Are there any risks in staking deflationary tokens?

Asked 2 years ago

I want to stake my deflationary tokens. Are there any risks involved in this?

Robby Reyes

Monday, August 01, 2022

Even investing in the most stable assets can be risky. History has proven time and again that investing always bears risks, no matter how slight the risk in question is. Namely, there are two main risks of staking deflationary tokens.

The first one is losing money by losing the value of the tokens. If you have staked a specific amount of Bitcoin at an APY of 5%, and Bitcoin loses over 20% of its in a year, you've effectively "lost" around 15-18% of the money you've initially invested. Of course, Bitcoin has a great track history and will probably still make you money years down the road, but other, less reputable projects (like TerraLuna) might make you lose all of your money.

The second one is losing your assets due to a cybersecurity breach or a financial disaster. If you've staked your coins at a crypto platform, and the crypto platform gets hacked or declares bankruptcy, chances are that you'll lose a part of your cash or you won't be able to withdraw your funds at all. This is why it's crucial to stake deflationary tokens at reputable platforms where the chances of such a disaster happening are minimal.

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