Although slashing events on Ethereum are infrequent, they remain a major concern for stakers. Addressing this, Chainproof has announced a new insurance product designed to protect Ethereum validators from slashing losses while guaranteeing a baseline yearly yield.

Slashing is a protocol safeguard that penalizes validators by confiscating a portion of their staked ETH if they submit invalid or incorrect data. Most slashing cases stem from technical bugs or operational errors rather than intentional misconduct.

Chainproof’s new offering, developed in collaboration with IMA Financial Group, guarantees that if a validator’s staking returns fall below the Composite Ether Staking Rate (CESR)—a benchmark reflecting the average annualized yield of all Ethereum validators—due to slashing, the policy will cover the shortfall.

The CESR benchmark, created jointly by CoinDesk Indices and CoinFund, represents a key metric for institutional investors. “As staking becomes a foundational element for ETFs and institutional products, yield protection is essential,” said Chris Perkins, CoinFund President.

Ethereum staking currently offers annual yields near 3.5%, rewarding token holders who lock their assets to support network operations.

Risks and Industry Impact

Since the launch of Ethereum staking in 2020, 474 slashing incidents have been recorded, according to beaconcha.in. A notable slashing episode in 2023 saw Bitcoin Suisse incur losses of nearly $200,000 after 100 validators were penalized.

Though slashing-related losses are smaller compared to exploits or protocol vulnerabilities, a large-scale slashing event involving thousands of validators could present a systemic threat.

Chainproof’s insurance is distinct from competitors like Nexus Mutual, which provides compensation per slashing event but does not assure overall yield performance.

Chainproof’s policy pledges to reimburse between 95% and 98% of the CESR benchmark yield over a full year. Should staking rewards dip below that due to slashing penalties, stakers will be compensated automatically—offering greater financial certainty.

Don Ho, Chainproof’s CEO, highlighted the importance of guaranteed yield coverage in attracting institutional capital to Ethereum staking.

The product will roll out June 1, initially targeting major validators and institutional staking providers.

Leading staking service firms such as Blockdaemon, Pier One, Globalstake, and P2P plan to integrate Chainproof’s insurance into their offerings, further bolstering security and confidence for their clients.