In Proof of Stake (PoS) and its variants like Delegated Proof of Stake (DPoS), staking is the process of locking up a certain amount of tokens or coins in a wallet to support the operations of a blockchain network. In return, participants are rewarded with additional tokens.
A staking pool is a mechanism that allows multiple participants to combine their tokens in a collective pool to increase their chances of earning rewards through PoS. When the staking pool successfully validates a block, it earns rewards, which are then distributed amongst the participants based on their contribution to the pool. Typically, the more a participant contributes, the larger their share of the rewards.
Some blockchain networks require a minimum amount of tokens to participate in staking, which might be prohibitively high for individual users. For example, Ethereum’s PoS protocol has a minimum requirement of 32 ETH for validators to run an independent node. This is where staking pools come in, allowing users to participate with smaller amounts.
Additionally, staking pools often have experienced operators who manage the staking process, reducing the technical risks for individual participants. By pooling together, participants can earn rewards more consistently, even if their individual stakes would not be large enough to earn rewards regularly.
