Rocket Pool 101 — FAQ
Rocket Pool is a first of its kind, Ethereum proof of stake infrastructure service. Individuals and businesses who want to earn interest on their ether over a fixed term can use Rocket Pool’s decentralised network of node operators to participate in staking.
Businesses such as exchanges, staking pools, and wallets can easily provide customers with proof of stake services by leveraging Rocket Pool’s API and its unique decentralised network of node operators.
This is a “quick” high level overview of what its all about. For a much more in-depth guide to Rocket Pool’s features and decentralised network, be sure to read our current whitepaper here.
Rocket Pool — General
- What is Proof of Stake?
A brief overview of what Proof of Stake is and why it is awesome.
- What does it do?
A quick introduction into what Rocket Pool actually does.
- Why would I need to use it?
Good question and hopefully even better answers.
- How does it work?
Smart contracts, smart node network & decentralised infrastructure.
- What is the difference between the RPL token and the RPD token?
We get this a lot, prepare for enlightenment.
- Who made it?
It wasn’t aliens or lizard people. Well, fairly sure anyway.
Rocket Pool — Staking
- What is the minimum deposit?
I’ll save you a scroll, it’s 1 ether.
- What is the maximum deposit?
I’ll save you another scroll, it’s 1000 ether.
- What are the staking periods?
Flexible staking periods to suit everyone, except that weird uninvited uncle that keeps coming to family gatherings.
- How much does it cost to stake with Rocket Pool?
If we could do it for free, we would :)
- How do you keep my funds safe?
Our top priority! We have lots of security features in place.
- How is interest generated on a deposit? What is the return?
OK, expect your mind to be blown.
- What is a decentralized staking network?
It is a very good idea to be part of a decentralised staking network.
- What if I need to withdraw my funds early?
Sometimes you can’t wait for staking to finish, we’ve got you covered.
- Can I setup a backup address?
Lose your car keys a lot? You might want to set a backup address just in case.
- Are your smart contracts audited and open source?
For sure! Audits and bug bounties coming out the wazoo.
Rocket Pool — Node Operators
- Why would I run a Rocket Pool smart node vs going solo?
Half the ether required to do so and extra income, boom!
- What is the minimum staking amount for a node operator?
It’s 16 ether, would you like to know more?
- What is involved in running a Rocket Pool node?
Some ETH, some RPL and uptime, uptime, uptime.
- How is the RPL token used?
This is quite clever, let’s explain. Better grab a drink first though.
Rocket Pool — Integrated Business
- Why would I want to offer my customers proof of stake services?
All the benefits of Casper with none of the infrastructure required!
- How can I offer my customers proof of stake services?
Integrating with Rocket Pool is super easy.
- Do my users know their using Rocket Pool in the background?
That’s up to you!
- Can I set a fee for my users?
You sure can and it’ll be kept safe on your very own contract.
Rocket Pool — General
What is Proof of Stake?
Proof of Stake is a consensus protocol coming to Ethereum in 2019. Currently Ethereum uses the Proof of Work (PoW) protocol, which you may have heard of before, because Bitcoin uses PoW. With a decentralised blockchain, these consensus protocols help keep everyone on the same page, so we all know what transactions have been processed and in what order.
Ethereum will adopt a new Proof of Stake (PoS) protocol called Casper, which is more energy efficient and more decentralised than PoW. It’s powered by users depositing ether and providing an Ethereum node online 24/7 to perform the required validation. As a reward for providing the node, Casper gives node operators interest on their deposits.
What does it do?
Rocket Pool is a decentralised staking infrastructure service that will allow users and businesses to earn interest on their ether holdings using Casper, Ethereums new consensus mechanism due in 2019. The ether deposits resemble a fixed term deposit where you can deposit your ether with Rocket Pool, then our smart contracts manage the deposit and interactions with Casper. Deposit terms will range from just a few months to over a year.
Why would I need to use it?
Rocket Pool removes several high barriers to entry that will exist with Proof of Stake on the Ethereum network for both individuals, groups and businesses.
- Casper requires a deposit of exactly 32 ether. Rocket Pool will allow anyone to earn interest from as low as a 1 ether deposit, up to a really large amount.
- Casper will also require the user to have knowledge on how to interact with smart contracts. Rocket Pool handles all interactions with Casper for you.
- Casper will require an user who makes a deposit to be technically proficient at running an Ethereum node 24/7 and keeping that node online + secure. Rocket Pool has a decentralised network of Ethereum nodes that provide this service.
- Casper will penalise users who make a deposit but fail to keep their node online. Rocket Pool uses a unique method called ‘chunking’ which significantly reduces risk to deposits by spreading a single deposit over a decentralised network of nodes to reduce risk.
