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Risks of crypto staking


Cryptocurrency staking can sometimes yield attractive returns. However, crypto staking comes with risks that can lead to partial or complete loss of the cryptocurrencies you stake. Before you begin staking, it is important for us to provide you with thorough information about the potential risks involved. Therefore, carefully read through the risk explanations provided below.

Counterparty Risk

BLOX utilizes two different forms of staking: delegated staking and staking with third parties. With delegated staking, as a cryptocurrency holder, you can delegate your coins to a validator (a party actively contributing to the security of the network and receiving rewards for it) to qualify for staking rewards. It is not necessary to physically send your crypto to this validator. With staking with third parties, cryptocurrencies are sent to a third party to make them available for staking. Despite BLOX's careful selection of these third parties and efforts to minimize risks, there always remains a counterparty risk. In the event a third party defaults, gets hacked, or goes bankrupt, you might lose a portion of your cryptocurrencies.

As a user, you cannot choose which form of staking to utilize.

Protocol Risk

The crypto staking process depends on the underlying blockchain protocol. There is a possibility of technical errors, bugs, security vulnerabilities, and unforeseen events that can impact the protocol. A protocol malfunction can result in the loss of both staked cryptocurrencies and staking rewards. BLOX has no control over the functioning, performance, and security of the blockchain protocol. Within BLOX, we thoroughly examine each cryptocurrency before listing them. Moreover, cryptocurrencies must meet stringent minimum requirements to be admitted. Despite all our careful processes, protocol risks cannot be eliminated.

Slashing Risk

Slashing refers to the loss of a portion of your staked cryptocurrencies as a penalty for violating rules within the staking protocol. This can occur if the validator doesn't comply with the rules or engages in suspicious activities. Examples of situations that can trigger slashing include 'double staking' (when a cryptocurrency is simultaneously used on multiple validators), incorrect voting, or failure to contribute to the network as required (for instance, in the case of validator downtime). Slashing can result in a loss of your invested cryptocurrency. BLOX collaborates with third parties that we carefully screen and investigate for their track record in crypto staking. This involves looking at uptime rates, past instances of slashing, and fallback scenarios these parties have in place to prevent slashing. However, this doesn't mean the risk of slashing can be completely eliminated.

All the above is intended solely as a general information source and does not constitute investment or legal advice. As a user, you bear full responsibility for your decisions regarding crypto staking and the associated risks.