Rocket Pool (RPL): An Ethereum 2.0 Proof of Stake Protocol

Decentralized finance (DeFi) has dramatically improved blockchain transactions in recent years, enabling them to be completed without an intermediary via smart contracts on a blockchain. This includes staking cryptocurrencies to increase gains on existing assets. While several platforms have been created to fulfill this purpose, one platform stands out from the crowd thanks to its excellent design and functionality.

What Is Rocket Pool?

Staking ETH required investors to hold at least 32 tokens, but this changed with the launch of Rocket Pool. As little as 0.01 ETH is required on this platform. This is because Rocket Pool staking involves the creation of a minipool of tokens from two matched investors. Together, these investors stake ETH tokens to meet the minimum requirement and earn staking rewards. 

In addition, the Rocket Pool network addresses the need to manage an Ethereum node, which makes this platform suitable for interested users who want to simplify their staking experience. Notably, Rocket Pool has several standout features that differentiate it from other seemingly similar networks. Users can connect their decentralized exchange (DEX) wallets in a few easy steps in order to immediately begin enjoying the lucrative benefits of staking their ETH tokens. 

Rocket Pool has two DAOs (decentralized autonomous organizations) for governance — Protocol DAO and Oracle DAO — and they are collectively responsible for voting on network upgrades and managing staking rewards.

History of Rocket Pool

Rocket Pool was established in late 2016 by David Rugendyke with an alpha launch date in May 2017. Its mainnet launch was set to be Oct 6, 2021. However, due to technical issues, the launch was pushed back to Nov 9 of that year. Rocket Pool was designed with the Mauve Paper released by Vitalik. 

Since the Rocket Pool network launched, several bugs have been identified and properly addressed to ensure the best user experience.

Investors are not required to lock their tokens to receive rewards, which has added to the growing popularity of Rocket Pool over the years. This network is live for traders and investors to take advantage of today, and it continues to be updated to improve the user experience. Currently, Rocket Pool has more than 1,400 node operators with more than 216,000 ETH staked.

What Does Rocket Pool Aim to Achieve?

The Rocket Pool protocol allows multiple investors to combine their transactions together for faster and more affordable transactions. This network is specifically advantageous to two groups of people. It provides staking benefits for those who want to earn staking rewards without a large investment or having to lock their tokens up. It is also suitable for those who want to operate a node and may not have a large supply of ETH available to stake. Because of its unique functionality, investors can take advantage of staking rewards through an investment of only 0.01 ETH.

How Does Rocket Pool Work?

Source: Rocket Pool

Interested investors only need to deposit the desired amount of ETH into their Rocket Pool account to get started. Then, after the user becomes a node operator, the investor’s deposits are paired with another user’s ETH investment in a minipool. This equates to the 32 ETH required for staking. Rocket Pool completes all of the requirements for having an Ethereum node, so extensive knowledge is not required by the investors. The users then collect a commission for staking their tokens. The actual commission rate is based on the demand on the node. However, users are able to specify the minimum return they want before staking their ETH tokens. Staking rewards are paid in the form of RPL, the network’s governance token.

Another key aspect of Rocket Pool is its watchtower nodes. These are maintained by Rocket Pool and serve the important role of communicating between the Beacon Chain and the Ethereum PoW network. Specifically, these nodes are used to determine the exchange rate for rETH/ETH. They also communicate withdrawal requests by users.

Features of Rocket Pool

Rocket Pool stands apart from other networks through its unique processes and features. Collectively, its features provide those who wish to stake their tokens the ability to do so even when they are working with a smaller number of tokens or do not have the expertise required to perform staking. What are the specific features that make Rocket Pool different from other networks?

Dual Token Model

Rocket Pool operates with a dual token model, and these two tokens are rETH and RPL. RPL is the network’s governance token. It works in the same way as the native token for other networks’ DAOs. The token is used to generate rewards and to support the network’s governance. The other token is rETH, which is a liquid staking token. You must stake at least 0.01 ETH to receive this ERC-20 token which acts as a tokenized deposit that you can trade for rewards.

rETH Tokenized Staking

On the Beacon Chain, validators are node operators who are tasked with verifying transactions before adding them to network blocks. Validators can also propose brand-new blocks. To take on this important position on the Beacon Chain, the individual must typically stake 32 ETH. 

Through Rocket Pool, however, you can take advantage of two distinct types of staking. One of these is rETH tokenized staking. With rETH tokenized staking, you can stake as little as 0.01 ETH or more based on your preference. The ETH you deposit will contribute to the deposit pool which allows a Rocket Pool node operator to create a new Beacon Chain validator. In return for your deposit, you will receive rETH. The amount of rETH that you receive will depend on how much ETH the you deposit, and when the deposit is made. The ratio also takes into account the rewards that Rocket Pool node operators earn from the Beacon Chain itself and priority fees as well as MEV rewards from block proposals. 

The rETH is a liquidity token, and since Beacon Chain rewards, priority fees and MEV rewards will always increase, the value of rETH will also increase proportionately to ETH. The rETH/ETH exchange rate is refreshed daily to take into account the staking rewards earned by Rocket Pool node operators. The Rocket Pool protocol allows rETH to be exchanged for ETH. These rETH tokens may also be traded and used on other networks. 

Node Staking

The other staking option on Rocket Pool is called node staking. Node staking is specifically suitable for users who are familiar with the technical side of being a node operator. Such users must stake 16 rather than 32 ETH. The remaining 16 ETH to form the full 32 ETH will come from the staking pool which stakers deposited in exchange for rETH to establish a new Ethereum validator known as a minipool. 

