Is staking crypto safe?

Whether staking crypto is safe depends on which risk you mean and who you are trusting. Staking is a normal part of how proof-of-stake networks run, explained in what crypto staking is, but it layers extra risks on top of price swings. This guide sorts them without saying whether to stake.

What are the main staking risks?

They fall into a few groups:

• Price risk. Rewards are paid in the same coin, so a fall in price can outweigh them.
• Liquidity risk. Coinbase says staked assets cannot be sold or sent until unstaked, which can take hours to weeks, and that instant unstaking for a fee may not always be offered. Waits by network are in how long unstaking takes.
• Protocol and code risk. Network rules can change, and pooled or liquid staking relies on smart contracts that Ledger notes can contain bugs even after audits.
• Platform and legal risk. A company that stakes for you holds the coins and can face regulators. In 2023 Kraken paid $30 million to settle SEC charges over its US staking program and agreed to stop it.

What is slashing, and how often does it happen?

Slashing is a penalty for validators that break a network's rules. On Ethereum, ethereum.org says a validator is slashed for proposing two different blocks for one slot or for contradictory votes. It loses an initial amount, is forced out over 36 days, and at the halfway point takes a further correlation penalty that grows with how many validators were slashed in the same period. In an isolated case only a small part of the stake is lost, but if many validators fail together, the penalty can reach their whole balance.

A validator that is merely offline loses roughly the rewards it missed instead. Coinbase cites a 2023 study finding about 0.04% of ETH validators had been slashed since 2020.

Is staking on Coinbase safe?

It shifts much of the risk to Coinbase, which holds your coins, runs or picks the validators and takes a commission. It also says rewards are not guaranteed and can be zero. It says it has never been slashed and that, under its user agreement, it reimburses penalties caused by mistakes by itself or its third-party validators. It says reimbursement is not guaranteed for slashing caused by a hack, a protocol bug or a customer's own actions. Coinbase staking is also unavailable in some states, as why staking is not available in some states explains.

Is staking ETH on Ledger safe?

Ledger's model is different because you keep the keys. Its Ethereum staking page says private keys stay on the Ledger device, validators never hold them, and each staking transaction is confirmed on the device. Staking itself is run by third-party providers, Kiln for native staking, Lido for liquid staking and Figment for amounts above 32 ETH, and Ledger says it gives no advice on them. So the device protects your keys, but not against slashing, smart contract bugs or the extra risks of liquid staking tokens, covered in what liquid staking is.