Substaking

Substaking refers to a specific mechanism within certain cryptocurrency staking protocols. It is a form of delegated proof-of-stake where a validator, or a staker who is running a validator node, delegates a portion of their staked assets to another validator. This secondary delegation is what differentiates it from direct staking. The purpose of substaking can vary but often involves validators seeking to increase their network influence, earn additional rewards, or meet certain network participation requirements by pooling their stake with others.

When a staker engages in substaking, they are essentially entrusting their assets to a chosen validator, who then incorporates these assets into their own larger stake to operate as a validator. The rewards generated by the sub-staked assets are typically shared between the original staker and the validator they delegated to, according to pre-defined terms. This arrangement allows smaller stakers to participate in validator rewards without needing to meet the often high capital requirements to run a full validator node themselves. However, it also means the sub-staker relies on the performance and security of the validator they have chosen. The sub-staker may also be subject to slashing penalties if the validator they delegated to acts maliciously or fails to meet network uptime requirements.