Offline Staking

Offline staking is a way for holders of a Proof of Stake (PoS) coin to earn staking rewards without keeping their own wallet online, by authorizing another node to stake their coins for them. The term is used most precisely by Qtum, a blockchain that combines Bitcoin-style Unspent Transaction Outputs (UTXOs) with smart contracts. On Qtum, a holder delegates an address to a super staker, which stakes the coins in that address and keeps an agreed fee from the rewards.

The key feature, according to Qtum's documentation, is that offline staking is non-custodial: the delegator keeps full control of the coins and the private keys, and can spend or move them at any time. That makes it different from handing coins to an exchange or a custodial wallet that stakes on a customer's behalf. Similar ideas on other chains go by names such as cold staking or delegation, including the Liquid Proof of Stake (LPoS) model used by Tezos.

Imagine you own a field but have no time to farm it. A neighbour with a tractor offers to plant and harvest it for you, in return for a tenth of the crop. You never sign over the deed, and you can sell the field whenever you like; you have simply given the neighbour permission to work it.

Offline staking is that arrangement for coins. Staking normally needs a computer that is always on. With offline staking, a specialist runs that computer, the holder's coins stay in the holder's own address, and the rewards are shared on terms agreed in advance.

Ordinary Qtum staking requires a full wallet that stays unlocked and connected around the clock, so that it can try to produce blocks with its coins. Offline staking removes that need through these steps:

1. The holder chooses a super staker and checks its fee and minimum amount.
2. The holder sends a delegation transaction, a call to a built-in delegation contract at a fixed system address, signed from the address being delegated. The call names the super staker and the fee percentage it may keep.
3. Once that transaction is confirmed and the super staker accepts the terms, the super staker can use the delegated address's eligible UTXOs as stake when trying to create blocks.
4. When a delegated UTXO wins a block, the reward is recorded on-chain, the super staker takes its agreed fee and the rest goes to the delegator.
5. The holder can undelegate at any time with a second contract call, or simply move the coins, which ends the arrangement for those UTXOs.

Qtum's documentation notes a few practical rules. The delegation transaction needs at least 0.9 QTUM in fees, with any excess refunded. Super stakers set a minimum UTXO size, 100 QTUM by default, and ignore smaller amounts. Coins must also mature for a set number of confirmations before they can be staked. Delegation works with legacy Qtum addresses, and Qtum's Electrum wallet supports delegating addresses held on a Ledger hardware device, so the coins can remain in cold storage.

• Custody stays with the holder. The super staker never receives the coins or the keys, which removes the counterparty risk of exchange staking.
• No always-on computer. The holder does not need to run a full node or leave a wallet unlocked, which reduces exposure to hacking compared with a permanently online hot wallet.
• Better odds for small holders. A super staker combines many delegated UTXOs, so delegators' coins are put to work continuously rather than depending on one small wallet's chance of winning a block.
• No lock-up. Coins remain spendable, unlike designs that freeze stake for a withdrawal period.

Offline staking is not risk-free. The holder relies on the super staker staying online and honest about which delegations it accepts; a staker that goes offline earns nothing for anyone. Fees vary between super stakers, and a staker that lowers its fee only applies the new rate if delegators redelegate. Each delegation also costs a transaction fee, which matters for small balances.

At network level, delegation can concentrate staking power in a few large super stakers, a concern shared with staking pools and delegated staking on other chains. Offline staking also differs from liquid staking: no receipt token is issued, so the delegator cannot use the staked position elsewhere in Decentralized Finance (DeFi). Compared with solo staking, it trades a fee for convenience. For background on the general practice, see staking; the related idea of letting one address act for another is covered under address delegation, and fixed-collateral service nodes under masternode.

• Qtum documentation: Offline Staking
• Qtum