The Rocket Pool (RP) protocol is a decentralized Ethereum 2.0 Proof of Stake infrastructure service. Without a stake pool service, only wealthy network participants who meet the 32ETH threshold are rewarded for validating transactions. Rocket Pool democratizes participation in network validation by providing a service that lowers the wealth threshold. Abstracting staked ETH as rETH, participants can retain commodity properties of their stake (transfer of ownership).
There are 2 primary users in RocketPool:
- rETH stakers
Stakers can show up with as little as 0.01 ETH to be deposited in exchange for rETH. rETH is a redemption token representing staked ETH. rETH can be burnt at the Rocket Pool contract or website in exchange for ETH and accumulated staking reward. They do not need to run a machine. The returns are subject to a commission to node operators, which is a % of the staking rewards earned.
- Node Operators
Node Operators can show up with 16 ETH, along with 1.6 ETH worth of RPL tokens as collateral to stake on behalf of the pool. This is permissionless, so anyone can do this as long as they have the infrastructure and collateral. They will receive RPL inflation rewards, as well as ETH commission from the pool, along with staking rewards on their own 16 ETH.
Unlike beacon chain ETH, rETH can be freely transferred and traded as it implements the ERC-20 interface. Onboarding rETH to Abracadabra would allow users to borrow against rETH.
Abracadabra is a fast-growing multichain protocol that would make a strong partner with RP and its community. Right now, RP is bridging its rETH token across chains to make liquid staking more accessible for the masses - it is currently available in both Optimism and Arbitrum. Abracadabra currently offers other ETH staking vaults, such as Yearn stETH. rETH is important to hedge against the risks of other ETH staking services (particularly because of its decentralized nature) and will be an important addition to the DeFi space in general.
As a protocol that aspires to keep in line with Ethereum’s ethos, the protocol aims to be fair and is actively engaged in research to share all MEV and proposal rewards with rETH stakers, increasing the chance that the protocol will outperform other staking services, or at the very least, provide the fairest reward possible.
Allow rETH as collateral with the same pool specifications as yvcrvSTETH (Maximum collateral ratio 75%, liquidation fee 12.5%, borrow fee .5%, interest .5%)
- Diversified risks and potentially higher return on ETH staking for Abracadabra depositors.
- Creates a non-LP liquid staking position that does not depend on the continuation of any liquidity mining incentives.
Rocketpool is quite new on mainnet - since November 9, 2021. However, the risk can be considered to be mitigated to a great extent because of:
- Staged rollout has been successful
- TVL is over 70 million USD as of writing
- The protocol has undergone 3 betas
- The protocol has undergone audits by 3 separate auditors
- The protocol has an active bug bounty program with immune.fi
- The code is open-source
rETH stakers are exposed to smart contract risks, primarily. Even if node operators get slashed, the rETH staker’s ETH is still safe, as the node will be booted from the beacon chain when the validator balance reaches 16 ETH - the entirety of the slashed balance will be subtracted only from the node operator’s balance.
As of now, rETH price can only be derived from uniswap’s liquidity pool. The dev team is looking to add a chainlink oracle soon.
As with anything to do with ETH staking, the usual risks apply - protocol risk and implementation risk of ETH staking, withdrawal methods, and RP’s implementation of withdrawals.
- Detailed explanation of Rocketpool: Rocket Pool — Staking Protocol Part 1 | by David Rugendyke | Rocket Pool | Medium
- rETH staking website: https://stake.rocketpool.net
Ethereum mainnet: 0xae78736Cd615f374D3085123A210448E74Fc6393