# Staking Router Module Proposal: Simple DVT

**URL:** <https://research.lido.fi/t/staking-router-module-proposal-simple-dvt/5625>\
**Category:** Proposals\
**Created:** [October 10, 2023, 4:06pm UTC](https://research.lido.fi/t/staking-router-module-proposal-simple-dvt/5625 "2023-10-10T16:06:24Z")\
**Posts on this page:** 1\
**Showing post:** 14

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**Author:** ![Mol\_Eliza](https://dub1.discourse-cdn.com/flex013/user_avatar/research.lido.fi/mol_eliza/32/3617_2.png) [@Mol\_Eliza](https://research.lido.fi/u/Mol_Eliza)\
**Post date:** [October 25, 2023, 9:08am UTC](https://research.lido.fi/t/staking-router-module-proposal-simple-dvt/5625/14 "2023-10-25T09:08:11Z")

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Hey there, Mol\_Eliza from Analytics Workstream!  
First of all, thank you @KimonSH for transparent and precise formulated proposal, all participants for discussion and @chainproof and @ccitizen for their proposals for mitigation mechanisms.  
I’d like to provide my view on options for risk mitigation.

### Risk decomposition

For baseline step I’ll dive deep in risks associated with performing validator duties, based on [Risk assessment for community staking](https://research.lido.fi/t/risk-assessment-for-community-staking/5502/2) **for 1 Validator (cluster)**

_All numbers would be calculated within a reasonable upper boundary assumptions (as risk decreases with overall APR) on CL and EL rewards based on recent [observed data](https://dune.com/LidoAnalytical/lido-execution-layer-rewards)_

- _Cl rewards: 3.2%_
- _EL rewards: 1.2%_

1. **Risks associated with slashings:**  
1.1. Initial penalty: **1** ETH  
1.2. Correlation penalty: _ **variable** _\*  
1.3. Attestation penalties: **0.0757** ETH (for 36 days exit period)  
1.4. Missed rewards: **0.1389** ETH (for 36 days exit period)
2. **Risks associated with validator inactivity:**  
2.1. Attestation penalties: **0.768** ETH (for **1 year of inactivity** )  
2.2. Missed rewards: **1.408** ETH (for **1 year of inactivity** )

_Correlation penalty is incremental and depends on share of **total network** within ongoing slashing:_

- **0** ETH in case less than 1.04% (8988 validators for today) of total network within ongoing slashing
- **1** ETH for 1.04% - 2.08% of total network within ongoing slashing
- **2** ETH for 2.08%-3.13%
- **3** ETH for 3.13% - 4.17%
- \<…\>

**Considering mitigation it seems important to explicitly specify risks covered from the list above** : as for me it seems more clear that direct penalties (1.1-1.3) are within scope, but missed rewards associated with slashings (1.4) and risks associated with validator inactivity (2) may be not included within the proposals.  
If possible, would really appreciate clarification @chainproof, @ccitizen

### Risk coverage

Applying framework above i’d like to share my vision on different risk-scenarios and compare them with coverage provided within existing fund and proposals for external coverage.  
As minor scenarios (~100 validators slashings) could be covered with existing fund, the focus would be on major incidents

All calculations would be done assuming 41 000 DVT ETH / 1281.25 Validators (non-integer value for stake of scalability)

**Scenario 1 Only slashing:** all validators are slashed and exited within 36 days, \<1.04% of total network within ongoing slashing

**Scenario 2 Only slashing + Correlation (1 ETH):** all validators are slashed and exited within 36 days, \>1.04% and \<2.08% of total network within ongoing slashing

**Scenario 3 Massive downtime + Slashing:** all validators are **inactive for one year** , then slashed and exited within 36 days, \<1.04% of total network within ongoing slashing

**Scenario 4 Massive downtime + Slashing + Correlation (3 ETH):** all validators are **inactive for one year** , then slashed and exited within 36 days, \>3.13% and \<4.17% of total network within ongoing slashing

 ![coverage options](https://europe1.discourse-cdn.com/flex013/uploads/lido/original/2X/f/fd1b7468cb924013f434e7f8ebe041c7716db648.png)

[Calculations details](https://docs.google.com/spreadsheets/d/1YTBaUp9VVq8krLYgzlXNvhXguUaOGDys65SZ6uoS86U/edit?usp=sharing)  
_Payout is calculated based on generous assumption of covering all risks_

### Key observations:

#### 1. Inactivity risks

If inactivity (downtime) risk is not included in coverage - substantially lowering coverage should be considered, as even im **most catastrophic reasonable scenario** (all validators are slashed, no correlation penalty) total effect only from penalties would be **~1.3k ETH**

#### 2. Correlation penalty risks

Levels of coverage provided are sufficient enough to cover 1-2 ETH correlation penalty, but **this risk is out of scope of simple DVT** (and hence not affected by risks involving with using new technology).  
It would require more than 1% of network slashing simultaneously with all validator slashing within module for correlation penalty to reach 1 ETH from 0.  
**Taking this risk should be considered rather than covering**

#### 3. Coverage providers comparison

**For all major scenarios Nexus proposal demonstrates more coverage and effect in terms of payout / costs**  
While its worth to mention that for minor events (~100 Validator slashings) Chainproof deductible structure would lead to some levels of payments, while under Nexus police all effect (~120 ETH) would be under deductible amount

**Given observations 1-2 so far proposals on extrenal coverage provided may be overestimating the impact to cover and, therefore, reasonable premium to cover those effect may be too high in comparison with self-covering**

**For minor incidents (\<300 validator slashings) both options provides little to no coverage as most of the impact (\>50%, up to 100% for ~150 validators) would be within deductable amount**

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_[View the full topic](https://research.lido.fi/t/staking-router-module-proposal-simple-dvt/5625)._