Security

Rocket Pool is designed with several security protocols in place. One of these is a socialized risk management system. This spreads the losses associated with ETH slashing across the full protocol versus one node. Another security measure used within Rocket Pool requires users to stake their tokens for at least 24 hours. By imposing this requirement, the risk of malicious behaviors on the network is minimized. In addition, several of the industry’s top auditing companies have completed thorough audits and have issued security endorsements for Rocket Pool.

Benefits of Staking on Rocket Pool

The Rocket Pool protocol is designed to improve ETH staking for its users and to open the door for more people to benefit from staking. Through its specialized protocol and unique features, it offers several important benefits that you may not find on other seemingly similar networks that serve as an intermediary via smart contracts on a blockchain.

Stake with Fewer ETH Tokens

Staking ETH tokens typically requires a minimum of 32 tokens. Many users, however, either do not have this minimum number available or do not want to stake so many tokens. Rocket Pool’s unique protocol enables those with a lower number of tokens to participate in ETH staking. For example, by staking only 0.01 ETH, you can obtain an rETH token and begin receiving staking rewards. Another option is to contribute 16 ETH and join a minipool. Collectively, the pool will have the minimum number of required tokens.

No Lock-Up of Tokens

Another benefit of Rocket Pool is that there are no staking periods for both stakers and node operators. This means that you are free to deposit and withdraw your tokens at any time that you desire. While this feature will soon be made available on Ethereum thanks to the Ethereum Shanghai Upgrade, users who are unwilling to wait until then can enjoy this flexibility on Rocket Pool for the time being. 

Risks of Staking on Rocket Pool

Rocket Pool is designed to minimize risks to users through its security mechanisms, protocol and features. However, as is true with all cryptocurrency-based activities, there remain a few risks. What are the primary risks that you should be aware of before getting active with Rocket Pool?

The Possibility of Smart Contract Failure

This decentralized application (DApp) uses smart contracts. These are lines of code that are automated, so there is a risk of failure. Developers have taken tremendous steps to address this potential security issue through audits from top auditors like ConsenSys Diligence and Sigma Prime. By relying on feedback from these auditors, Rocket Pool’s developers have made enhancements to the protocol. Nonetheless, users should understand that there may still be a potential for smart contract failure.

Penalization by Beacon Chain

Node operators on the Beacon Chain are expected to perform their specific duties on a regular basis. When they do not follow through, they may be penalized. Nodes must deposit collateral of between 10% to 150% of their staked ETH. Collateral is paid in RPL, and this collateral pays any penalties that may be assessed. However, this risk can be mitigated as node staking is not the only way to earn staking rewards on Rocket Pool. You can also choose to stake ETH to receive an rETH token that you can trade for RPL rewards.

Rocket Pool Road Map

Rocket Pool had both a token presale and a crowd sale in 2017 with the launch of its beta version. In 2018, Rocket Pool 2.0 was released in response to changes to the Casper system used by the Ethereum network. By November 2019, roughly 1,000 users have staked 50,000 ETH through Rocket Pool. In 2020, the Beacon Chain enhanced Rocket Pool’s protocol. Improvements to Rocket Pool going forward will be determined through the network’s governance. 

RPL Tokenomics

RPL is an inflationary token with new tokens minted every four weeks. At its launch, 18 million RPL tokens were released. Investors received a 54% allocation of these tokens. In addition, 31% was reserved for airdrops and pre-mined rewards. The remaining 15% went toward the founders and project costs. 

Rocket Pool implements a 5% annual emission over a 10-year period to increase the total supply to just under 30 million tokens. The circulating supply, total supply and max supply are the same. The supply is slightly more than 19.1 million. As an inflationary token, the supply of RPL grows periodically.

RPL Price Prediction

As of Jan 31, 2023, the price of RPL is $38.08. During its initial coin offering (ICO) in 2017, RPL was valued at $0.98. Following this, RPL’s price remained relatively stagnant and moved sideways from 2018 to 2020. It started climbing in price in February 2021 and hit a peak of $23.32 in May 2021. Its price then declined before increasing again in August that year. At the time of its mainnet launch on Nov 9, 2021, RPL price hit an all-time high of $59.46. Its price then steadily declined following the poor market sentiment experienced by the entire crypto market. 

In November 2022, RPL price was trading between $15 and $20. In January 2023, RPL price shot up drastically to $39.51 after RPL’s listing on Binance was announced. Looking forward, PricePrediction believes that RPL price will range between $57.35 and $69.41 at the end of 2023. Its price in 2024 may range between $82.73 and $100.31. In 2025, RPL price is expected to reach between $119.83 and $146.97. By 2030, RPL price is predicted to be between $762.92 and $933.09. 

Where to Buy RPL

RPL is available for purchase through several popular exchanges, including Bybit. Purchasing RPL through Bybit is a relatively fast process that can be completed in a few easy steps. The first step is to sign up for a Bybit account if you don’t already have one. Once this is done, you can proceed to trade the RPL/USDT Spot Trading pair. 

Is RPL a Good Investment?

RPL can be purchased through several exchanges, and it can be earned by staking ETH or rETH on Rocket Pool. While RPL can be exchanged relatively easily, users could benefit by holding RPL for a longer period of time. In fact, the RPL value currently is $38.08 (as of Jan 31, 2023), and it is projected to be as high as $933.09 by 2030. Of course, the cryptocurrency market is extremely volatile at times, so there is a risk of loss. As such, even though there is a strong potential for profits by holding RPL, users should not invest more than they can afford to lose.

Closing Thoughts

Rocket Pool is designed to swing the door open wider for more users to benefit from staking their ETH. Its design and features enable users to stake ETH if they do not have technical expertise with node operations and if they only want to stake a small amount of ETH. More than that, rewards are given in RPL tokens, and the value of these tokens has a probability of increasing over time. With this in mind, taking a closer look at Rocket Pool is worthwhile.