Rocket Pool (RPL) is an Ethereum 2.0 staking pool. The protocol aims to reduce the capital and hardware requirements for ETH 2.0 staking and enhance the decentralization and security of Ethereum. To achieve this, Rocket Pool allows users to stake to the node operator network in a trustless manner.
This article will explain what Rocket Pool is, how it works, and how to buy RPL tokens if you want to invest in this interesting blockchain project.
Introduction to Rocket Pool
Ethereum 2.0 has arrived, and many people are interested in profiting from existing crypto assets through staking. But staking Ethereum isn’t as simple as depositing cryptocurrency and waiting for profits to rise. It requires you to deposit at least 32 ETH and requires setting up and monitoring a node. The emergence of Rocket Pool is to solve this problem and give new users the opportunity to join Ethereum 2.0.
Rocket Pool is a groundbreaking, fully decentralized Ethereum staking protocol that performs verification services for the Ethereum 2.0 blockchain. Its purpose is to serve users who do not have the minimum ETH token requirements and those who do not have the technical skills required to run a node. The project was first established in late 2016 and has since had some fairly successful tests during the development of ETH 2.0.
Staking ETH required investors to hold at least 32 tokens, but that changed with the launch of Rocket Pool. The platform only costs 0.01 ETH. This is because Rocket Pool staking involves creating a mini pool of tokens from two matched investors. These investors collectively stake ETH tokens to meet minimum requirements and earn staking rewards.
However, even with Rocket Pool, Ethereum investors who want to stake are still committed to locking up their tokens for the long term. Once staked, all assets will be locked until the second phase of Ethereum’s proof-of-stake rollout.
While RP cannot cover this lock-in, it does a pretty good job of balancing risk with the help of tokenized staking.
Every time a user stakes 16 or 32 ETH, he receives rETH tokens in return, which represents two main things: your stake and your earnings. While the asset is locked, stakers can use rETH like any other ERC-20 token, such as selling it, using it on a DeFi platform, or keeping it in cold storage. As node operators receive rewards for their validation work, the value of rETH gradually increases relative to ETH, allowing holders to benefit from staking rewards.
Rocket Pool’s Atlas Upgrade
The Atlas Upgrade is a protocol change that occurred in April 2023 and significantly modified the Rocket Pool protocol. The upcoming Ethereum “Shapella” upgrade brings a new wave of features and supports Beacon Chain withdrawals. Node operators can withdraw some or all of the ETH locked on the beacon chain.
Additionally, the Atlas upgrade introduces an 8-ETH bonded mini-pool. For just 8 ETH bonds, node operators can create mini-pools that match the 24 ETH in the staking pool, reducing the capital requirements to run validators and increasing rewards for node operators and rETH stakers.
History of Rocket Pool
Rocket Pool was founded by David Rugendyke at the end of 2016, with an alpha release date of May 2017. Its mainnet launch was originally scheduled for October 6, 2021. However, due to technical issues, the release was delayed to November 9 of that year. Rocket Pool was designed using Mauve Paper published by Vitalik.
Since the launch of the Rocket Pool network, multiple bugs have been discovered and properly addressed to ensure the best user experience.
Investors can earn rewards without locking up their tokens, which has made Rocket Pool increasingly popular over the years. The network is now live and available for traders and investors, and is constantly being updated to improve the user experience. Currently, Rocket Pool has over 1,400 node operators with over 216,000 ETH staked.
How does Rocket Pool(RPL) work?
1. Standard node
As mentioned before, Rocket Pool works by running nodes that validate transactions on the Ethereum 2.0 network. ETH investors can start staking through Rocket Pool by depositing ETH and becoming a node operator. If you only stake 16 ETH, that deposit will be matched with ETH deposited by other users.
This node performs all the standard tasks and responsibilities of a standard Ethereum node. In return, it earns a flexible APY that is allocated to users’ deposited ETH as commission.
