> For the complete documentation index, see [llms.txt](https://safu-protocol.gitbook.io/safu/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://safu-protocol.gitbook.io/safu/slashing-mechanism.md).
# Slashing Mechanism
A critical component of the SAFU protocol is the ability to execute slashing mechanisms when specific pre-agreed insurance conditions are triggered. These slashing events occur when the conditions that were set for coverage—such as asset depegging, insolvency, or other financial failures—are met, activating the fallback insurance provided by the protocol. This ensures that restakers, who secure the AVS, are held accountable and their staked collateral is used to cover the insured party.
Each product built on top of SAFU can establish its own distinct "insurance policies," allowing flexibility in how coverage is applied. For instance, Ethena’s yield-bearing token, **USDe**, may focus on insuring against the insolvency of custodians holding their collateral, since the demand is higher for mitigating third-party risks rather than covering potential failures in its delta-neutral strategy. On the other hand, fully on-chain protocols like [**Morpho**](https://app.morpho.org/) or [**Aave**](https://app.aave.com/) might prefer insurance coverage for depegging on-chain, ensuring that market price risks are accounted for.
To assess whether the insurance conditions triggering a slashing event are met on subjective insurance polcies (for instance, those whoe are not simply an on-chain depeg), SAFU will utilize[ Kleros](broken://spaces/u7uKAaIceCgc3MKPtnQ9), a subjective oracle with lower cost structures than fully intersubjective options like EIGEN token (enormous social cost to make all EIGEN stakers decide on this) or other subjective oracles.
Kleros, being a decentralized oracle, will help determine if the conditions for slashing have been satisfied, ensuring a coherent claim and fair execution of the fallback mechanism while making SAFU Labs have no control over users funds
#### Example Slashing Flow
A first model which should enable SAFU (prev "EAGER" ) to abord complex insurance policies:
First, SAFU AVS would have an operator set for each insurance market;
* sUSDe/ETH
* lBtc/sUSDe
* etc
Each Operator set therefore will have an arbitration policy where there is an explicit rule around the insurance/coverage safuAsset holders are getting; For example, a policy could cover sUSDe depeg until 0.8 following this oracle, and for more than X amount of hours based on Coingecko price.
That policy is upload on IPFS or other and anyone can make a claim on SAFU at all times leaving an important bond;
That claim initiates a optimistic challenge period for the claim being accepted or not (ps here we will have some off-chain component like a message alert on the UI and also some social media direct communication to enable users not to make useless claims that will make them lose money), and there are 2 options:
A) No challenge: Aka claim is accepted
Which means that the operator needs to slash the funds of the restakers who opt into that operator set accordingly to cover the “current insolvency” from the depeg…for example there where 1m dollars restaked and the depeg was of 5% and there were 2m dollars who “bought insurance)…100k would be slashed and redistributed….claimant recovers bond
B) Challenge (someone leaves a bond to cover arbitration fees)
The claim being challenge creates a dispute on Kleros, which gives the answer whether the claim should be accepted or not and the operators should “read” kleros ruling
If accepted, same as A (and Challenger lose arbitration fees while claimant recover bond)
If denied, Claimant lose bond and challenger gets back arbitration fees and a % of the bond;
This decentralized, transparent process ensures that slashing occurs only when the insurance conditions are genuinely met, providing both fair coverage for the insured and accountability for the restakers.
An example of how a claim process could go on [Example Ethena's depeg policy](/safu/slashing-mechanism/example-ethenas-depeg-policy.md)