- You are confident in running your own node but do not have the 32 ether required for the deposit. If you join Rocket Pools decentralised network of Ethereum nodes with your own, you only need 16 ether minimum to solo stake. You also get the added benefit of receiving extra income from the network for providing this service.
How does it work?
Hold tight, this is a meaty one! Rocket Pool is primarily composed of 3 main elements, Smart Contracts, Smart Node Network and Minipools.
Our Smart Contracts accept ether deposits, manages users, issues + tracks various tokens and handles all interactions with Casper. They can also detect if a smart node in the network has gone down and will automatically disable it from receiving any new users until it is repaired.
Our Smart Node Network is a decentralised network of special Ethereum nodes that run our Smart Node software. They feature custom background processes that allow them to communicate with Rocket Pool’s smart contracts and just as importantly, provide the network consensus required by Casper.
Any user can run one of these smart nodes and stake their own ether fee-free if they have the minimum 16 ether required. For providing the Rocket Pool network with a smart node, the user also receives extra income from the network on top of the interest they earn staking their own ether.
Minipools are another smart contract, but these are worth defining on their own due to being such a key aspect of Rocket Pool. These contracts contain groups of users pooling their ether together and staking for a specific amount of time. They are distributed over the Rocket Pool network in distributed and decentralised manner to increase redundancy.
View the visual guide below to get a glimpse as to how these components work together in the Rocket Pool network.
What is the difference between the RPL token and the RPD token?
RPL — Rocket Pool Protocol Token
The Rocket Pool protocol token is used to regulate the capacity of the decentralised node operator network.
There is some more information here: How is the RPL token used?
RPD — Rocket Pool Deposit Token
The Rocket Pool deposit token is used by stakers who want to withdraw their deposits before the end of the staking period.
There is more information here: What if I need to withdraw my funds?
Who made it?
Rocket Pool was originally started in late 2016 by David Rugendyke, a senior developer with over 18 years commercial experience and a computer science background.
In May 2017, an alpha version of the product was released. A vibrant community started to form and the team began expanding.
In July 2018, a successful public beta of the Rocket Pool 1.0 was released with over 1,700 deposits, using the recently deprecated Casper FFG 0.2.0 smart contract. Rocket Pool 1.0 was a great success and well received by the community.
With Ethereum 2.0 on the horizon, Rocket Pool is aligning its battle-tested platform with the new version of Casper.
Rocket Pool — Staking
What is the minimum deposit?
Rocket Pool allows anyone to earn interest on deposits as low as 1 ether.
What is the maximum deposit?
Rocket Pool allows currently has a single maximum deposit size of 1000 ether.
What are the staking periods?
Rocket Pool supports staking periods of 3, 6, and 12 months.
Please bear in mind, that the Casper Proof of Stake system has a 4 month withdrawal period.
- 3 month staking period + 4 month withdrawal = 7 months total
- 6 month staking period + 4 month withdrawal = 10 months total
- 12 month staking period + 4 month withdrawal = 16 months total
How much does it cost to stake with Rocket Pool?
Casper is still under development and there are a number of factors to consider. We believe in being highly competitive from day 1. So our fee will be as good as it gets.
How do you keep my funds safe?
Our smart contracts are responsible for holding and moving funds. In the interest of trust, they are open source for all to analyse. Additionally, before the smart contracts are deployed to mainnet they will be fully audited and a bug bounty program will be run to ensure the best level of security.
Rocket Pool is a decentralized network of node operators. Your deposit will be allocated to a node operator who will perform Proof of Stake duties. Node operators are required to stake as much ether as they are assigned — this means they have skin in the game; they are incentivised to perform their duties diligently.
To further disperse risk, large deposits are broken up into chunks and distributed across multiple node operators, reducing single points of failure significantly on larger deposits.
All Rocket Pool contracts have also been uniquely designed to allow them to be upgradable. If an issue does arise with a smart contract, it can be seamlessly replaced sans bugs.
How is interest generated on a deposit? What is the return?
Great question! Casper is under development so this is a provisional answer.
The Ethereum Proof of Stake system rewards validators (node operators) with interest on their deposits; this interest is paid for through new issuance of the ether currency.
The interest/reward return depends on the total amount of Casper deposits. It is estimated between 10–20 million ether will be deposited into the Proof of Stake system.
- 10 million staked — gives a return of 3.8% (annual ether inflation of 0.36%)
- 20 million staked — gives a return of 2.69% (annual ether inflation of 0.51%)
What is a decentralized staking network?
