Rocket Pool 2.5 — Tokenised Staking
Hello Rocket Poolers! We’re excited today to reveal some big improvements to Rocket Pool, a decentralised staking network for ETH2. These big changes have been inspired by feedback from our community over many months and have also allowed us to implement some additional features that we’ve been planning.
Such are these changes, that we’re marking this as a significant upgrade to the platform and calling it Rocket Pool 2.5. We’ll outline all the major changes below and their differences from version 2.0, our initial release that supported ETH2 and the beacon chain.
We’ve updated our whitepaper and our FAQ to reflect these changes and our website will be updated soon. This release will also push back our next planned beta but never fear, for these changes are definitely worth it and we hope you’ll agree! So strap in, here we go!
Tokenised Staking Deposits
When a user deposits into the Rocket Pool network, they will instantly receive the rETH token which represents a tokenised staking deposit and the rewards it gains over time in the Rocket Pool network.
This token does not need to be locked within the network to gain rewards and it can be traded, sold or held as the user desires, all from the moment they deposit ETH for staking. This token can instantly be used in DeFi apps and allows DEXs, wallets the ability to offer instant staking services.
Importantly, this token also provides Rocket Pool users with liquidity over Phases 0 and 1 of the ETH2 rollout, in which any staking deposit is locked. When smart contracts are natively enabled on ETH2 during Phase 2, a smart contract will be deployed that will allow users with the rETH token to burn it for ETH.
You will also now be able to deposit into Rocket Pool with as little as 0.01 ETH, and for you whales out there, no maximum limit applies.
What’s different from 2.0? rETH did exist in Rocket Pool 2.0, but it was a 1:1 token that could be traded for BETH when the user’s staking duration was completed (min 3 months). It is now much more flexible, and has a dynamic trade-in ratio for BETH — its value increases as the Rocket Pool network earns rewards.
The minimum deposit limit has also been reduced significantly, and the maximum limit has been lifted entirely.
Continuous Staking
Since rETH is minted upon deposit we have now eliminated the need for staking durations in Rocket Pool. Node operators also benefit greatly from this as they can come and go in the network as they please — they no longer need to be locked in for any specific duration.
Whats different from 2.0? Previously if you deposited into Rocket Pool, you would have had to select a staking duration, as seen here in a demo of our previous beta UI for depositing into the network. Durations were 3m, 6m or 12m. This introduced a problem in Phases 0 and 1 where validators would sit idly after their staking duration completed, not earning any more rewards on their deposit. This is no longer the case, as node operators can stake all the way up to Phase 2 if they wish, at which point ETH can be withdrawn from the network.
Extra Deposit Safety
Due to the change in network mechanics that v2.5 brings, Rocket Pool can now offer even more safety for user deposits. All losses that are incurred when a node operator finishes staking with < 16 ETH in total are now socialised across the whole network. This means that your deposit cannot be assigned to a “bad node” — all rETH holders share the risk of nodes being slashed or penalised equally. If a node fails, all holders lose a tiny amount of value, rather than one unlucky person losing everything.
What’s different from 2.0? Previously, when a deposit arrived into the Rocket Pool network, it was split up into ‘chunks’ of 4 ETH and spread randomly around the network’s node operators. This provided some risk mitigation for large deposits. Losses for stakers are now socialised over the whole network, removing the need to spread out deposits this way. It also provides deposit protection against slashing events which was not previously possible.
Node operators, though, are still accountable for their penalties and will absorb any losses if their validators earn less than 32 ETH. This makes them economically bonded to perform in the same way as previously. As long as a node performs well, it stands to earn extra rewards in the network from commissions charged on deposits and staking rewards. This increases the ROI for node operators over staking solo, where all the same parameters apply.
Node Commission Rates
Commission rates that go to node operators for providing staking services are now variable depending on the capacity of the network to accommodate deposited ETH.
This variable commission rate is determined by the size of the deposit pool and the current capacity of node operators to meet that demand. If the deposit pool contains a huge amount of ETH beyond current node capacity, the commission rate will increase, encouraging more node operators to come online and stake that ETH while earning a high commission on it. On the flip side, if current node capacity is much higher than the deposit pool balance, the commission rate will decrease. Supply and demand at work!
What’s different from 2.0? Previously, the node commission rate was determined by network voting mechanics. The new variable commission rate should strengthen incentives for new nodes to join when Rocket Pool needs them!
nETH, the temporary node operator token!
For Phases 0 and 1 of the ETH2 rollout, if you run a node in Rocket Pool and withdraw from the network, you will receive the nETH token, which represents your deposit, rewards + commissions earned in the network for the time you participated, and is backed by ETH 1:1. This is not the same as rETH, which represents tokenised staking deposits + rewards earned by the whole network, and has a variable exchange rate.
This is a temporary token for node operators which will be replaced with actual ETH in Phase 2 of the ETH2 rollout. At this time, node operators will also be able to trade nETH in for actual ETH.
Will nETH be tradable for rETH or ETH? Great question, we expect a market would most likely arise on Uniswap for this. Now that would make things very interesting!
What’s different from 2.0? Previously, node operators would have received the old version of rETH, which operated in the same manner as above. Effectively, this is just a renaming of node operator rewards.
RPL Tokenomics
We realised one of the drawbacks for 2.0 was the need for RPL to even run a single minipool validator on your node. This was a barrier to entry and we are all about knocking those down at Rocket Pool HQ.
While RPL served a good purpose at preventing excess capacity being added to the network when it was not needed, it was still a barrier and its solution to our problem has now been minimised using our new 2.5 approach to staking.
After listening to much feedback from community members over many months on our Discord, we decided to update the RPL tokenomics to help address some of the bigger issues with decentralised staking that people were concerned about, most importantly node barriers, security and uptime.
RPL will now not be needed to run a node in Rocket Pool. Our aim now is to encourage the highest levels of security and it turn the performance of the rETH token to gain rewards over time, under 2.5 you will be able to stake RPL on your node as an additional security and uptime promise. Users that choose to stake RPL be rewarded with an additional reward proportional to the extra security they are providing. Failure to provide this additional security when staking RPL will result in your RPL being burned proportionally to the size of your penalty or slashing event.
But wait, where does this extra reward come from? In short, from us. Previously we had a commission on all rewards earned on the network. We will now be giving that to users that provide extra security and uptime by staking RPL. Encouraging node uptime and safety is now our highest desire as rETH and how well/fast it gains rewards depends on it.
How does this differ from 2.0? Bigly.
When can we try all this out?
These changes are being built right now and will be available to test out in our next beta. They will result in updates to our node CLI, node GUI and web JS library as well, so we are focusing on that for now before we launch it.
We are also aiming to run our next beta on a long-lived multiclient testnet to make sure it will run for long enough for everyone to experience it.
Where’s all the pretty graphics?
Yeah I know, we usually have lots of pretty screenshots and clips here and there in our updates. But today it was all about the changes and unless you like screenshots of code and log files, we couldn’t squeeze many in.
But not all is lost; so to compensate, here’s the most liked community made meme from our Discords #meme channel over the last month!
Questions or just say hello!
Well this turned out a bit longer than expected, 10 points to you for making it this far! If you have questions or want to know a bit more about us, why not swing by for a chat and say G’day! You can view our website or have a chat with us in our Discord room that anyone can join. If chat rooms aren’t your thing, we’re also on Twitter!
