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Risk Assessment for Redistributable Slashing

Before implementing redistributable slashing, AVSs should conduct:

  • Comprehensive risk assessments covering:

    • Key Management Risks: Evaluation of current key security practices
    • Operational Risks: Assessment of internal processes and procedures
    • Technical Risks: Analysis of smart contract vulnerabilities and integration points
    • Economic Risks: Understanding of changed incentive structures and attack economics

  • Threat model analysis covering:

    • Internal Threats: Key compromise, insider attacks, governance capture
    • External Threats: Economic attacks, MEV extraction, coordinated manipulation
    • Technical Risks: Smart contract bugs, integration failures, oracle manipulation
    • Operational Risks: Key management failures, process breakdowns, communication failures

  • Economic incentive analysis covering:

    • Slash Incentives: Understand how redistribution changes slashing motivations
    • Operator Behavior: Consider how redistribution affects operator incentives
    • Staker Risks: Evaluate the risk-reward profile for stakers
    • Attack Economics: Analyze the cost-benefit of potential attacks

Regulatory and Compliance Considerations​

AVSs using redistributable slashing should also consider:

  • Potential regulatory implications of controlling redistributed funds
  • Compliance requirements for fund management and distribution
  • Legal liability for key management failures
  • Insurance and risk mitigation strategies