It’s what could happen if you’re running a validator or if you delegate your stake to a validator that fails. There are several ways a validator can get slashed (explained more here) resulting in loss of funds. I know this can be a scary thought, but as of Feb. 2023 only 0.04% of validators for ETH have been slashed. That’s 226 validators slashed since 2020.
But if you can protect yourself against that risk, why wouldn’t you? This article is explaining on solution for institutional investors, but there are other staking platforms that offer protection for retail users as well, RocketPool for example provides slashing protection.
Insured Staking Solution To Counteract Slashing Risks Brings Two Companies Together
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Cryptocurrency investments carry risk; you should always do your own research before making any investment decisions.