The shift of the global financial infrastructure to decentralized protocols has placed Validators (authentication nodes) in a key position in the digital economy. In the Proof-of-Stake (PoS) consensus mechanism, Validators are not simply server operators but also entities that maintain the integrity of the ledger, prevent fraud and ensure network security. However, the nature of block proposal power and the information asymmetry between operators and delegators create loopholes for sophisticated profiteering practices. This analysis by Tan Phat Digital will delve into the technical, economic and behavioral aspects of Validators on the Ethereum, Solana and Cosmos networks, to clarify whether these "unsung heroes" can cheat users and how existing protection mechanisms work.

Consensus architecture and role delineation in PoS systems

In existing blockchain networks Nowadays, maintaining security is no longer based on pure computing power but on locked economic value. Validators meticulously check every transaction, ensuring that only valid data is added to the chain. However, this structure creates a fiduciary relationship between token holders and node operators. Users submit their voting rights to Validators in exchange for a portion of inflation rewards and transaction fees, but at the same time they also bear the risks arising from that Validator's behavior.

Networks such as Ethereum, Solana, and Cosmos have different approaches in establishing technical barriers and economic penalties to regulate Validator behavior.

Compare basic security parameters between networks grid

Below is a summary of the core technical specifications from Tan Phat Digital's research:

Ethereum (ETH): Uses PoS consensus mechanism (Casper/LMD-GHOST). Minimum requirement is 32 ETH to operate the node. Unbonding time is flexible according to the queue (Exit Queue). There are currently more than 1,000,000 Validators participating in network security.
Solana (SOL): Combining PoS and Proof-of-History (PoH). There is no official minimum requirement for the number of SOLs to run a node. Unbonding time is short, about 2-3 days (equivalent to 1 Epoch). The network maintains approximately 2,000 Validators.
Cosmos (ATOM): Uses the Tendermint (BFT) mechanism. The number of Validators is limited, usually in the Top 175-180 leaders. Unbonding time is fixed at 21 days. The number of Validators varies depending on each specific App-chain.

This structural difference leads to different types of risks. For example, the high centralization of Solana's Validator team or the reliance on relays in Ethereum both create weaknesses that malicious actors can exploit.

Transaction Profiteering: The Rise of MEV and Sandwich Attacks

Maximum Extractable Value (MEV) is one of the most common forms of fraud or profiteering that Validators can perpetrate on users end. MEV refers to the ability of block producers to change the order, include or exclude transactions in order to optimize individual profits.

Sandwich Attack Mechanism

Sandwich Attack is a variant of MEV that targets transactions directly on decentralized exchanges (DEX). The process goes like this:

Detection: Validator or an MEV bot monitors the public mempool looking for large buy orders with high slippage setups.
Front-running: The attacker places a buy order right in front of the victim's trade, driving up the asset price.
Execution: The transaction of The victim is executed at an inflated price, causing them to receive fewer tokens than expected.
Back-running: Validator executes a sell order immediately afterward to profit from the price difference created by the victim.

This behavior not only causes direct financial loss to users, but also erodes trust in the fairness of DeFi protocols. According to analytical reports, MEV operations on Ethereum have extracted hundreds of millions of USD from users before protection solutions were widely deployed.

See more: What is Proof of Stake?

Relay vulnerability analysis and the $25 million incident 2023

A prime example of serious fraud occurred in April 2023 on the Ethereum network. A malicious Validator exploited a vulnerability in the PublishBlock() function of MEV-boost-relay. This vulnerability allows Validator to view the payload content of a block even if the block is invalid.

Attack flow: Validator sends an invalid but properly signed block. Relay, instead of aborting, revealed detailed transaction information.
Transaction Swapping: This Validator then rebuilt the block, removing the back-run transactions of other MEV bots and replacing them with its own transactions to appropriate assets.
Consequences: About 25 million USD was stolen from 5 different MEV bots, stealing marked one of the largest Validator fraud cases in history.

This incident shows that even with mechanisms such as Proposer-Builder Separation (PBS), Validators can still find technical "gray areas" to profit.

