The IP addresses and other metadata of individuals who stake Ethereum (ETH) are logged and monitored, Justin Drake, a researcher at the Ethereum Foundation, revealed on Wednesday during an interview on the YouTube cryptocurrency channel Bankless.
“This is information that I know internally,” Drake said.
Drake revealed that Ethereum stakers can be tracked, and there’s a database with their metadata. ETH is the second major cryptocurrency after Bitcoin.
Metadata is a set of data that can reveal basic information about other data. For example, the metadata of an image can show when and where the photo was taken. Metadata is generated when you visit a website or conduct transactions online.
Is ETH Staking Safe?
According to Drake, staking nodes can expose users’ IP addresses. This means their identities and locations are potentially exposed.
“There’s a lot of metadata, you can look at deposit addresses, you can look at withdrawal addresses, you can look at fee recipients, you can look at IP addresses,” Drake said.
“There are some people looking at the set of metadata for validators,” he added. Validators are like digital accountants who verify transactions on a blockchain.
Staking allows individuals to earn rewards for holding cryptocurrencies. It also contributes to the validity and security of cryptocurrencies by verifying transactions. Staking is more environmentally friendly than “proof of stake” validations” and more cost-effective than mining.
How to Protect Your Privacy While Staking Crypto
A virtual private network (VPN) can protect your privacy when performing crypto transactions. VPNs hide your IP address and replace it with another based on your chosen server location. Check out our list of the best VPNs for Bitcoin transactions for more information.
You could also use the Tor browser or a mix-net like Nym and Chainsafe to obfuscate your internet traffic. We strongly recommend storing your crypto assets in a cold wallet (hardware) instead of an online hot wallet.
Crypto exchanges increasingly have to comply with international Anti-Money Laundering (AML) and Know Your Customer (KYC) laws. As a result, cryptocurrency-related projects have started collecting user information. In November 2022, the popular browser wallet MetaMask began collecting users’ IPs and wallet addresses.
In January, Marty, the co-founder of Ergopad — an innovative cryptocurrency project built on the Ergo smart contract platform (ERG) — told us he is concerned about privacy.
“We are moving to a regulatory environment where all VASPs (Virtual Asset Service Providers) must do KYC for all transactions. This is even being pushed to the DeFi [decentralized finance] space,” he said.
