Risks of Crypto Staking You Need to Know — How Does CoinWind Mitigate Them?
While we’ve talked about what staking is (Click here), in this article, we zoomed in on the risks that we might potentially face when staking our crypto assets. Understanding these risks should be the first order of business before staking your assets, as you may be exposing yourself to unnecessary dangers that you can easily avoid.
The first risk is the validator cost that one could incur while staking cryptocurrency, whether you run a validator node or stake your tokens through a platform.
While running a validator node, you will be required to be equipped with devices and hardware that incur monthly expenses such as electricity costs. If you choose to stake your tokens through a third-party platform, you will incur such costs in the form of operating fees that the platform will take as a percentage of your staking rewards. Either way, it is essential for crypto investors to constantly ensure that such costs make economic sense.
As we know that many stakable assets come with a lockup period where we will not be able to access them. We will not be able to unstake it or sell it as and when we wish to, where we might even have to wait for an unstaking period which could take a while.
There is a substantial market risk in the crypto market as it is notoriously known for its crazy swings and high volatility, where adverse price movements can be detrimental to your portfolio. Accompanied by the fact that you are not able to immediately unstake your assets, you will be losing out on your overall returns despite gaining staking rewards after the lock-up period. To mitigate such risks, you could choose an asset with a shorter lock-up period.
Loss of Theft
While this could be an attack by hackers that infiltrate networks to steal funds, or as simple as forgetting to keep your private keys safe, security issues are apparent and rampant in the crypto space.
Thus, finding the right crypto platform is very crucial in ensuring the safety of your staked assets, as inadequate security safeguards for crypto-assets can lead to unfavorable consequences.
As we don’t have control over the crypto market, we cannot guarantee that we will be able to liquidate our crypto assets post-lock-up period. Some cryptocurrency tokens may be trading at a very low volume making it hard to convert your crypto assets to cash or other tokens. Therefore, it may be beneficial to stake assets with higher trading volumes to mitigate such risks.
How Does CoinWind Mitigate Them?
At CoinWind we maintain a high level of security and transparency with the use of processes such as node multi-signature management. This would significantly increase the security level of assets as more than one approval has to be gained before funds can move across different points in the staking process. We will also release the address nodes containing details regarding the location and current balance of pledged funds, for users to view
Additionally, our team puts the safety of user assets first by submitting all codes for audit before going live. Audits will be done in a timely fashion, where they will resubmit it whenever there is a major iterative upgrade.