Non Custodial Approach

There’s a well-known saying in the crypto ecosystem, “Not your keys, not your coins.”

This highlights the criticality of holding custody of your private keys for the safety of your funds. When utilizing a staking service, for instance, one must surrender their private keys to the service, placing complete reliance on the staking service operator for the security of these keys. In systems where vulnerabilities exist and deceitful actors operate, entrusting someone else with the custody of your keys is ill-advised.

Validators generate two public-private key pairs: validator keys for participating in consensus and withdrawal keys for accessing funds. While validators can securely store withdrawal keys in cold storage, validator private keys must be online 24/7. Compromise of a validator private key could enable an attacker to take control of the validator, potentially resulting in slashing or the loss of the staker's ETH.

Dexponent naturally mitigates this risk through its design. When a user stakes ETH, an individual smart contract is created for each user, containing all necessary information, including the withdrawal keys. This approach ensures that no unauthorized entity can access a user's withdrawal keys. Additionally, funds staked with the validator are inaccessible to the validator itself; only the user retains the capability to unstake the ETH at will.