The Hidden Cost of Exit Scams in Unslashed Curator Pools

A curator submits a legitimate item, then immediately submits a malicious one. They challenge their own good submission, forcing a dispute. During the ~1 week arbitration window, they exit-scam the malicious listing, leaving the pool to cover the ~$500-$5k slashed deposit.\n- Exploits the time delay between challenge and resolution.\n- Transforms curation from a public good into a negative-sum game for the pool.

Pools without a slashing mechanism for failed challenges are pure profit for attackers. The attacker's cost is just the gas to submit and challenge, while the guaranteed payout is the curator's full deposit, stolen from the pool's treasury.\n- Inverts incentive alignment: Honest curators subsidize attacks.\n- Creates a perpetual drain on community-managed treasuries like those for Token Lists or NFT Registries.

The core fix is to slash the challenger's deposit if they lose a dispute. This aligns incentives: only parties believing a submission is malicious will challenge, as they risk their own stake. This mirrors the security model of optimistic rollups like Arbitrum.\n- Restores game-theoretic integrity: Makes attacks economically irrational.\n- Shifts burden of proof back to the malicious actor, protecting communal resources.

Curator pools in protocols like EigenLayer or Symbiotic allow operators to stake with minimal skin in the game. A single exit scam by a major operator can lead to massive, uncapped slashing events that drain the entire pool, leaving users with worthless receipts and protocols with no security.

• Cascading Insolvency: Losses propagate to all restakers, not just the malicious actor's stake.
• No Backstop: Unlike over-collateralized models (e.g., MakerDAO), losses exceed the attacker's capital.
• Reputation Contagion: A single event can trigger a mass withdrawal from the entire restaking sector.

Force curator pools to maintain a real-time, protocol-specific collateral ratio that exceeds 100%. This creates a capital buffer that absorbs losses before impacting user deposits, moving risk from the collective to the individual operator.

• Risk-Weighted Capital: Higher-risk AVSs (e.g., new bridges) require higher collateral ratios, akin to risk-adjusted capital in TradFi.
• Automated Liquidations: Use oracle networks (e.g., Chainlink, Pyth) to trigger automatic operator liquidation if their collateral ratio falls below a safety threshold.
• Explicit Insolvency Ordering: Clearly define a waterfall for loss absorption (operator capital first, then insurance fund, then slashing).

Static slashing conditions are insufficient. Protocols need continuously verified actuarial models that dynamically price operator risk based on performance, market conditions, and correlated failures. This turns security into a verifiable, real-time metric.

• Proof-of-Solvency Checks: Frequent, fraud-proof verified attestations of operator capital and AVS health, inspired by zk-proofs for exchanges.
• Correlation Penalties: Heavily penalize operators running highly correlated, risky AVS bundles that increase systemic failure probability.
• Transparency Feed: A public dashboard showing live capital ratios, slashing risk scores, and concentration warnings for each pool.

Even with over-collateralization, black swan events happen. A mandatory, protocol-level insurance fund—funded by a small slice of staking rewards—creates a final backstop. This moves beyond individual pool failure to sector-wide resilience.

• Non-Correlated Funding: Funded by rewards from diverse AVSs, not a single asset, to avoid death spirals.
• Circuit Breaker Triggers: Large, anomalous slashing events automatically pause withdrawals and trigger fund payouts, preventing bank runs.
• Skin-in-the-Game for Protocols: AVS developers must bond capital into the fund, aligning their incentives with security.

Unslashed pools create a massive, one-sided trust assumption. Curators must trust the pool operator not to rug, but the operator has zero skin in the game. This misalignment is a systemic flaw, not a bug.

• Attack Vector: Operator can withdraw 100% of TVL in a single transaction.
• Market Impact: A single scam can destroy confidence in the entire curation primitive, similar to early DeFi exploits.

Mandate that pool operators bond a significant, slashable stake. This transforms the trust model from blind faith to cryptoeconomic security.

• Mechanism: Use a bonding curve or vesting schedule that ties operator rewards to long-term pool health.
• Reference Model: Look to Cosmos validators or EigenLayer operators, where slashing for malice is a core deterrent.

Prevent capital flight by implementing time-locked exits and full on-chain transparency for all pool actions.

• Time-Locks: Enforce a 7-30 day delay on large operator withdrawals, allowing curators to exit first.
• Transparency: All pool treasury movements must be emitted as public events, enabling real-time monitoring by tools like Tenderly or OpenBlock.

The endgame is removing the centralized operator role entirely. Build curation as a public good protocol, not a rent-extracting pool.

• Architecture: Use smart contract automations (like Gelato) for rebalancing and DAO-governed treasuries for fee distribution.
• Precedent: This follows the evolution from centralized exchanges (Mt. Gox) to DEXs (Uniswap) and centralized sequencers to shared ones (Espresso, Astria).