About delegating XTZ

There is no risk to you , however you should redelegate your coins because that baker will lose his bond and also lose baking rights meaning you probably won't receive rewards. Plus a shady baker like that shouldn't be trusted with your delegation. Your Tezzies won't be effected if they are just delegated.

In tezos the block producers are called “bakers”, not masternodes. And if you delegate to a baker you are called a “delegator” (the baker being called the “delegate”).

That being said is as explained above when you delegate your tez to a baker your staking rights are pointed to the baker for the purpose of assigning slots for various operations related to baking (baking, endorsing eg) but no actual transfert of capital occurs between you and the baker which is why your capital is safe since the baker has no control over it.

Now on the other hand the delegate receives inflation rewards for their work and usually shares the proportion of these rewards (minus a fee) with their delegators. To the extent that this sharing of the rewards is controlled directly by the baker itself, it is subject to counterparty risk so any of the following can happen to it:

• the baker may decide not to pay
• the baker may be subject hack/theft and find themselves unable to pay
• the baker may be misbehaving (intentionally or not) with respect to its onchain duties (double baking, double endorsing) and lose rewards and part or all of its “baking bond” which could impact its ability to send rewards to its delegate.

So for all these reasons in tezos the capital allocated to baking from a delegator to a baker is free of counterparty risk but the inflation rewards are not.

For more information about tezos pos you can read the following

• https://medium.com/tezos/liquid-proof-of-stake-aec2f7ef1da7
• https://tezos.gitlab.io/whitedoc/proof_of_stake.html

In Tezos, we use the term 'baker' for a node which creates new blocks. When you delegate your tez to a baker, the tez remain 100% in your control and are not locked up for any period of time. If the baker misbehaves, you are in complete control to move your delegation to another baker at any time. Your tez are never at risk.