Rocket Pool (RPL)

About Rocket Pool (RPL)

As is pretty clear from the name, staking is the central part of any Proof-of-Stake (PoS) blockchain. This process not only helps keep PoS networks secure but also incentivizes people to help keep it running.

Let’s use the biggest PoS blockchain, Ethereum, as an example. As a peer-to-peer network, Ethereum relies on some of its participants to act as network validators. These validators operate blockchain nodes and verify new blocks so they can be added to the blockchain.

However, to prevent bad actors from acting as validators, Ethereum requires its validators to lock up some Ethereum to serve as validators. They must have a financial stake in the network, to prove their trustworthiness. In return for doing this and operating a node, validators receive staking rewards.

But let’s face it: staking ETH on your own is a complex process and is not for everyone. It requires technical know-how, a dedicated computer connected to the internet ~24/7, and – not least of all – a hefty 32 ETH, making it a no-go for many.

This is where Rocket Pool comes into the picture. Rocket Pool acts as an alternative by allowing users to participate in Ethereum staking without the technical and cost barriers of doing it independently.

So, what is Rocket Pool? How can you take advantage of Rocket Pool while being mindful of the risks? Let’s dive into all this and more!

What Is Rocket Pool (RPL) ?

Rocket Pool is one of the leading liquid staking platforms for Ethereum. Basically, Rocket Pool allows its users to stake ETH without losing their liquidity.

Liquid staking platforms accomplish this through the use of Liquid Staking Tokens (LSTs), also called Liquid Staking Derivatives. These tokens are pegged to the value of the initial asset that users stake and, crucially, can be used on DeFi platforms and other decentralized apps, just like any other token. To that end, Rocket Pool gives its users the liquid staking token, rETH.

Today, Rocket Pool is one of the largest ETH staking pools in the ecosystem. In fact, since its launch in October 2021, users have staked over 1M ETH on the platform.

What Is Rocket Pool (RPL) For?

Rocket Pool is an open-source, decentralized, and trustless platform, aligning it closely with the ethos of Ethereum. The platform has become a very popular ETH staking solution since its launch for several reasons.

Staking With Less Than 32ETH

For one thing, Ethereum’s native staking requires users to stake at least 32 ETH. In contrast, Rocket Pool’s barrier to entry is much lower as the platform allows you to stake any amount, starting as low as 0.01ETH.

Staking Without Running Hardware

Similarly, Ethereum’s native staking requires you to run your own node – a resource-intensive, technically challenging, and time-consuming process. Rocket Pool, on the other hand, allows you to start staking ETH simply by buying the ERC-20 token, rETH. While the value of rETH is pegged to ETH, its value goes up over time as holders earn staking rewards.

Removing the Need to Lock up Liquidity

Furthermore, Rocket Pool provides users liquidity by enabling them to use their locked funds. The platform’s liquid staking mechanism gives you rETH in exchange for your staked ETH. You can then utilize rETH just like any other ERC-20 token in the vast DeFi ecosystem.

Those who want to earn more rewards can do so by becoming a Rocket Pool node operator, which has a minimum requirement of 8 ETH. There are currently more than three thousand node operators in Rocket Pool’s network.

How Does Rocket Pool Work?

The Rocket Pool protocol consists of three main elements: smart contracts, the Smart Node Network, and Minipool Validators. Let’s take a look at the role that each of these elements plays in the system.

Smart Contracts

The first main element of Rocket Pool is its smart contracts, and they fulfill two roles within the protocol. Firstly, they accept ETH deposits from users and assign them to node operators. Secondly, the smart contracts are responsible for issuing and tracking the various tokens within the protocol.

Smart Node Network

This is a decentralized network of Ethereum nodes that run Rocket Pool’s Smart Node software. These nodes are specialized to run custom processes, allowing them to communicate with Rocket Pool’s smart contracts and provide network consensus.

Anyone can run these Smart Nodes and stake their ETH without incurring a fee, provided they fulfill the minimum 8 ETH requirement. In return for providing Rocket Pool with a node, you get to earn extra rewards on top of what you earn from staking your ETH. These rewards come in the form of the Rocket Pool token.

Minipool Validators
These are special smart contracts that fulfill a key role in the Rocket Pool Network. Here’s how they work:

A node operator first deposits 8 ETH (or 16 ETH) on their node. When this happens, the Minipool Validator then receives 24 ETH (or 16 ETH) in deposits from users who are staking on Rocket Pool but not running a node of their own.

As the smart contract accumulates a total of 32 ETH – the ETH from the operator plus the ETH from the other users – it creates a new validator on that node, which then performs the consensus duties to earn staking rewards on that 32 ETH.