Authentication fraud and Slashing mechanisms

Slashing is the harshest economic penalty designed to punish illegal acts. Validator's mistake. When a Validator violates the protocol's core rules, a portion of the deposited assets (including the principal's capital) are destroyed.

Detailed Crimes and Penalties

The severity of Slashing varies depending on the type of violation and the specific network:

Double Signing times):
- Ethereum: Immediate fine of 1/32 of the effective balance (can be up to 1 ETH).
- Cosmos: Penalty of 5% of the total amount being staked.
- Solana (Expected): Penalty based on quadratic function, the highest level can be up to 100%.
Downtime:
- Ethereum: Apply Inactivity Leak (light penalty but gradually increases over time).
- Cosmos: 0.01% penalty if Validator misses 95% of 10,000 consecutive blocks continued.
- Solana: Currently there is no direct penalty to the original stake capital.
Additional consequences:
- Ethereum: Validator is pushed out of the network permanently.
- Cosmos: Is "tombstoned" (marked and permanently removed). from the list).
- Solana: Stripped of the right to receive delegation from Foundation support programs.

On the Cosmos network, data from mainnets shows that the biggest risk to delegators is often not conscious fraud but weak management of the Validator infrastructure leading to downtime errors.

Commission fraud: "Commission Rug Pull" on Solana

A specific form of profiteering often seen on the Solana network is fee fraud rose. Because Solana allows Validators to change commission rates flexibly, some bad actors have implemented the "Commission Rug Pull" tactic.

Validators will start with low commission fees (even 0%) to attract a large number of authorizers. Right before the end of an Epoch, Validator suddenly increases the fee to 100%. This behavior allows Validator to appropriate all rewards that should belong to the delegator for that cycle. In response, real-time monitoring tools have been created to label nodes that violate these professional ethics as "Badge of Dishonor".

"Escape" and inactivity (Inactivity)

Validator's instability not only reduces rewards but can also lead to users' capital being "locked up". Many users often choose Validator based on an Uptime index of nearly 100%, but Tan Phat Digital notes that this can be a vanity index if not accompanied by a low Skip Rate. A Validator can be online but miss blocks repeatedly due to poor network configuration, leading to a severe drop in real profit (Real APY).

Solana Foundation Action Analysis June 2024

In June 2024, Solana Foundation officially removed a large group of Validators from the delegation program. The reason is that these Validators were found to use special modifications to participate in private mempools to perform Sandwich Attacks against the users who are authorizing them. Although these Validators can still operate (because Solana is a permissionless network), being deprived of financial support from the Foundation is a strong blow to their economy and reputation.

Self-protection strategy for delegators

To ensure the safety of assets when Staking, Tan Phat Digital advises users to comply with the rules The following:

Avoid 0% fees: 0% commissions are often unsustainable and can be a sign of malicious MEV cost recovery or preparation for sudden fee increases.
Validator diversification: Split capital to minimize the risk of a node being attacked or Slashed.
Avoid Top 10:Users should choose Validators in positions 11 to 100 with stable performance to help make the network more decentralized and avoid the risk of power concentration.
Check technical indicators: Prioritize nodes with low Skip Rate, stable fee history and a large amount of "Skin in the game" (self-deposited assets).

Tools and methods Dedicated wallet management

Owning a personal wallet is the first step to regaining control. The Redelegate feature is the most important tool to convert Validators immediately without waiting for a long Unstake period.

Keplr (Cosmos): Allows to choose a new Validator and confirm 'Redelegate' to transfer funds immediately.
Phantom (Solana/Ethereum): Provides high risk warnings and Supporting Liquid Staking solutions like JitoSOL helps users maintain liquidity and easily get rid of inefficient nodes.

Vision from the Vietnamese Blockchain community

Vietnam is asserting its position in operating reputable validating nodes with typical units:

SotaTek: Operating nodes on many networks such as Ethereum, Polygon, BNB Chain; owns the largest human resources team in APAC.
Savvycom: A leader in digital transformation, developing professional blockchain product ecosystems.
NCCPlus Vietnam: A network of young software engineers providing technical solutions for large blockchain networks.
ONUS: Staking ecosystem serving more than 7 million users, helping popularize digital asset investment in Vietnam.
InApps Technology: Experts in security consulting and developing solutions to minimize risks for businesses.

