What is Multi-Asset Staking
It’s no longer news that the application of blockchain technology has brought notable changes to many industries. Despite these growing use cases and capabilities that seem to be pushing blockchain towards mainstream adoption, the financial sector takes the center stage as the early adopter of decentralization. Cryptocurrency, due to the virtue of this collaboration, has also grown quite tremendously, creating new possibilities for participants to store, earn, and transfer funds.
There are many popular ways to earn passive income in the cryptocurrency industry for not just holders but also crypto traders and investors who want to diversify their means of income such as multi-asset staking and cross-chain swapping.
Crypto staking is known by many traders and investors as a popular means to earn passive interest in the cryptocurrency world. As of September 2021, the total worth of assets locked in staking contracts across almost 170 assets has grown to more than $147 billion. Meanwhile, there is still speculation that people are yet to scratch the deeper skein of the possibility that staking offers.
More still: staking is a tool established by proof-of-stake blockchains to ensure users commit to the wellbeing of the blockchain network by staking their assets either directly or through intermediaries. However, in return, these stakes get a chance to earn more tokens.
Multi-asset staking is used to describe a superior form of staking in which participants lock one type of cryptocurrency in a staking pool and earn rewards in another. Simply put, participants get to earn rewards paid in multiple assets when they stake a single asset. Let’s say you stake Cardano’s native $ADA, instead of earning just $ADA tokens as seen in single-asset staking, you can earn multiple tokens from the same or different blockchains.
Multi-asset staking is a perfect passive income vehicle for digital assets when executed with the right strategies on the right protocol. However, some risks affect multi-asset staking.
Financial risk is one major risk faced by multi-asset taking since cryptocurrency is still inherently volatile and their market prices fluctuate. This creates a big problem for traders and investors who might stake assets at their high only to incur losses when the prices go down. Another financial risk is liquidity risk, which refers to some staking platforms that do not allow participants to exit a position or access locked assets until the end of the staking period.
A notable operational risk that affects multi-asset staking, in some manner as in all forms of third-party staking, is the unpredictability of the existing platform where you have staked your assets which can become insolvent. Multi-asset staking is oftentimes custodial in their operations, thereby making you trust another entity with your private keys and tokens. The staking platform might become insolvent in the future, which might cost you delisted coins and insufferable regulatory interference, and you might not be able to retrieve some of your funds.
Another operational risk points to the fact that you might never know the number of tokens you’ll receive as your reward. In some cases, you might be rewarded with tokens of a project with seemingly flawed token economics, which might cost peanuts in the market as compared to your staking value.
Most crypto traders and investors are undeniably aware of the latent security risks that affect multi-staking. For instance, in 2020, hackers and scammers stole about $3.8billion from the cryptocurrency industry. More still: in 2021, the Defi industry has suffered about 75% hacks and attacks, and a good percentage of multi-asset staking forms the bedrock of the Defi industry. Hence, there’s the risk that the staking platform may be hacked and you lose all your assets. The staking process might also get compromised due to user negligence or severe attacks that could affect validator nodes.
The Bullet Point
Multi-asset staking is still at its nascent stage, there’s no fixed prediction as to what it might become in the nearest future. Hence, the aforementioned risks are not to deter you from its numerous benefits, but to educate you on how meticulously well you language your staking process. Also, some staking companies are already springing up new ways to mitigate these risks.
CrossFi is a cross-chain protocol that provides liquidity for Filecoin staking and rewards.
CrossFi Official Website: https://crossfimain.com
CrossFi DApp Address: dapp.crossfimain.com
CrossFi Official Twitter Account: https://twitter.com/globalcrossfi
CrossFi Official Discord Group: https://discord.gg/UKGSX3VBY3
CrossFi Official Global Telegram Group: https://t.me/crossfimain_en