New Ways to Save When Staking Ethereum with rETH and C14
One of the key innovations in the DeFi space over the past 18 months has been the rise of Liquid Staking Protocols, such as Rocket Pool. LSPs play an increasingly important role in the DeFi ecosystem, but there still remain substantial barriers to entry for new consumers.
With the regulatory issues in the United States in 2023 for crypto exchanges, it is clear that the future is very bright for DeFi and Ethereum staking protocols that are decentralized.
With the help of a Rocket Pool community advocate and C14 advisor, KentPhilly.eth, the C14 team has found a great way to dramatically reduce the barriers to entry for staking services such as Rocket Pool. As the article below will elaborate, for certain transaction sizes, entering rETH through C14 rather directly through the staking protocol can reduce fees by more than 60%.
What is Liquid Staking Ethereum? What is an Ethereum LSD?
According to EthereumStakingGuide.com, liquid staking is pooled staking of Ethereum. Pooled staking is combining your ETH with other investors’ ETH inside together to reach the required validator minimum of 32 ETH.
What are Liquid Staking Protocols?
Liquid staking protocols have emerged as innovative solutions to address the limitations and illiquidity associated with traditional staking in blockchain networks. In a typical staking setup, users lock their tokens for a specific period to participate in network consensus and earn rewards. However, this locked capital is illiquid, meaning it cannot be easily accessed or utilized for other purposes. Liquid staking protocols aim to unlock the value of staked tokens by creating derivative assets that represent users’ staked positions. These derivative assets, often referred to as “liquid staked tokens,” can be traded, lent, or used as collateral, providing users with additional flexibility and liquidity.
Rocket Pool is the leading decentralized Ethereum Liquid stalking protocol, but not the #1 leading LSD, which is Lido. We at C14 believe in the importance of decentralization for Ethereum and thus with Ethereum Liquid Staking Tokens and products.
Liquid staking protocols offer several advantages to crypto investors and current Ethereum users.
“When considering the long-term value offering of decentralized finance and composable finance, Liquid Staking Derivative tokens stand out as an elementary and critical piece to the puzzle.” @StakeRocketPool Blog
Firstly, they enable token holders to unlock the value of their staked assets and access liquidity without waiting for the staking period to end. This liquidity can be leveraged for other investment opportunities, mitigating the opportunity cost associated with locked funds.
Additionally, liquid staking tokens can be integrated into various DeFi applications, providing users with additional utility. For example, users can supply their liquid staking tokens to lending protocols to earn interest or use them as collateral to borrow other assets. These protocols bridge the gap between staking and DeFi, combining the benefits of both to create a more dynamic and accessible ecosystem for token holders.
How does Rocket Pool Work?
Rocket Pool operates on a trustless and decentralized infrastructure, ensuring transparency and security for all participants. The protocol allows users to deposit their Ethereum and other compatible tokens into a shared pool, known as a “Rocket Pool Node.” These nodes, operated by network participants called “node operators,” handle the technical aspects of staking on behalf of the entire pool.
Node operators play a crucial role in the ecosystem, as they are responsible for running and maintaining the infrastructure required for staking. In return for their services, node operators receive a share of the staking rewards generated by the pool. This incentivizes individuals to participate in the network and contribute to its stability.
What Are the Rewards for Staking with Rocket Pool?
There are two sets of rewards for Rocket Pool participants. The first is for validators and the second is for stakers.
As rETH can be used as collateral in DeFi applications, Rocket Pool Providers an attractive way for ETH holders to increase their returns without locking their assets.
Barriers to Staking ETH with Rocket Pool
For a user to stake ETH in Rocket Pool, they must said Ether to the Rocket Pool smart contract. This is more computationally challenging than a simple transfer, and thus requires more gas fees. Below is a screenshot of the estimated gas fees to begin staking ETH with Rocket Pool on June 26th, 2023.
A screenshot of the recent gas cost associated with staking ETH using Rocket Pool.
The cost to stake $200 worth of ETH to Rocket Pool is just under $30. Holding ETH prices constant, it would take many years for the investment to make sense.
In contrast, here is the cost to place $200 with Rocket Pool using C14.
Using C14, a user can enter Pocket Pool at ~30% of the price of going directly to the smart contract.
How is This Possible?
C14 holds inventory of rETH, which it broadcasts to users as they successfully purchase. This allows us to amortize the cost of interacting with the smart contract providing substantial savings.
In dollar terms, at an ~3% reward rate a user would have to deposit over $1,000 into Rocket Pool to breakeven in a year. Using C14, that number falls to $300.
How to use C14 to buy rETH?
We have made rETH available through our partnership with stakerocketpool. Simply head over to their website and click “purchase” to be directed to the C14 widget. Once you have completed your purchase your rETH will be sent directly to whichever wallet you desire.
Over the coming weeks we’ll publish additional information about rETH on C14, including a chart that will help make it clear at waht gas rate and transaction size using C14 to obtain rETH is cheaper than going directly to the Rocket Pool protocol.
Our hope is that this integration is just the first step in a long journey towards making staking products more easily accessible to mainstream consumers. If you have any requests or feedback, please reach out to us on Twitter and we would love to discuss!
Best,
C14
