What Happens to the Funds That Are Slashed from a Validator’s Stake?

The fate of slashed funds varies by protocol. In some systems, a portion of the slashed funds is awarded to the "whistleblower" ▴ the block proposer who first reported the malicious activity.

The remaining, and often largest, portion of the slashed funds is typically burned, meaning it is permanently removed from the total supply of the cryptocurrency. This burning process benefits all token holders by making the remaining tokens more scarce.

In other protocols, the slashed funds might be sent to a community-governed treasury or development fund instead of being burned.