Crypto staking: the new trend that poses significant security risks

07 Apr, 2019
by Richard Allen
Crypto staking: the new trend that poses significant security risks

In what became the longest bear market ever, it makes sense that many anxious traders would be looking for alternate strategies to make a profit during the downturn. One of these strategies, known as staking has become a popular trend. However, it poses some serious risks.

As CCN explains, staking involves investor-owned tokens which are placed in crypto wallets and used to validate transactions that create new blocks in blockchain networks. This produces coin rewards, increasing the holder's total asset value.

The publication reports that the first major risk involves crypto-staking computers being permanently online. This exposes the IP address of the staker and introduces a hacking risk. If hacked, it’s safe to assume the hackers will immediately target the private keys of the staker.

Additionally, cryptocurrency pools are vulnerable to hacks. Staking pools have been growing in popularity as an alternative to managing your own staking infrastructure. While more convenient, it means putting your trust in the group maintain the pool. Risky, as pools have been hacked quite frequently in the past.

Finally, when staking your claim, you perform a transaction which further exposes your IP address and reintroducing the hacking risk. Additionally, with NEO, for example, if you want to compound the rewards, you must claim rewards often, converting them from gas to NEO. Using a VPN proxy can help combat this, but these can be complex to set up, and one mistake in its configuration results in no protection.

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