Stakehound ran a staking service for ETH with the help of Fireblocks, and used a nontraditional 3/4 multisig solution for storing the keys to their staking wallet. Stakehound and Fireblocks both kept 2 keys each, and one of them wiped/lost their keys. Now the ETH is locked/unrecoverable and they’re pointing fingers at each other.
I know we have 11 withdrawal key holders but what fraction of them are needed to access the staked ETH?
Secondly, is there anything we can do to prevent such an incident with Lido? The upgrade process to smart contract withdrawal seems more pressing than anything else.
Can Lido look into insurance for the event that something like this happens? There’s now a lot of money riding on a fraction of 11 people being both competent and honest.
It’s a 6/11 threshold signature, and we’ll be running a long-planned drill in July to know for sure everyone still holds their keys. The tesntet upgrade process and proposal to have a mainnet upgrade is planned to happen in summer as well.
There’s zero chance we can get insurance on that size of deposits, though.
Maybe starting up a nexus mutual insurance coverage in case stETH loses its peg to ETH? Wont be able to cover all deposits but should be enough for the people who want coverage.
I think its fair to say we probably need a medium article or dev/team post about Stakehound and what Lido is doing that is different. This is likely to give the market jitters and needs to be dealt with head on and transparently.
