After DeFi, Ethereum users are stocking up on Ether in hopes of earning passive returns via staking. But as exchanges and staking services emerge, these easy payoffs come with a serious cost.
Major Risks to Staking Ethereum
Ethereum’s most promising upgrade has been delayed once again despite promises of a summer release. But even after Phase 0 takes flight, enthusiasts will likely need to wait a few more years before earning passive income on their holdings.
In the meantime, Brian Crain, a founder of Chorus One, a blockchain-as-a-service that runs validators for roughly ten staking networks, has a few words of caution.
“Proof of stake networks were not designed with the idea that exchanges would start offering staking services,” said Crain in an interview with Crypto Briefing. “Their inclusion in such networks poses serious challenges.”
Crain and the Chorus One team released an 81-page report last month outlining these serious challenges. However, for anyone who lives and breathes crypto, events in 2020 have already revealed the bulk of the danger.
When big exchanges like Binance, Coinbase, KuCoin, and others began offering staking services, users were relieved. Instead of setting up sophisticated blockchain hardware and ensuring nodes are operating correctly, they could hand off this responsibility to exchanges.
Unfortunately, this convenience comes with a cost, evidenced by a battle for control between Steemit’s community and the founder of Tron, Justin Sun.