SLASHES
Slashing Slashing will happen if a validator misbehaves (e.g. goes offline, attacks the network, or runs modified software) in the network. They and their nominators will get slashed by losing a percentage of their bonded/staked SkyPirl.
Any slashed SkyPirl will be added to the Treasury. The rationale for this (rather than burning or distributing them as rewards) is that slashes may then be reverted by the Council by simply paying out from the Treasury. This would be useful in situations such as a faulty runtime causing slashing or forcing validators offline through no fault of their own. In the case of legitimate slashing, it moves tokens away from malicious validators to those building the ecosystem through the normal Treasury process.
Validator pools with larger total stake backing them will get slashed more harshly than less popular ones, so we encourage nominators to shift their nominations to less popular validators to reduce their possible losses.
It is important to realize that slashing only occurs for active validations for a given nominator, and slashes are not mitigated by having other inactive or waiting nominations. They are also not mitigated by the validator operator running separate validators; each validator is considered its own entity for purposes of slashing, just as they are for staking rewards.
As an example, assume BIG_COMPANY has 50 validators that all go offline at the same time, thus causing a 1% unresponsiveness slash to their nominators. In this example, the nominator has nominated five validators, two of which are with BIG_COMPANY (BC_1 and BC_2) and three are with other validators that do not belong to BIG_COMPANY (OV_1, OV_2, and OV_3). In this era, BC_1 is the active validator for this nominator, BC_2 and OV_1 are inactive, and OV_2 and OV_3 are waiting. The nominator will be slashed 1% of bonded stake, since BC_1 is the active validator. The inactive and waiting validators (BC_2 and OV_1 through 3) don't have any effect on this, since they are not actively validating. Any nominator actively nominating BC_2 also receives a 1% slash, but any nominator actively nominating OV_1 is unaffected.
In rare instances, a nominator may be actively nominating several validators in a single era. In this case, the slash is proportionate to the amount staked to that specific validator. For instance, if another nominator had their stake split 50% to BC_1 and 50% to OV_1, they would receive a slash of 0.5% (50% of 1%). If a nominator were actively nominating BC_1 and BC_2, again with 50% of their stake allocated to each, they would still end up with a 1% slash, since a 1% slash is applied to both halves of their stake. Note that you cannot control the percentage of stake you have allocated to each validator or choose who your active validator will be (except in the trivial case of nominating a single validator). Staking allocations are controlled by the Phragmén algorithm.
Once a validator gets slashed, it goes into the state as an "unapplied slash". You can check this via Polkadot-JS Apps. The UI shows it per validator and then all the affected nominators along with the amounts. While unapplied, a governance proposal can be made to reverse it during this period (7 days on Kusama, 28 days on Polkadot). After the grace period, the slashes are applied.
The following levels of offence are defined. However, these particular levels are not implemented or referred to in the code or in the system; they are meant as guidelines for different levels of severity for offences. To understand how slash amounts are calculated, see the equations in the section below.
Level 1: isolated unresponsiveness, i.e. being offline for an entire epoch. Generally no slashing, only chilling. Level 2: concurrent unresponsiveness or isolated equivocation. Slashes a very small amount of the stake and chills. Level 3: misconducts unlikely to be accidental, but which do not harm the network's security to any large extent. Examples include concurrent equivocation or isolated cases of unjustified voting in GRANDPA. Slashes a moderately small amount of the stake and chills. Level 4: misconduct that poses a serious security or monetary risk to the system, or mass collusion. Slashes all or most of the stake behind the validator and chills. Let's look at these offences in a bit more detail.