  On several proof-of-stake blockchains, agents engaged in validating
transactions can open a pool to which others can delegate their stake in order
to earn higher returns. We develop a model of staking pool formation in the
presence of malicious agents and establish existence and uniqueness of
equilibria. We then identify potential and risk of staking pools. First,
allowing for staking pools lowers blockchain security. Yet, honest stake
holders obtain higher returns. Second, by choosing welfare optimal distribution
rewards, staking pools prevent that malicious agents receive large rewards.
Third, when pool owners can freely distribute the returns from validation to
delegators, staking pools disrupt blockchain operations, since malicious agents
attract most delegators by offering generous returns.
