What is Rocket Pool?
Ah, sweet Ethereum staking, where your dreams of earning a passive income come true, for the whopping entry fee of 32 ETH. It's like the VIP section of a nightclub, but instead of bottle service, you're getting a slice of the blockchain pie.
Let me tell you, staking ETH is no easy feat. On top of the certified rich boy bag, you also need to have brains to spin up your own ETH node and keep it running 24/7. Let's be honest, how many actually afford this luxury? This is where Rocket Pool comes in.
Rocket Pool is the base layer protocol for decentralized and trustless Ethereum staking. By pooling together their Ethereum, users can participate in staking and earn rewards without having to own 32 ETH on their own.
The value of Rocket Pool comes from its ability to provide a convenient and accessible way for users to participate in Ethereum staking. The platform is powered by smart contracts and decentralized nodes, ensuring that the staking process is secure and reliable. Rocket Pool strives to embody the core ethos of Ethereum and DeFi, specifically the non-custodial, trustless nature that allows self-sovereignty to truly thrive.
Rocket Pool utilizes a network of decentralized nodes to validate and confirm the transactions on the platform. These nodes are run by independent operators who are incentivized to maintain the integrity of the network. By using a decentralized network of nodes, Rocket Pool avoids relying on a single centralized authority to validate transactions.
The protocol also has a governance model that is designed to be decentralized. RPL token holders can propose and vote on changes to the platform, which means that the direction and development of Rocket Pool is determined by a decentralized group of stakeholders. In addition to its governance properties, RPL is also required in order to use protocol – a small fee compared to buying 32 ETH.
How does Rocket Pool work?
Protocols in the Web3 ecosystem have broad support, including service providers who play a vital role in facilitating access to the Proof of Stake landscape, especially in projects like Ethereum. These highly knowledgeable Staking as a Service providers (SaaS) cater to a wide range of participants, from institutional capital and hedge funds to family offices and more.
Rocket Pool was specifically designed to support these service providers, offering them an alternative solution for utilizing ETH staked through their SaaS offerings. Rather than having to create custom staking solutions for each client, service providers can leverage Rocket Pool's infrastructure to maximize their returns. They have the choice of either paying a service provider or becoming an operator themselves and earning rewards. By running a node through Rocket Pool, service providers receive compensation in both ETH and RPL tokens, enabling them to optimize their earnings.
Rocket Pool allows teams to operate their own infrastructure while utilizing the protocol to securely stake ETH in batches of 16 ETH. This approach enables service providers to put their capital to work more effectively and capture a larger share of the returns generated by the staking process.
The beauty of Rocket Pool's design is that it provides equal opportunities for all participants, regardless of their size or status. Whether it's Coinbase or any other large entity, anyone can join Rocket Pool as a node operator by simply staking 16 ETH. The protocol's democratized staking system ensures fairness by directly supporting the network with every ETH staked through Rocket Pool.
Rocket Pool rETH
By depositing ETH into Rocket Pool, users receive rETH in exchange. This unique token, rETH, holds significant value within the wider DeFi ecosystem and benefits from the ETH earned through the staking process.
The process of depositing ETH and receiving rETH is seamless and can be completed in a single transaction by various user groups, including individuals, dApps, exchanges, wallets, and anyone interested in utilizing or building on top of the protocol. It offers an easy and permissionless way to engage in staking without the need to run staking infrastructure or even possess 32 ETH. With Rocket Pool, you can stake as little as 0.01 ETH.
Once you stake your ETH and obtain rETH, it automatically starts accumulating staking rewards based on the performance of the entire decentralized network of node operators within Rocket Pool. As a result, the value of rETH grows over time, allowing holders to utilize this collateral to access a wide range of opportunities within the DeFi landscape, all while contributing to the security of the Ethereum network.
To ensure the protection of rETH's value against node slashing and downtime, Rocket Pool implements multiple built-in insurance mechanisms. Node operators stake RPL tokens as collateral to cover any penalties they may incur. More detailed information on these mechanics will be provided in Part 3 of this series, RPL & Tokenomics.
If you possess rETH, you have the flexibility to trade it back to Rocket Pool for ETH and rewards at any time, as long as the liquidity in the deposit pool is sufficient to cover the amount. Alternatively, you can swap it on supported decentralized platforms like 1inch at the prevailing market price. This means you don't have to wait for years to access your Ethereum withdrawals or staking rewards, providing a truly awesome experience.
Node Staking
Rocket Pool offers a superior return on investment compared to staking outside the protocol.
Running a node in Rocket Pool comes with no fees, as you are providing a valuable service to the protocol. So, what exactly is that service?
In Rocket Pool, running a node only requires a minimum of 16 ETH per validator, whereas outside the protocol, you would need 32 ETH.
Once you deposit your 16 ETH, the protocol will assign you an additional 16 ETH from users who deposit ETH and receive rETH. As a node operator, you stake your own 16 ETH and an additional 16 ETH on behalf of the protocol.
Rocket Pool operates on a flat commission rate of 15%, allowing node operators to earn a percentage of the rewards on the assigned 16 ETH from the protocol. This means you earn rewards on your own 16 ETH deposit and receive a commission from the network for staking its ETH.
How to make money on Rocket Pool?
Rocket Pool is the perfect app to use when you want to stake your ETH, but you don't have enough ETH to spin up your own node. All you need is as little as 0.1 ETH to stake with Rocket Pool.
Here's how you stake ETH with Rocket Pool:
Open the Rocket Pool app
Input the amount of ETH you would like to stake
Click Deposit and approve the transaction
Congrats! You are now staking ETH. Upon staking with Rocket Pool, you will be credited with rETH representing your staked position. rETH accumulates APY from staking, so the longer you hold rETH, the higher the interest.
If you received less rETH than the amount of ETH you put in, that’s normal. rETH and ETH have a dynamic exchange rate, which goes both ways. As the network earns rewards, 1 rETH will become worth more than 1 ETH, which in turn means 1 ETH will buy less than 1 rETH.
Price Prediction for Rocket Pool — Can it hit $1000?
Buying and hodling RPL — the native token of Rocket Pool— is one way of potentially making money on Rocket Pool.
By looking at its current price, it’s natural to think about the chance of RPL hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the RPL token by analyzing its tokenomics. RPL’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} RPL tokens being in circulation today, that means a price of {PRICE} per RPL.
How did we come to that calculation? It’s quite easy, the price of an RPL token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each RPL coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of RPL at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for RPL to hit that price.
At a price of $1000 per token, that means the current market cap of RPL would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. RPL’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} RPL which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of RPL? Taking into account the current price of an RPL token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. RPL coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of an RPL token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the RPL protocol fully diluted market cap.
These are all crucial details to know when calculating if RPL can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of RPL depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some RPL to your portfolio, the most trusted places to get some are Binance and Coinbase.