Coincover, a specialist in digital asset protection technology, has launched what it says is the world’s first staking protection technology.
Staking, which allows investors to put their crypto to work and earn a yield, has opened up new opportunities for the crypto market and is catching the attention of a growing number of institutional investors. However, the relatively new investment strategy comes with potential risks.
In certain cases, the network can penalise investors, eliminating a portion of their staked currency. This means that staking organisations – and the investors that use them – are open to significant financial as well as reputational damage.
Looking to protect investors against this vulnerability, Coincover has developed technology to protect staked assets from any kind of outage or disaster scenario, which it does by providing staking organisations with an encrypted backup key.
Proof-of-stake depends on validators, who are chosen at random by the blockchain. In staking their cryptocurrency, investors are responsible for validating transactions via their validator key. But should a firm be unable to use its validator key – which can be caused by anything from system failures, downtime or human error – the network penalises them and a portion of their staked currency is taken away. Different networks have different validator rules and penalties, but on the Ethereum network investors can lose up to 50% of their stake over a 21 day period, and are ejected out of the validator pool after 21 days.
