Glossary

Stacking

Custodial vs. Non-Custodial Staking Services

A major differentiator between staking services is level of custodianship; meaning, how a service stores user private keys. Most staking services are custodial or 'centralized.' Custodial staking services manage the entire ETH staking process on behalf of the user and have 'custody' over user private keys. Some centralized services only retain access to user validator keys (semi-custodial).

Custodial and semi-custodial staking raises security breach concerns should a hacker gain access to the service and access its user's assets. Additionally, should the service inadvertently partake in a slashable event, its users face steep penalties given that slashing penalties grow exponentially the more validator keys are involved in an event. The larger the centralized service, the larger the potential penalties.

Alternatively, Non-Custodial staking solutions are available which are intended to provide streamlined validator set-up and management but allow the user to keep control of their private keys.