyone in case of an attack by mass selling and taking the token price down to $0$ (an implied feature they call token toxicity).

On the other hand, this is the table they show once slashing is integrated:

As one can see, the bottom-left corner and the top-right corner have changed: a failed attack now has a cost, and a successful attack almost doesn't have one anymore. Showing that slashing is strictly better than not slashing.

While this analysis is great to read, I'm not sure I fully agree with it. First, where did the "token toxicity" go in the case of a successful attack? I would argue that a successful attack would impact the protocol in similar ways. Perhaps not as intensely, as as soon as the attack is detected the attackers would lose their stake and not be able to perform another attack, but still this would show that the economic security of the network is not good enough and people would most likely lose their trust in the token.

Second, is the case where the attack was not successful really a net improvement? My view is that failed attacks generally happen due to accidents rather than legitimate attempts, as an attacker would most likely succeed if they had enough to perform an attack. And indeed, I believe all of the slashing events we've seen were all accidents, and no successful BFT attacks was ever witnessed (slashing or no slashing). (That being said, there are cases where an attacker might have difficulties properly isolating a victim's node, in which case it might be harder to always be successful at performing the attack. This really depends on the protocol and on the power of the adversary.)

In addition, attacks are all different. The question of who is targeted matters: if the victim reacts, how long does it take them to punish the attackers and publish the equivocation proofs? Does the protocol has a long-enough unstaking period to give the victim time to punish them? And if a third of the network is Byzantine, can they prevent the slashing from happening anyway by censoring transactions or something? Or worst case, can they kill the liveness of the network instead of getting slashed, punishing everyone and not just them (up until a hard fork occurs)?

Food for thought, but this shows that slashing is still quite hard to model. After all, it's a heuristic, and not a mechanism that you will find in any BFT protocol whitepaper. As such, it is part of the overall economic security of the deployed protocol and has to be measured via both its upsides and downsides.