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Rocket Pool — Staking Protocol Part 2

Rocket Pool ETH2 Staking Protocol Explainer Series Part 2 — The Oracle Node and Protocol DAO’s

Welcome to Part 2 of the Rocket Pool Staking explainer series! As Rocket Pool prepares for the mainnet debut, it’s important to break down the dynamics for ETH2 staking on a decentralised, trustless and community owned staking protocol.

If you haven’t read Part 1 yet, we’d highly recommend it as it gives a great overview on what a decentralised trustless staking protocol for ETH2 is and which types of users can become a part of it.

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.

This article will be focusing on the two DAO’s which are responsible for helping run a decentralised staking protocol. Each one has a unique set of responsibilities which we’ll detail below, as well as the type of members that might make up each DAO.

Rocket Pool ETH2 Staking Protocol Series

What’s a DAO?

DAO’s stand for Decentralised Autonomous Organisations. They provide governance or services in a decentralised manner using incentives which align with their interests in being a member of such an organisation. It allows members to pool and distribute funds in a trustless manner, and is at the heart of coordination in a web3 landscape.

Protocol DAO

The Rocket Pool Protocol DAO will be responsible for a host of settings across the protocol and be run by RPL governance. It will go live post-launch with much more detail surrounding it’s proposal and voting mechanisms coming Soon™.

Currently the protocol DAO is responsible for these broad settings:

  • RPL Inflation — How much RPL inflation is generated yearly to reward participants and align incentives in providing decentralised staking.
  • RPL Rewards — How the reward amounts are divided between the DAOs and Node Operators. This can be changed should the DAO see fit.
  • RPL Auctions — Slashed RPL is sold at auction to make the protocol whole. The min/max bid amounts + more is configurable.
  • Nodes — Min/Max RPL staking amounts, registration enabled + more.
  • Network — Min/Max node commission fees, consensus quorum for reported Oracle Node data + more.
  • Deposits — Min/Max deposit amounts of ETH for rETH, depositing enabled + more.

Almost every aspect of the protocol is currently configurable. In the future RPL governance will be the driving force that is able to propose changes to these settings and pass them should the majority wish it.

With standard DAO’s using a single layer of governance with little checks and balances, we are currently looking at implementing a new two-tier DAO governance structure to improve upon these shortcomings.

Oracle DAO

The Rocket Pool protocol has two types of nodes, regular bonded nodes and oracle nodes. These node operators make up Oracle DAO.

Regular bonded nodes can participate in staking by posting a 16 ETH bond, which is then matched with 16 ETH from the deposit pool. These node operators can range from hobbyist to full on SaaS professionals, the appeal for them being that Rocket Pool allows you to earn a greater ROI staking inside the protocol vs outside of it.

This process is completely permissionless as anyone with 16 ETH and the appropriate amount of RPL collateral can join the protocol to become a bonded node operator and increase their rewards.

Oracle nodes that make up the Oracle DAO are largely the same and run the same smart node software. What makes these nodes special is an on-chain DAO where members perform extra duties for the protocol and are rewarded for doing so.

These decentralised duties range from ETH2 oracle tasks to providing staking liveliness for the protocol when it needs it the most. So let’s dive a little deeper into these important duties and how they help a decentralised staking protocol thrive.

Oracle DAO Duties

Ethereum in its current state is operating with two separate chains, the ETH1 mainnet chain that everyone knows and loves, plus the relative newcomer, the ETH2 beacon chain where validators spend their time earning rewards for people who have deposited into the ETH1 deposit contract.

These two chains aren’t connected (yet) and they might never be in a way that would allow a smart contract on ETH1 to know about the state of any validator on the ETH2 chain — such as if that validator had been staking well earning rewards or performing badly by being offline regularly.

So how does a decentralised staking protocol for ETH2 based on ETH1, handle such a task when these two chains are separate?

This is where the Oracle DAO comes in. It helps bridge this gap and helps provide valuable oracle services + network liveliness for the protocol and all its users, both stakers and node operators alike.

Being a member of this DAO means you’re operating as a group. Any data reported back for any of these duties requires majority consensus. So if data reported to the protocol is not agreed upon by more than 50% of the members, it is not accepted. This helps prevent malicious behavior, nodes that go offline and helps to ensure the integrity of the reported data.

