Pyde Slashing Rules

Version 0.1

This document specifies all slashable offenses, detection mechanisms, slash amounts, evidence flow, jail mechanics, and the interaction with the validator lifecycle.

Numbers below are starting points. Final numbers require economic modeling pre-mainnet and may be adjusted via PIP.

Principles

1. Safety vs Liveness distinction — different severity, detection, and slash amounts
2. Correlated slashing for safety — coordinated attacks lose more
3. Permissionless evidence — anyone can submit cryptographic evidence; reporter reward incentivizes monitoring
4. Bounded slashing — per-epoch caps prevent stacking attacks

Offense Catalog

Safety Offenses (Severe, Cryptographic Evidence)

Liveness Offenses (Auto-Detected, Graduated)

Future / Deferred

Correlation Multiplier (Safety Offenses Only)

To punish coordinated attacks and protect isolated failures:

correlation_multiplier = 1 + (other_offenders_this_epoch / max_byzantine)
                       = 1 + (k / 42)   for n=128

Caps at 2× to avoid disproportionate punishment in bug scenarios.

Combined with repeat-offense escalation, a coordinated 43-attack can hit the maximum 50% slash within an epoch.

Slash Math (Percentages of Offender's Stake)

All percentages apply to the offender's current stake at the time of offense. Pyde uses a single staking tier:

• Validators: minimum MIN_VALIDATOR_STAKE = 10,000 PYDE
• Operator-identity cap: 3 validators per operator (anti-Sybil)
• Real-world bonds will be higher than the minimum (rational operators stake more to absorb minor liveness penalties without falling below the floor)

Equivocation (10% × correlation × repeat) — minimum 10K PYDE bond:
  1st instance, alone:        1,000 PYDE
  1st instance, 42 others:    2,000 PYDE     (2× correlation cap)
  2nd instance, 42 others:    4,000 PYDE
  Capped at 50%:              5,000 PYDE     (full burn at the bond floor)

Downtime (0.05%/round) — minimum 10K PYDE bond, when serving on the active committee:
  10 rounds missed:           5 PYDE
  100 rounds missed:          50 PYDE        (5% — also triggers jail)
  At 10% epoch cap:           1,000 PYDE

Liveness penalties apply only while a validator is on the active committee for the epoch. Validators awaiting selection have no per-round liveness obligation (they can still be slashed for safety offenses with freshness-window evidence).

Evidence Submission

Permissionless: any node can submit evidence.

#![allow(unused)]
fn main() {
struct Evidence {
    offense_type: OffenseType,
    offender_id: ValidatorId,
    epoch: u64,
    proof: CryptographicProof,
    reporter_id: Option<Address>,  // for reward distribution
}

// Submission as a regular transaction (paid gas)
fn submit_evidence(evidence: Evidence) -> Result<()> {
    // Engine verifies cryptographic proof
    // If valid:
    //   - Stake slashed from offender (subject to 24h escrow)
    //   - Distribution applied (burn / treasury / reporter)
    //   - Jail status set if applicable
    //   - Event emitted for indexing
}
}

Evidence Freshness Window

• Safety offenses: 21 days
• Liveness offenses: 1 epoch (real-time only)
• DKG failures: 1 epoch (same as ceremony)

Outside the window: cannot slash. Evidence becomes historical record but no enforcement.

