Coincover launches disaster recovery technology to protect staked crypto

By Joy Dumasia

Coincover, one of the digital asset protection technology companies, announces launching the world’s first staking protection technology. Staking, which allows investors to put their crypto to work and earn a yield, has opened up new opportunities for the crypto market and is catching the attention of a growing number of institutional investors. However, the relatively new investment strategy comes with potential risks.  

In certain cases, the network can penalise investors, eliminating a portion of their staked currency. This means that staking organisations and the investors that use them are open to significant financial and reputational damage. Coincover has developed technology to protect staked assets from any kind of outage or disaster scenario, which it does by providing staking organisations with an encrypted backup key. 

Proof-of-stake depends on validators, who are chosen at random by the blockchain. In staking their cryptocurrency, investors are responsible for validating transactions via their validator key. But if a firm cannot use its validator key – caused by system failures, downtime, or human error – the network penalises them, and a portion of their staked currency is taken away. Different networks have different validator rules and penalties, but on the Ethereum network, investors can lose up to 50% of their stake over a 21 day period and are ejected out of the validator pool after 21 days.  

Adam Smith, Chief Technology Officer and Co-Founder of Coincover, said: “This technology is an industry first. Lots of our clients were talking about the need for protection, so we wanted to formalise our offer. Our mission is to make the entire crypto space safer, and staking is a growing part of that landscape. Firms need systems in place to prevent losses by having their validatior key backed up with a third party – in case things go wrong internally. Our back up provides a layer of security that internal technology simply can’t match.” 

Rosie Leheup-Ffoulkes, Product Lead at Coincover, said: “Staking is a huge area of growth for crypto, which the Merge will undoubtedly supercharge. The ability to put your crypto to work and churn out a yield is a game-changer, especially for those with a long position on the market. However, it’s still a new form of investing, which most are exploring for the first time, without the systems in place to avoid getting caught on the wrong side of penalties. We want to move the industry in a direction that sees crypto companies pre-empt, plan for, and prevent risks like this before they cause problems and deter people from investing. This technology gives investors an extra layer of security, providing reassurance and building trust.”