Delegator Security

As the cryptocurrency sector grows, it unfortunately becomes a target for malicious actors, including hackers, scammers, and fraudulent operators. Holding crypto involves inherent risks, but you can mitigate them by understanding common attack vectors and implementing robust security practices.

Security Best Practices

Security is a continuous process. Below are the core areas where you should focus your attention to safeguard your funds and personal information.

Social Engineering & Phishing

Social engineering attacks exploit human vulnerabilities rather than technical ones. The most common type is phishing, where attackers pose as legitimate entities to steal passwords or private keys.

Common tactics include:

• Urgency: Telling you that you are about to lose funds.
• Greed: telling you that you have won a prize.
• Impersonation: Pretending to be support staff or team members.

Key Management

Your private keys are the only way to access your funds. If you lose them, you lose your BTSG. If someone else gets them, they control your BTSG.

Account & Software Security

Attackers know that humans often reuse passwords. A single compromised account can act as a gateway to your financial life.

• Enable 2FA: Use Two-Factor Authentication everywhere. Prefer Authenticator Apps (like Google Authenticator or Authy) or hardware keys (like YubiKey) over SMS, which is vulnerable to SIM-swapping.
• Update Software: Keep your operating system, browser, and wallet apps updated. Updates often contain critical security patches.
• Supply Chain Attacks: Only purchase hardware wallets directly from the manufacturer. Scammers often sell compromised devices on third-party marketplaces.

Delegating Responsibilities

Becoming a Delegator is technically easier than becoming a Validator, but it is not a passive role. You play a vital part in balancing the network's power.

Choosing a Validator

Delegators safeguard the network by backing Validators who behave correctly. If you back a bad actor, you risk losing a portion of your stake. Use the BitSong Explorer to research candidates.

Verifying Transactions

Blockchain transactions are irreversible. Once you send funds, you cannot get them back if the address is wrong.

Active Monitoring

Your job isn't done after delegating. You should actively monitor your chosen validator.

1. Uptime: Ensure they are not missing blocks.
2. Governance: Check if they vote on proposals. If you disagree with their vote, you can cast your own vote to override theirs.
3. Commission: Watch for unexpected commission changes.

Rewards and Economics

Validators and Delegators earn rewards from two sources: Block Rewards (inflation) and Transaction Fees.

How Rewards Work

• Block Rewards: Newly minted BTSG. The inflation rate fluctuates based on the percentage of total supply bonded. If fewer tokens are bonded, rewards increase to attract more stakers.
• Transaction Fees: Fees paid by users to execute transactions on the network.

Commission Calculation Example

Validators take a commission before distributing rewards to delegators. Here is how the math works for a hypothetical block.

Distribution Breakdown:

1. Pool Revenue: Since the pool has 10% of the network stake, it receives 100 BTSG.
2. Calculate Commission: The validator takes 10% from the delegators' portion.
   • Delegators' portion is 80 BTSG.
   • Commission = 10% of 80 = 8 BTSG.
3. Validator's Total:
   • Own stake reward (20 BTSG) + Commission (8 BTSG) = 28 BTSG.
4. Delegators' Total:
   • Pool reward (80 BTSG) - Commission (8 BTSG) = 72 BTSG.

Risks and Slashing

Staking involves specific protocol risks that you should be aware of.

• Lock-up Period: When you unbond, your funds are locked for 21 days. You do not earn rewards during this time, and you cannot transfer the tokens.
• Mitigation: You can offset risks by splitting your stake across multiple validators.