Reporter Cooldown

• Same reporter address: max 5 evidence transactions per epoch
• Limits griefing (malicious reporter spamming invalid evidence)

Jail Mechanics

When a validator is jailed:

• Removed from committee at next epoch boundary
• Cannot rejoin until unjail() transaction executed
• Unjail requirements:
  • Time elapsed ≥ jail period
  • Pays unjail fee (10 PYDE — anti-griefing)
  • Remaining stake ≥ minimum bond for the validator's tier (MIN_VALIDATOR_STAKE = 10K PYDE — single tier)

Escalating Jail Periods

• 1st jail: 24 hours
• 2nd jail within 30 days: 7 days
• 3rd jail: permanent removal (kicked out of validator set)

Slashing Escrow (24-Hour Dispute Window)

To handle false-positive slashes:

Stake state machine:
  bonded → slashed_frozen → slashed_finalized
              (24h)

During the 24-hour escrow:

• Slashed stake is in "frozen" state (not yet destroyed)
• Governance multisig can void or reduce the slash
• After 24h with no dispute: slash finalizes (distribution applied)

This protects against bugs in slashing logic or contested circumstances (e.g., network partition that fooled detection).

New Validator Grace Period

A validator in their first epoch has 50% reduced slashing on all offenses. Encourages experimentation with new operational setups; bad actors can't hide forever (just one epoch).

Unbonding Interaction

Critical: unbonding must exceed evidence freshness to prevent attack-then-exit.

Unbonding period: 30 days
Safety evidence freshness: 21 days
30 > 21 → prevents attacker withdrawing before evidence is submitted

State machine:

bonded → (request_unbond) → unbonding (30d) → withdrawable
                                  ↓
                            still slashable during unbonding

Slashing applies during BOTH bonded and unbonding states. After withdrawal (past 30 days): cannot slash.

Edge Cases

1. Network Partition

If >43 validators go offline simultaneously due to network split:

• Downtime slashing PAUSES (auto-detected by protocol — committee active count < 85 → liveness mode)
• Resumes once active count ≥ 85
• Prevents punishing the 85+ honest majority while 43+ are partitioned

2. Key Compromise

Validator's key stolen, attacker double-signs:

• Slashing applies (your responsibility as key holder)
• Mitigations: HSM, key rotation, multisig validators (v2)
• No insurance pool (avoid moral hazard)

3. Chain Halt

If chain halts entirely:

• No automatic slashing during halt
• Manual investigation post-recovery
• Specific validators slashed only with cryptographic evidence

4. Hard Fork

If chain hard-forks:

• Slashing state migrates with the chain
• "Wrong-fork" validators on minority chain don't auto-slash (separate chains, separate state)

Sanity Check

At the bond floor, total committee bond: 128 × 10K = 1.28M PYDE. In practice operators stake more to absorb minor penalties without falling below the floor — realistic total committee bond depends on actual operator behavior post-launch.

Max single-event slash at floor (42 offenders × equivocation × 2× correlation):

42 × 10K × 10% × 2.0 = 84K PYDE   (= 6.5% of total committee bond at floor)

Max correlated attack across epoch (42 offenders × 5 events × 2× correlation, capped at 50%):

42 × 10K × 50% = 210K PYDE        (= 16.4% of total committee bond at floor)

These dollar numbers are intentionally not the load-bearing deterrent. Pyde's security argument (Chapter 16 §16.4) is that threshold encryption removes the attack-profit motive entirely — there is no MEV-extraction revenue to recoup. Stake serves as a credible-commitment deposit against slashable misbehavior plus the input the slashing mechanism has to slash. The operator-identity cap, KYC binding, and slashing-with- finder's-fee do the heavy lifting on Sybil resistance.

Implementation Notes

Slashing is implemented as system transactions handled by the engine:

#![allow(unused)]
fn main() {
// At evidence submission:
pvm.execute_system_tx(SystemTx::SubmitEvidence(evidence));

// At slashing escrow expiry (24h after slash):
pvm.execute_system_tx(SystemTx::FinalizeSlash(slash_id));

// At unjail request:
pvm.execute_system_tx(SystemTx::Unjail(validator_id));
}

All slashing state is part of validator account state, indexed by validator_id.

References

• Validator lifecycle: see VALIDATOR_LIFECYCLE.md
• Threat catalog (cross-reference): see THREAT_MODEL.md
• Chain halt + recovery: see CHAIN_HALT.md

Document version: 0.1 License: See repository root