What is a staking pool?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
A staking pool lets several holders combine their assets into a single validator and share the resulting rewards in proportion to their contributions. It removes the minimum stake and the operational burden of running a validator alone. In exchange, the operator's mistakes and downtime reach the participants too.
Key points
- Combines several holders' assets into one validator
- Gets around a minimum stake an individual cannot meet
- Operator downtime and mistakes affect participants
- Fees and withdrawal terms differ between pools
Definition
An arrangement in which multiple holders combine assets to participate in validation, and the rewards, less a fee, are distributed according to each contribution.
A proof-of-stake chain requires a minimum deposit to run a validator; on Ethereum the unit is 32 ETH. Pooling exists so that holders below that threshold can still take part.
There are broadly two models. In one, holders delegate to a validator while keeping their assets under their own control. In the other, assets are handed to a pool contract or operator to manage. The first avoids giving up your keys; the second depends on the custodian.
Pools take a fee from rewards. The fee level, whether rewards are automatically restaked, and how long withdrawals take all vary by pool. If you deposit without reading the terms, you will learn them at the moment you try to withdraw.
Watch out for
- · During the unbonding period you cannot withdraw and cannot escape price moves
- · If the validator is slashed, your principal can be reduced
- · Operator mistakes or prolonged downtime come back as reduced rewards for participants