What Are the Risks a Validator Faces When Staking ETH?
Validators face several operational and financial risks. Operational risks include hardware failure, power outages, and incorrect client configuration, leading to minor "inactivity" penalties.
Financial risks include the risk of "slashing" for malicious behavior, which burns a portion of their stake. Furthermore, validators face market risk, where the value of their staked ETH may decline relative to other assets.
The staked ETH is also locked and illiquid for a period.
Glossar
Running an Ethereum Validator
Staking ⎊ Running an Ethereum validator necessitates a substantial capital commitment of 32 ETH, locked as collateral within the Beacon Chain, functioning as a mechanism to secure the network and participate in consensus.
Validator
Role ⎊ A validator is a critical network participant in a Proof-of-Stake blockchain responsible for proposing, verifying, and attesting to new blocks of transactions to maintain consensus and secure the distributed ledger.
Staked ETH
Stake ⎊ Staked ETH represents the process of locking Ethereum (ETH) within the Beacon Chain to participate in the network's consensus mechanism, transitioning from a Proof-of-Work to a Proof-of-Stake system.
ETH
Volatility ⎊ Ethereum, within cryptocurrency markets, represents a key parameter for option pricing and risk assessment, influencing derivative valuations and trading strategies.