Who can use this feature?
Staking is currently only available to Luno customers in Malaysia and South Africa.
There are two main risks to be aware of, downtime penalties and slashing, both of which involve losing some staked crypto.
Tip
These risks depend on the coin you’re staking, as they are protocol rules set by the blockchain. For example, penalties and slashing are present on the Ethereum and Solana networks, but not on the Cardano network.
What are the downtime and slashing risks?
As you might already know, staking helps to keep blockchains secure by using a system of rewards and punishments. Reliable participants are rewarded crypto for verifying transactions correctly. On the other hand, those who do things incorrectly, inconsistently, or maliciously are penalised with a deduction of their staked crypto.
Downtime
For the blockchain to run smoothly, validators (the people or companies responsible for operating the nodes that verify transactions) need to ensure their computers remain online and available at all times. If validators have connectivity issues or go offline, this can attract a downtime penalty: they’ll lose a small percentage of their staked crypto for behaving unreliably.
Slashing
Crypto transactions need to be securely verified according to very specific rules set by the blockchain. If those rules are broken – for example, if a validator accidentally verifies two blocks of transactions at the same time (double signing), or attempts to alter the blockchain’s historical data – that validator will be slashed. Because rule-breaking is seen as a worse offence than going offline, slashing is a greater loss of crypto than the downtime penalty.
How is this risk reduced?
Our staking service provider maintains a strong, long-standing, and fault-tolerant network that has run with 99.9% uptime to date across all supported blockchains. In other words, 0.01% downtime. Validator node operation is monitored 24/7, with backup nodes ready to be used when there is a problem. This switchover is carried out manually by trained engineers to prevent double signing, one of the major causes of slashing.
Prevention is the best line of defence, which is why slashing is an incredibly rare occurrence in the industry. And in the unlikely event that your staked crypto is slashed, our staking provider has processes in place to review and remediate slashing penalties where it is commercially reasonable to do so. We’ll communicate the steps you can follow should this ever happen.
Luno and our staking provider have taken every precaution to minimise your risk, but it’s important to note that downtime and slashing can be caused by events outside of Luno’s control. Only stake your crypto if you feel comfortable accepting this risk.