Rocket Pool is a decentralized network of node operators. Each node operator is a separate entity with their own server infrastructure. Having this heterogeneous network is important for:
- Fault tolerance — failures only affect a small number of nodes
- Scalability — by opening up the network it means a huge number of nodes can be brought online to meet demand
- Quadratic Leaking — this is a fancy term — for how Casper punishes validators for being offline. As a node operator, if you go offline with a big group of other validators your punishment is greater — this deters centralised staking pools.
What if I need to withdraw my funds early?
Rocket Pool will allow stakers — to withdraw a token that backs their deposit, the RPD token. These tokens match the value of ether on a 1:1 basis when redeemed from Rocket Pool, provided liquidity of the RPD contract is sufficient. Of course, if lots of users have been redeeming these tokens quicker than the RPD contract can refill with ether, users can sell these tokens on the free market, most likely at a slight discount, to users who are willing to wait for the contract to gain sufficient liquidity again. This means the user always has options to get funds quickly even while staking.
The RPD token contract contains a variable amount of ether in it at any given time. This ether is sourced from minipools that have finished staking and had users withdraw all or part of their deposit as RPD tokens. This ether is sent to the RPD token contract where it becomes an available source of ether for those wishing to trade in RPD tokens.
When withdrawing RPD tokens, the users incur a 0.25% fee which serves a dual purpose. The fee prevents abuse of the RPD contract, where a user could keep in permanently drained of ether by staking, then withdrawing RPD tokens and redeeming those immediately. With the fee, the user incurs a small penalty each time.
Can I setup a backup address?
What a great idea! Yes you can. If you’re the cautious or forgetful type, you can set a backup Ethereum address that will be allowed to collect your deposit + rewards after 3 months; if the original address that made the deposit does not collect it in this time.
Are your smart contracts audited and open source?
We wouldn’t want it any other way. Before our smart contracts are deployed to mainnet they will be comprehensively audited by a third-party. We will also run a bounty program on a testnet to ensure best practice security. Anyone can also view our smart contracts at our github repo!
Rocket Pool — Node Operators
Why would I run a Rocket Pool smart node vs going solo?
As a node operator, you can take advantage of the following benefits:
- You require only 16 ether to stake (as opposed to 32 ether outside of Rocket Pool), since Rocket Pool assigns 16 ether of user deposits.
- You earn extra ether by charging Rocket Pool users a set percentage of the interest earned on your node.
- You stake your own ether, free from any Rocket Pool fee.
- You are always in control of your own node.
What is the minimum staking amount for a node operator?
The minimum staking amount for a node operator is 16 ether.
What is involved in running a Rocket Pool node?
As a node operator you will need to run a server 24/7 performing proof of stake validator duties. We help you setup your server quickly and easily by providing installation packages that install everything you need to start. We will also be providing cloud provider devOp playbooks to easy setup on the most common cloud hosting provides such as AWS, Rackspace and more.
Apart from that you just need the prerequisite ether deposit (16 ether) and RPL, which is determined on deposit.
How is the RPL token used?
Rocket Pool is a self-regulating network of node operators; it automatically adjusts its capacity to match demand. The Rocket Pool protocol token is used to maintain an optimal capacity by:
- Increasing capacity when needed, by incentivising node operators to join.
- Decreasing capacity when not needed, by disincentivising node operators to join.
In addition to depositing ether, a node operator is required to deposit a set amount of RPL per ether they are depositing. This RPL:ether ratio is dynamic and is dependent on the network utilisation. E.g:
- If the network has plenty of capacity, then node operators need more RPL to join.
- If the network is reaching capacity, then node operators need less RPL to join.
Rocket Pool — Integrated Businesses
Why would I want to offer my customers proof of stake services?
If you or your customers are holding deposits of ether, they could be earning interest.
How can I offer my customers proof of stake services?
It is easy — we will have an API specifically for integrating businesses so that you can start providing proof of stake services straight away.
Anyone can benefit from providing proof of stake services, but in particular it would be a great benefit to businesses such as exchanges, hedge funds, staking pools, and wallets.
Do my users know their using Rocket Pool in the background?
Only if you tell them! Rocket Pools decentralised staking network can be used by any group. You simply register your group with the Rocket Pool smart contracts and begin integration that way. All ether to and from Rocket Pool will be controlled by smart contracts you control that plug into our API.
Can I set a fee for my users?
Yes you can. When you register your group with Rocket Pools smart contracts, a new group contract is created just for you. Here you can set a fee to charge your users, that fee is then stored on that contract which only you as the group owner has access too. When your users finish staking, your fee will be deducted from the interest they earned while staking on our network.