What Is the Counterparty Risk When Using a Centralized Exchange for Staking? ⎊ Path

What Is the Counterparty Risk When Using a Centralized Exchange for Staking?

When staking through a centralized exchange (CEX), the user gives up custody of their private keys, creating custodial risk. The CEX becomes the counterparty.

If the CEX is hacked, becomes insolvent, or acts maliciously, the user's staked assets may be lost, regardless of the underlying network's security. This is a significant single point of failure.

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Glossar

Centralized Exchange

Custody ⎊ Centralized Exchanges function as custodians for digital assets, managing private key infrastructure and providing a regulated framework for asset holding, a critical component for institutional adoption within cryptocurrency markets.