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I have been baking for a couple weeks now. I've decided that solo baking isn't for me, instead I'm going to use a delegation service.

So, the question I have is, how can I properly stop baking? Is there a proper way to stop without incurring any penalties? Are there any implications that I should know about?

8

You will not incur any penalties as long as you don't double bake so you can just stop running your nodes.

The key thing when shutting down is to remember that you have earned future baking rights 7 cycles in advance. So if you want to make full use of the rights and earn all of your rewards you need to leave your baker running with enough funds to cover deposits until your rights have ended. Any balance you don't need for paying deposits should be put into a KT account and delegated elsewhere as soon as possible

To stop earning further rights you just need to have less than 1 roll in staking balance (baker balance + frozen deposits + delegated balances).

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  • One addition: There is a certain amount of "lost profits" involved, because the amount to leave at the baker for the future baking rights could earn yourself a return when delegating it to a service, but I guess this could be neglected.
    – jdsika
    Feb 5 '19 at 9:15
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I have done it by following these steps:

  • Calculate the maximum amount of stake you will need to leave in the account to cover rewards you are already eligible for. Basically the sum the upcoming rewards for the next 7 cycles
  • Delegate the remainder of your balance to your chosen baker leaving the amount you calculated in step 1
  • This should leave you with a balance less than 10k at the next cycle so your baker will no longer be eligible for rewards
  • You can now either delegate any free Tezos after each cycle or wait until the end of the 7th cycle and delegate it all at once
  • Turn off your baker

If there is a possibility of stealing a block you may want to leave more tezos in your bakers account to cover that possibility

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