In addition, communities like Cardano Vietnam also play an important role in guiding users to operate Stake Pool safely.

10 Typical Case Studies About Validator Risks and Fraud

To provide the most realistic view, Tan Phat Digital has compiled 10 shocking incidents related to Validator's behavior:

1. MEV-boost-relay Ethereum Exploit (April 2023)

On April 3, 2023, a malicious Validator exploited a vulnerability in the PublishBlock() function of Flashbots relay. This validator sent an invalid but properly signed block to trick the relay into revealing the payload content. He then swapped the back-run transactions of other MEV bots with his own.

Damages: More than $25$ million USD was misappropriated from 5 MEV bots.
Lesson: Even the MEV protection infrastructure can become a weakness if software bugs exist.

2. Solana Foundation removes a series of Validators (June 2024)

Solana Foundation has officially removed a group of Validators from the authorization program for participating in private mempools to perform Sandwich Attacks. These Validators used special modifications (mods) to profit from their own users.

Consequences: Validators were permanently stripped of the right to receive authorization SOLs from the Foundation.
Importance: Demonstrates the network's willingness to punish unethical behavior to protect retail users.

3. Multi-Slot "Wide Sandwich" Issue on Solana (2025)

Researchers from 0xGhostLogs have discovered a more sophisticated form of MEV attack called "Wide Sandwich". Instead of executing in a single slot, the attacker executes front-run and back-run commands in different slots to avoid detection by monitoring tools.

Scale: Estimated $222,272$ victims with extracted profits up to $87,000$ SOL in January 2025 alone.
Challenges: Validators can collude with each other to re-order cross-block transactions.

4. Impact of the AWS incident US-EAST-1 (October 2025)

The service disruption of Amazon Web Services (AWS) in the Virginia region caused thousands of Validators to experience problems. Ethereum validator nodes located at US-EAST-1 recorded downtime rates ranging from $18\%$ to $22\%$.

Risk: Shows too much dependence on centralized infrastructure (Cloud Concentration Risk).
Recognition: Solana maintains better stability with uptime rate reaching $99.97\%$ thanks to the more diverse infrastructure distribution.

5. Hetzner blocks more than 1,000 Solana nodes (November 2022)

Cloud provider Hetzner suddenly changed its policy, banning all cryptocurrency-related activities. This caused more than $1,000$ of Validator Solana (accounting for about $10\%$ of the network) to be disconnected immediately.

Damages: Operators faced loss of rewards and risk of fines for not being able to relocate infrastructure in time.

6. Rare Double-signing history on Cosmos Hub

Since its launch in 2019, Cosmos Hub has only recorded 5 Slashing events due to double-signing errors. A typical incident occurred in September 2022 when a Validator simultaneously activated both a primary node and a fallback node using the same identifier, resulting in the production of duplicate blocks.

Penalty: The Validator was "tombstoned" (permanently removed) and fined $5\%$ of the stake.

7. Slashing attestation incidents on Ethereum Q3/2024

Report from Figment shows that in the third quarter of 2024, there were 10 Slashing events occurring on the Ethereum network, all of which were related to violations of attestation (validation) rules.

Analysis: Most of these errors came from incorrect operation procedures when moving nodes or non-standard software configurations. body.

8. Solana Foundation's burning of 11.36 million SOL (2020)

In the early part of 2020, the Solana community reacted harshly when it was discovered that the Foundation lent $11.3 million SOL to a market maker without disclosing it. To appease public opinion and demonstrate transparency, Solana Foundation has permanently destroyed this amount of SOL from its reserve fund.

9. Lido Finance's Centralization Risks

Despite being the leading Liquid Staking protocol, Lido faces criticism for its centralization of power, controlling nearly $30\%$ of ETH staked across the network.

