How the recent SEC crackdown on exchange staking helps the evolution of self-managed digital assets.
The Kraken Staking Crackdown
Recently, the Securities and Exchange Commission (SEC) has been cracking down on staking, and Kraken was one of the exchanges involved. This crackdown highlights a vital issue in the crypto space: the importance of managing your own crypto.
Centralized Staking != Native Staking
Centralized exchanges often advertise staking as “native staking,” but in reality, they may not be using the native staking system of the blockchain. Instead, they may hold customers’ crypto in a separate account and earn staking rewards themselves. This can lead to issues with transparency, accountability, and even security. Customers may not fully understand how their crypto is being used and may not have control over their staking rewards.
It’s essential to manage your own crypto and not rely solely on centralized exchanges. As the saying goes, “not your keys, not your crypto.” This means that if you don’t control your private keys, you don’t really own your crypto. You are trusting a third party to hold and manage your crypto for you. This can lead to issues with security, accessibility, and even loss of funds.
Native staking, on the other hand, is staking directly from your wallet, without the need for a centralized exchange. Native staking is a way to earn rewards for helping to secure the blockchain network. When you stake your crypto, you are helping to validate transactions on the network, and in return, you earn staking rewards.
To understand native staking, let’s use an analogy. Visa charges a fee for validating transactions on its network. This fee goes to the banks and financial institutions that help process and validate transactions. In the same way, staking allows you to earn interest by helping to ensure the transactions on the blockchain network are valid. This is a way to participate in the network and earn rewards while also helping to secure it.
Conclusion
Overall, the recent crackdown on staking by the SEC highlights the need for transparency and accountability in the crypto space. It also emphasizes the importance of managing your own crypto and not relying solely on centralized exchanges. By using native staking, you can participate in the network, earn rewards, and help to ensure the security and stability of the blockchain.
Don’t forget, one of the best parts of crypto and blockchain is to enable you to manage your own funds and not trust a 3rd party. Don’t let the centralized exchanges act as your bank. Manage your own cryptos!
About Coinbag
Coinbag helps clients, particularly institutions, create, manage and de-risk their digital asset investments by connecting them to multiple licensed custodians and self-managed, on-chain wallets with seamless reporting and automated rebalancing, all in one place. With Coinbag, it’s your keys, your crypto, and your control!
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