Rocket Pool — Staking Protocol Part 1
Welcome to the Rocket Pool Staking Protocol Explainer series! This is part of a explainer series that covers all aspects of Rocket Pool, a decentralised, trustless and community owned staking protocol designed for ETH2.
Our goal is to help all Ethereum users gain a better understanding of Rocket Pool. If you’re brand new to ETH2 staking, an experienced staker or even a high level staking as a service (SaaS) provider; this series will provide valuable insights into how you can use Rocket Pool to stake in ETH2.
While this series rolls out, Rocket Pool will be undergoing audits from some of the best auditors in the space, Sigma Prime and ConsenSys Diligence. Part 4 of this series will go over the audit results and the Rocket Pool launch details.
Rocket Pool ETH2 Staking Protocol Series
For this introduction, we’ll give a high level overview of Rocket Pool and how to stake.
Being a community owned staking protocol, we cater to all aspects of collective ownership.This includes ETH bulls using our simple staking token rETH to smart contract dApps, wallet providers, DEXs or you amazing staking node operators, be it hobbyist or professional. There’s room for everyone!
Rocket Pool is the base layer protocol for decentralised and trustless ETH2 staking.
Designed to support stakers of all shapes and sizes, Rocket Pool was built with the intent to allow anyone to trustlessly stake ETH to a network of decentralised node operators with full autonomy underpinned by RPL collateral.
The core premise behind a protocol is to ensure the network is not beholden to any one party. This is a principle directly linked to Ethereum and ETH2 itself, and a mindset used at every stage of the process as we develop Rocket Pool for its upcoming launch.
Rocket Pool strives to embody the core ethos of Ethereum and DeFi, specifically the non-custodial, trustless nature that allows self-sovereignty to truly thrive.
This is why creating the protocol layer for ETH2 staking is so important, especially with the vast majority of players either not having the technical skills to run a node, or the financial capacity to own 32 ETH.
Protocol vs Staking as a Service
Protocols support a wide array of actors, including service providers.
Web3 is full of highly knowledgeable Staking as a Service providers, helping the world better access the proof of stake landscape with projects like Ethereum. They support everything from institutional capital, to hedge funds, family offices and everything in between.
Rocket Pool was designed to support those providers, meaning ETH staked through SaaS solutions can be put to use through Rocket Pool, rather than having to spin up bespoke staking solutions to deal with each client.
ETH holders can choose between paying a service provider or being paid to be an operator. With Rocket Pool, service providers maximize their return by being paid to run a node, both in ETH and RPL. The protocol allows teams to run their own infrastructure, and use Rocket Pool to trustlessly stake ETH in batches of 16 ETH — allowing them to put their capital to work further and earn a larger share of returns.
This design means Bison Trails or Gemini could use Rocket Pool the same as a DeFi power user. Simply show up with 16 ETH and you’re treated the same as any other node operator. Rocket Pool’s democratized staking system doesn’t favor any one party as ETH staked through Rocket Pool always directly supports the network.
Rocket Pool’s staked ETH wrapper, rETH, is the purest in DeFi. We foresee a vibrant ecosystem of integrations ranging from lending markets to run validators more efficiently to composability for productivity.
In short, rETH is a natural building block for Etherum, and the most trust-minimised form of staked ETH.
Rocket Pool is designed to cater to two main user groups; those that wish to participate in tokenised staking using rETH and those that wish to stake ETH and run a node.
rETH Tokenised Staking
In exchange for depositing ETH to Rocket Pool, users receive rETH in return. rETH is fully composable in the wider DeFi landscape, while accruing value from ETH earned through ETH2 staking.
Depositing ETH and receiving rETH can be done in a single transaction by a variety of different user groups, be it individuals, dApps, exchanges, wallets or just about anyone looking to use the protocol or build on top of it. It is an easy and permissionless way to engage in staking without needing to run any staking infrastructure or even have 32 ETH, with Rocket Pool you can stake as little as 0.01 ETH this way.