Case Study: Having only about $30$ of DAO-approved professional node operating entities creates a potential governance risk where decisions can be manipulated by minorities.

10. Rocket Pool's RPL insurance mechanism

In contrast to Lido, Rocket Pool uses a decentralized insurance model. Each node operator is required to deposit RPL tokens as insurance collateral.

Fact: In Slashing cases, the operator's RPL tokens will be sold to compensate the delegator before touching their ETH capital.

Frequently Asked Questions (FAQs) About Validator Risk

Below is a collection of the 20 most common questions that Staking users are often interested in, answered by Tan Phat Digital based on the latest data:

What is a Validator?
Are nodes in the Proof-of-Stake network responsible for validating transactions, producing blocks, and securing the network to receive rewards.
Can Validator directly steal funds from my wallet?
No, they do not have access to your private key. However, they can make you lose money through Slashing or commission fraud.
What is a Sandwich Attack?
It is a form of MEV exploitation when a Validator or Bot inserts a buy order right before and a sell order right after your transaction to capture the price difference.
Is MEV always bad?
Not really. MEV helps balance the market (arbitrage), but attacks targeting small users (Sandwiches) are malicious behavior that needs to be eliminated.
How does Slashing affect me?
If the Validator you authorized is Slashed, a portion of the tokens you are staking (usually from 0.1% to 100% depending on the error) will be permanently destroyed by the network far.
How much ETH is needed to become an independent Validator?
You need at least 32 ETH to be able to run a validator node on the Ethereum network.
How does Commission Rug Pull on Solana work?
Validator charges 0% to attract capital, then suddenly increases to 100% right before paying rewards to appropriate all users' profits.
Why does Cosmos (ATOM) require 21 days to withdraw funds?
This is the "unbonding" period to ensure security and prevent sudden capital withdrawal attacks.
Why should you avoid Validators that charge 0% fees?
0% fees are often not enough to cover operating costs, leading to the risk of Validators having to maliciously use MEV or suddenly increase fees to profit.
What is Skip Rate and why is it important?
Skip Rate is the rate at which Validator misses block production. A Validator with high Uptime but high Skip Rate still brings low profits to users.
What is the benefit of the Redelegate feature?
Allows you to transfer funds from a less reputable Validator to a new Validator immediately without waiting for the unbonding period (7-21 days).
Where can I find a reputable Vietnamese Validator?
Large units like SotaTek, Savvycom, ONUS and communities like Cardano Vietnam are popular choices.
What does the Jito-Solana client do for users?
This is software that helps Validators optimize MEV transparently and re-share the portion large amount of MEV profit for users instead of keeping it all.
What is Correlation Penalty on Ethereum?
It is an aggravated penalty if many Validators have problems at the same time, to punish infrastructure centralization (like too many people using the same AWS).
What are Liquid Staking Tokens (LST)?
Are tokens that represent staking assets (like stETH, JitoSOL), helping you both receive staking interest and be able to use that token in DeFi.
What can I do with stETH or JitoSOL?
You can use them as collateral to borrow, Provide liquidity on DEX or sell for SOL/ETH at any time.
Is staking on an exchange (CEX) safe?
The exchange makes it easy to operate but you do not hold the "private key" and there is a risk if the exchange crashes or imposes high management fees.
Is 100% Uptime the only criterion for choosing a Validator?
No, Uptime only shows that the server is online. You need to look into Slashing history, fees, and whether they have good security measures in place.
What is the significance of the Solana Foundation removing Validators in 2024?
Shows that the network is strongly eliminating Validators that perform Sandwich Attacks to protect the rights of small users.
Why should you not choose Validators ranked in the Top 1-10 in terms of stake amount?
To increase the decentralization of the network and minimize the risk of a large entity being attacked, causing widespread impact.

Can Validator cheat users? The answer is Yes, but the blockchain architecture is designed so that users can actively control it. The ultimate control is always in your hands through mastering knowledge and using wallet management tools properly. Tan Phat Digital believes that each individual's vigilance and understanding is the most important firewall protecting the integrity of the decentralized economy.