Mon. Oct 25th, 2021

    Receiving income from staking means increasing your crypto capital by earning a reward. However, like any form of income, staking has inherent risks.

    High Cryptocurrency Volatility

    First of all, the cryptocurrency holder must understand that the exchange rate of any tokens is unstable. When investing in staking, you should not only expect the income that the application promises but also keep in mind the possible loss of funds because of a drop in the exchange rate.

    Solution To The Problem

    You can reduce the risk of exchange rate losses by investing in staking with several cryptocurrencies. That is, part of the tokens can be staked at a high yield but with the risk of serious exchange rate fluctuations, and the other part can be transferred to a blockchain cryptocurrency with a high capitalization, whose rates are more stable.

    The Work Of The Validator

    1. Poor work of the validator will result in penalties being imposed on its stake. Validator errors are penalized differently in different blockchains. It may only be the funds of the validator, or it can be the entire stake that is at risk.

    Solution To The Problem

    Read in detail the characteristics of the validator work, which in each blockchain are available for viewing. If the validator has close to 100% successful rounds/work cycles and minimal penalties, it can be trusted.

    2. Validator’s refusal to transfer income. There are blockchains where the validator is not responsible for transferring the reward to depositors, and there are those where it is the validator that shares its interest.

    Solution To The Problem

    Familiarize yourself in advance with the principle of depositing funds to staking and withdrawing from it. Do not transfer your funds directly to the validator, but use trusted staking services.

    3. Personal risks. The last risk is the loss of the wallet seed phrase, which will entail the loss of staking funds.