Risks

While staking itself does not involve smart contracts and is considered a low risk endeavor, it is not entirely risk-free. The following is a list of key risks you should be mindful of before beginning to stake.

  • Private key security

    • Losing or exposing your private key will put your staked coins at risk. Hackers can get access to your staked coins if you do not safekeep your private key.

  • Token locks

    • While staked, coins cannot be transferred. Stakers will need to unstake before being able to transfer their coins again.

  • Unbonding period (unstaking period)

    • Unstaking is not instantaneous. There will be a waiting period before a staker's coins can become transferable again.

  • Price volatility

    • Staking rewards are earned in native coins. Therefore, the realized reward rates may be lower or higher than expected depending on price fluctuations.

  • Penalties

    • If a validator is offline and does not perform its duties, its stakers will have their stake deducted by a small amount. The deduction may become more severe if the validator is offline for a prolonged period.

  • Slashing

    • If a validator attests to two different blocks for the same height, its stakers will have a major portion of their stake deducted. This offense is considered an attack on the blockchain hence why the consequences are severe.

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