Rocket Pool 2.5 — Tokenised Staking
Hello Rocket Poolers! We’re excited today to reveal some big improvements to Rocket Pool, a decentralised staking…
When you stake ETH and receive rETH, it will automatically begin accruing staking rewards based on performance of the entire decentralised network of node operators operating in Rocket Pool. This means rETH grows in value over time, while holders can utilise that collateral to leverage the wider DeFi landscape while helping to secure the ETH2 network.
rETHs value is protected against node slashing and downtime by several built in insurance mechanisms, with node operators staking RPL on nodes as collateral for any penalties they incur. More details on these mechanics will be included in Part 3 of this series, RPL & Tokenomics.
If you have rETH, you’ll also be able to trade this back to Rocket Pool for ETH plus rewards at anytime if liquidity in the deposit pool will cover the amount. No need to wait a few years for Phase 1.5 or 2 of the ETH2 rollout to have liquidity or get your staking rewards. Awesome!
From hobbyist node operators to full on SaaS professionals, Rocket Pool allows you to earn a greater ROI staking inside the protocol vs outside of it.
If you want to run a node in Rocket Pool, you are not charged any fees as you are providing a valuable service for the protocol. What service is that you ask?
With Rocket Pool, running a node only requires a minimum of 16 ETH per validator vs 32 ETH outside of the protocol.
Once you deposit 16 ETH, the protocol will assign you 16 ETH from users who are depositing ETH and receiving rETH. So as a node operator you are staking your own 16 ETH and 16 ETH on behalf of the protocol.
The protocol also allows you to stake 32 ETH so you can starting earning rewards straight away on your deposit, the protocol will then ‘buy out’ 16 ETH from your deposit when ETH is available from rETH users who are depositing. This is handy in times where the protocol might not be receiving a lot of ETH deposits for rETH, so no time is wasted earning your own staking rewards.
Rocket Pool has a commission rate that changes based on supply and demand mechanics. If there is a lot of ETH that needs to be staked and not many node operators available, this commission rate will go up. So when node operators create validators and are assigned ETH to stake for the protocol, that ETH also comes with a commission rate that might be high or low depending on node operator demand at the time. This commission rate allows the node operator to earn a percentage of the rewards earned on that 16 ETH assigned by the protocol, meaning node operators earn rewards on their own 16 ETH deposit plus a commission from the network for staking its ETH.
Rocket Pool is designed reward node operators for providing valuable insurance in the case they are heavily penalised or slashed.
When depositing ETH, node operators must also deposit a minimum amount of RPL to act as collateral in the case they incur any of these penalties. Should a penalty occur and the user finishes staking with < 16 ETH, the collateral is sold for ETH at auction and the proceeds from this sale are given back to the protocol to compensate for the missing ETH.
When a node operator provides an amount of RPL as collateral as an insurance promise, they are rewarded with RPL rewards respective to the amount of collateral they provide. The minimum collateral required is currently 10% of the ETH value and capped at a maximum of 150%.
This means a good node operator can earn rewards on their own ETH, a commission in ETH and RPL rewards. Not a bad pay day if you know your way around a node or two!
With all this talk about token staking and node staking, I bet you’re wondering who holds the keys to all these deposits by these different users.
Rocket Pool will be launching once smart contract withdrawals are integrated into ETH2 to enable truly trustless staking that doesn’t exist with any staking provider today.
Rocket Pool — ETH2, Our Vision
The launch of the Beacon Chain today marks a significant milestone in Ethereum’s migration to Proof of Stake. As the…
Seeing as Rocket Pool strives to be the most trustless staking protocol for ETH2 staking, this piece of the puzzle is crucial to our rollout. Unfortunately, all staking providers today come with some degree of centralisation around deposits, and this is not a risk we believe a protocol should inherit. Instead, we believe it should be trustless from the start.
We have a live beta right now!
Want to get a good feel for Rocket Pool right now? You can stake, get rETH and run a node! We have a live beta on the ETH2 Pyrmont testnet right now with over 900 node operators!
You’ll even get some RPL for participating, at least until the 27th Jan when rewards period finishes for the Pyrmont beta.
Questions or just say hello!
Well 10 points to you for making it this far, that was a long one! 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 chat room that anyone can join. If chat rooms aren’t your thing, we’re also on Twitter!