Validators are integral for maintaining a secure and reliable network, necessitating penalties to deter subversive behavior. The Active Validator set possesses shares in keys, but the authorization to move funds or call a crossway contract requires at least 28 of the maximum 42 validators to be online and able to authorize transactions. Hence, the protocol implements penalties to encourage consistent, secure performance among Validators.

While discouraging Validator downtime is essential, legitimate reasons, such as connectivity issues or software updates, should be respected. Penalizing minor offline periods could adversely affect network operations. To balance these considerations, the Portal Network employs a unified slashing and reputation system within a time-based framework, encompassing both positive and negative reputation scores. These are not unique to Portal Network and are inspired by other protocols that implement slashing and reputation management.

This system primarily applies to Active Validators, and not Inactive Validators who lack reputation, aren't rewarded when offline, and can't be slashed. Validators start with a reputation score of zero and stay at this level until joining the Active Validator Set. Three on-chain states—Online, Offline, and Suspended directly influence their Reputation score. Being Online allows for rewards and reputation accumulation, whereas Offline status decreases reputation gradually. Suspension leads to complete reputation loss. In the case of a negative reputation while offline, periodic slashing occurs until the Validator restores the Online state, with a higher negative reputation accelerating the slashing rate.

A limit exists on slashing; no more than two thirds of a Validator's staked collateral can be slashed. This safeguard provides an incentive to return online.

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