1) Oracle Tasks

There are two main oracle duties required by the Oracle DAO members, both of which are integral to the protocol. These are:

  • Minipool Validator Balances — Each validator in the protocol is referred to as a Minipool. It contains 16ETH from the node operator and 16ETH from the deposit pool. The performance of these validators needs to be monitored so the protocol can calculate the performance of all the validators in the decentralised network and allow users holding rETH to exchange it for ETH + rewards at the correct exchange rate.
  • RPL:ETH Ratio — When depositing 16ETH as a node operator, you are required to deposit a minimum 10% of that ETH’s value in RPL as an insurance promise to the protocol. The more RPL you provide as insurance, the more RPL rewards you earn. To make sure this amount of RPL is correct, the current RPL:ETH ratio must be reported and agreed upon by > 50% Oracle DAO members.

2) Service Tasks

Oracle DAO members also must also perform daily services for the protocol. These include:

  • Minipool Validator— Mark validators as exited/withdrawn when they perform these actions on the beacon chain.
  • Protocol Liveliness — Make sure the protocol is always lively and staking as much ETH from the deposit pool as it can to help generate rewards value for rETH holders. Oracle DAO members can create unbonded minipool validators that don’t require 16 ETH to be matched by themselves.

Importantly, to maintain decentralisation in the above scenario, unbonded validators are only ever selected for ETH assignment from the deposit pool if there are no bonded node operators available, as they always have priority. There is also a cap on the amount that members can make and that can be changed should > 50% of members agree to change it.

How the Oracle DAO consensus operates and their required duties — Click for full size!


The Oracle DAO will launch at genesis and consist of 15–20 members from peers in the community, ecosystem and industry. We believe these actors represent the values and ethos that ETH2 embodies. It will operate entirely as it’s own decentralised DAO through on-chain governance that can be audited by anyone.


Once the DAO is live, new members must be invited by an existing member and post a sizeable RPL bond to ensure good behavior. Members will then be approved to join when consensus is reached by more than 50% of current members.


Members can apply to leave anytime and will receive their RPL bond back when consensus among members approves their departure.


If a member wants to replace their current node with a new one and transfer the RPL bond to that, they can choose to replace their membership account with a new one that will assume their role and own their bond.


Members that show malicious behavior (like attempting to report bad balances often or going offline on a regular basis) can be kicked by existing members when consensus is reached. They may also incur an optional burn penalty to their bond depending on the size of the offense(s).

Contract Upgrades

Members can propose to improve the protocol with upgrades to its smart contracts. Should consensus be reached on an upgrade, it is passed and the contract is upgraded.


Members can propose to change settings of the DAO, from the quorum required for proposals to pass, to the RPL bond amount required for new members to join and even the number of unbonded validators members are allowed to make.


Oracle DAO members is a paid position. As oracle nodes are expected to relay ETH2 oracle data back to the protocols contracts on ETH1, they must be aligned for the long term with the decentralised staking ecosystem.

Members are required to stake a large amount of RPL to signal their alignment. This bond provides the potential for large economic loss if they act maliciously.

In exchange for these services, oracle nodes are rewarded with 15% of RPL inflation annually. This allows members to earn a return for playing this crucial role in the ongoing health and sustainability of the protocol.

In Part 3 of this series, we’ll go into depth on the breakdown of the RPL inflation schedule.

Why Use DAOs?

Coordinating the oracle node group via a DAO allows Rocket Pool to leverage several key mechanisms including:

  • Permissioned entry — New oracle nodes can only enter the group after consensus is reached within the existing group, only after proving that they meet certain criteria.
  • Transparent consensus — All decisions must go through an on-chain proposal. Members can collectively vote to kick nodes who aren’t fulfilling their duties and the wider Rocket Pool community can always stay up on new upgrades to the oracle node group.
  • Permissionless incentives — Leveraging a DAO allows RPL to be directed to an on-chain pool of oracle node operators, rather than having to manually distribute rewards earned from performing duties.

Oracle Node Role Call

We’ll be announcing the first set of Rocket Pool Oracle Node operators for closer to launch. If you believe you might have what it takes to be a member, be it in the form of a notable community member, ecosystem actor or a top shelf SaaS provider, please reach out to us in our Discord for consideration.

Questions or just say hello!

Well 15 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!



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David Rugendyke

David Rugendyke

Rocket Pool Founder, CTO and Ethereum Developer