The exact commissions users earn are determined by the supply and demand dynamics of Ethereum 2.0. When depositing large amounts of ETH and the available minipool capacity is limited, node demand can be very high. Otherwise, if there is a lot of capacity but not enough ETH, demand will be low.
Both node requirements and commission rates are calculated when users stake and create mini pools. Before making a deposit, the user can enter the minimum commission rate he is willing to accept for the mini-pool he creates.
2. Watchtower Node
In addition to standard nodes, Rocket Pool also hosts so-called watchtower nodes, which are held by RP itself and its trusted partners. These nodes are tasked with reporting the status of the beacon chain to the Ethereum PoW network. To do this, a majority of these nodes must reach consensus for the reported data to be valid.
Their first priority is to regularly report the total value of the Rocket Pool network to the RP smart contract, which helps update the rETH/ETH exchange rate based on the rewards earned.
Their second task is to report when validators are ready to withdraw their assets. Rocket Pool updates the mini-pool in question, and the network mints a validator’s share of nETH tokens, which is equal to his final mini-pool balance.
Validators must wait for a period of time before they can finally withdraw their newly acquired tokens and exchange them for ETH. According to the Rocket Pool team, once the second phase of ETH2 is launched, stakers can also burn tokens into ETH through the nETH smart contract.
Rocket Pool vs Lido
Lido and Rocket Pool are both decentralized Ethereum 2.0 staking solutions that allow users to stake their ETH without running their own validators. Lido Finance operates in a more centralized manner, with a group of node operators being professional staking providers. When users stake ETH to Lido, they receive stETH, a token that represents their staked ETH and accrued rewards. stETH can be traded or used in other DeFi protocols.
Rocket Pool, on the other hand, offers a more decentralized approach. It allows any ETH holder to become a node operator by running a smart node. It also supports partial staking, where you don’t need to hold the full 32 ETH to stake. Users who stake ETH receive rETH, which, like stETH, represents the ETH they stake and receive rewards. Rocket Pool’s system also involves a unique insurance mechanism through its native RPL token.
Overall, Lido is more streamlined and simple for those who want to stake, while Rocket Pool offers its users more choice and participation, but can be a bit complicated to understand.
What’s unique about Rocket Pool ETH staking?
Rocket Pool’s Ethereum staking mechanism is unique in that it decentralizes and democratizes the staking process. Here's a brief overview of how it works:
Mini-pool creation: Rocket Pool validators contribute 16 ETH, and the other 16 ETH comes from the user-funded staking pool.
Lower staking requirements: Users only need 0.01 ETH to stake, allowing for wider participation.
rETH tokens: Users receive rETH tokens when they stake ETH. These tokens represent staked ETH and increase in value over time.
Staking Rewards: As node operators receive staking rewards, the value of rETH tokens increases relative to ETH.
rETH redemption: Users can exchange rETH tokens back to ETH directly through Rocket Pool and enjoy accumulated staking rewards.
Mitigated Penalty Risk: Any penalties incurred by node operators will be deducted from their own revenue, protecting rETH holders. Losses caused by improper node operation will be socialized through the network.
What is RPL coin?
RPL is an ERC-20 token that represents the protocol’s primary cryptocurrency. Users who wish to increase the security of their project can stake it on Rocket Pool nodes. However, it is not a prerequisite for running the node.
Rocket Pool users who use RPL with at least one mini-pool validator will be rewarded with additional commissions based on the size of their deposit. But if a user fails to fulfill their node duties and ends up with less than 32 ETH due to slashing, their RPL deposit will be destroyed in proportion to the ETH loss suffered.
The fixed supply of RPL is 18 million, subject to an annual inflation rate of 5%, and is currently distributed as follows: 70% is used for node operators who pledge RPL. 15% goes to oDAO members for data oracles. 15% goes to pDAO Treasury. The distribution of RPL tokens took place primarily between the pre-sale held on September 22, 2017, and the crowdsale held in January 2018.
RPL Coin Overview
