A staking pool is formed by several people joining their cryptocurrencies in staking. The aim of this practice is to increase the staking power of the single individuals, i.e. the probability of being chosen for block validation in Proof-of-Stake (PoS) networks and, consequently, to earn rewards. In the PoS consensus mechanism, the validators are chosen in proportion to the amount of tokens they stake, so the larger the stake of a person or entity, the more likely they are to be selected to add new blocks to the blockchain. Nodes that validate blocks also receive rewards in the form of cryptocurrencies, so the more cryptocurrencies a staking pool contains, the more rewards it will earn because it will be called upon more often to act as a validator.
A staking pool consists of all the assets of the people who joined the pool, and the rewards are redistributed among the participants. In terms of locking the assets, the rule is the same as in the classic staking – when you lock your cryptocurrencies in the pool, you can no longer use them until you remove them from the staking pool or the staking period expires.
There are both decentralised and centralised staking pools. Decentralised staking pools are typical of centralised exchanges, where users earn rewards for staking their cryptocurrencies and the total stake of all the users is used by the validators. Decentralised staking pools, on the other hand, are very common on DeFi protocols or platforms. In this case, the staking is carried out through a smart contract.