Rocket Pool is a decentralized Ethereum staking network built to be compatible with Beacon Chain. The project was first founded in late 2016 and since then has had some pretty successful betas during the development of ETH 2.0.
This network allows any individual, business, DeFi app, etc. to provide users with the ability to staking for profit without worrying about maintaining other infrastructure.
Rocket Pool, with a TVL of $500 million, ranks second in liquid staking protocols just behind Lido Finance. Rocket Pool accounts for only a small fraction of the ETH liquid staking market share. There is a little less than $220,000 worth of ETH deposited into Rocket Pool compared to over $4 million deposited in Lido Finance. However, Rocket Pool distributes this ETH to over 1,400 node operators, while Lido Finance distributes over 4 million ETH to just 24 node operators.
Rocket Pool’s goal is to become the primary staking platform for Ethereum, by providing an easy-to-use, decentralized staking network for individuals and businesses.
The main goals of Rocket Pool are:
Rocket Pool will have two main types of users:
Staking users:
As major stakers of the Rocket Pool platform, they will participate in the proof of stake validation service and earn rewards. Rocket Pool allows users to bet to earn as little as 0.01 ETH, without any hassle. When depositing, users will receive rETH tokens, they are valid according to the time of deposit + rewards earned in the network.
Node Operators:
Users/businesses will be able to stake using their own node in the Rocket Pool platform with as little as 16 ETH. In addition to the rewards earned on their own ETH, Node Operators will receive a certain percentage of the rewards earned by users staking on their Node.
Following Ethereum’s successful transition to Proof-of-Stake (PoS), nodes and the validator landscape have emerged as an ideological microcosm of the age-old tension between decentralization and decentralization. central and operational efficiency. In terms of performance, there are major staking custodians like Lido and Coinbase, both of which have come under considerable criticism recently. On the other hand, Rocket Pool asserts itself as the decentralized savior among the leading staking service providers.
What makes Rocket Pool so well received is that it is becoming a decentralized savior among the top staking providers.
The recent Tornado Cash sanctions have spurred heated discussion about censorship risks on Ethereum. After Ethereum transitioned to the Proof of Stake blockchain, staking providers like Binance Stake and Coinbase Stake control a large amount of staked ETH.
These validators are responsible for validating new transactions and generating new blocks for Ethereum, and they are susceptible to pressure to censor certain transactions to comply with respective regulatory requirements.
On the other hand, more than 30% of the staked ETH is transferred through Lido Finance, the largest liquid staking protocol. Users deposit ETH into Lido’s staking pool and this deposited ETH will then be allocated to 24 whitelisted node operators.
These node operators are selected by Lido and are all major players in the professional node industry such as P2P Validators, Stake.Fish and Chorus One. Lido Finance covers over 90% of the liquidity staking fields and allocates all deposited ETH to only a handful of professional node operators selected by the DAO protocol. This naturally raises concerns that the success of Lido brings about the concentration of validating power and possibly even influence on Ethereum.
Meanwhile, Ethereum’s vision is to have a decentralized and diverse composition of validator nodes located around the world. However, the current situation is that most of the staked ETH is either staked via centralized exchanges or passed through Lido to some professional node operators.
The protocols support many types of actors, including service providers.
Web3 is full of Staking service providers as a highly knowledgeable service (SaaS) provider, helping the world better access the proof-of-stake (PoS) landscape with projects. projects like Ethereum. They support everything from institutional capital, to hedge funds, family offices, and everything in between.
Rocket Pool is designed to support those providers, meaning that ETH staked through SaaS solutions can be put to use through Rocket Pool, rather than having to create separate staking solutions to handle each customer.
ETH holders can choose between paying a service provider or getting paid to be an operator. With Rocket Pool, service providers maximize their profits by getting paid to run a node, both in ETH and RPL.
rETH is the LSD token of the Rocket Pool protocol. rETH represents an equivalent amount of ETH brings into the protocol plus an equal portion of the ETH staking rewards accumulated for the protocol. While the balance of rETH held will remain constant, the balance of ETH that supports tokens in the Rocket Pool protocol continues to grow. In other words, the rETH token accumulates value by increasing its market value relative to ETH over time.
RPL is the native token of the Rocket Pool protocol. RPL is used by node operators to vote on protocol governance and serves as a form of insurance against staker and validator penalties or cuts.
This protocol allows teams to run their own infrastructure and use Rocket Pool to reliably staking ETH in batches of 16 ETH — allowing them to stake their capital to keep going and earn larger profits.
This design means that Coinbase or any other large entity can use Rocket Pool just like a DeFi proficient user. Just show up with 16 ETH and you are treated like any other node operator. Rocket Pool’s democratized staking system doesn’t favor any side as ETH staked through Rocket Pool always supports the network directly.
The Rocket Pool ecosystem consists of two tokens: rETH and RPL.
The problem with Rocket Pool is how to scale. Since Solo Validator needs to provide 16 ETH and a certain amount of RPL as insurance, this is still an important financial requirement. In addition, to be able to run a node of Ethereum, requires a good computer with good performance, such as CPU greater than 2.8 GHz, RAM 16 GB, memory greater than 100 GB and connection Stable internet, suitable speed. These are insurmountable hard barriers that limit the number of potential independent validators.
Rocket Pool’s liquid staking token rETH offering is directly linked to the number of Solo Validators. Even with demand from the staking side, there may not be enough Solo Validator to absorb Rocket Pool’s increase in staking demand. This limits the potential for rETH, without the larger scale, it is difficult for other DeFi protocols to accept rETH, limiting the application scenario for rETH in DeFi.
The above article introduced you to what Rocket Pool is and what it means for Ethereum 2.0. Rocket Pool is the third largest LSD protocol. Overall this is a protocol that aims to help Ethereum achieve its vision of decentralization and permissionless. However, scaling issues will certainly limit the protocol’s growth. The founding team acknowledges this limitation and is working to fix it. If the problem can be solved, the potential of the protocol is still huge.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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