Despite being created in 2016, Rocket Pool is now getting the attention it deserves. It’s an amicable service that deals with an array of blockchain services: defi dapps, wallet providers, SaaS providers, exchanges, businesses, and individuals.

What sets Rocket Pool apart?

Along with the fact that it has rendered Proof of Work (PoW) obsolete, Rocket Pool offers a decentralized staking infrastructure that makes use of the beacon chain to allow its users to earn staking rewards with Ethereum. It makes the entire PoS system more accessible by having smart contracts that push staking deposits to decentralized node operators (basic delegates in a staking pool). 

Rocket Pool has overridden a lot of barriers that make staking inaccessible for the common man. We’ll explore these below:

• The initial minimum deposit is 0.01 ETH, far from the general staking minimum of 32 ETH. Additionally, the service works on smart contracts that eliminate difficulties that may popup with the beacon chain. 

• With ETH2 coming in at different phases — along with the fact that it’s going to be locked in until the protocol decides to unbind it — it may take a while before you reap the rewards for the assets you’ve put in. Rocket Pool, on the other hand, easily releases rETH tokens for your convenience. The token garners rewards without the need to wait for the unbinding process to take place. It also provides earlier trading, selling, and holding for liquidity purposes. You technically have the token with its proportionate value to pass around. 

• Rocket Pool provides decentralized node operators to make every node secure and online 24/7. In contrast, the beacon chain asks users to do this on their own. Additionally, the beacon chain issues penalties for not keeping track of this. Rocket Pool throws the penalties all across the network so that the incurring damages are barely felt. 

• A solo stake requires only 16 ETH, unlike that of beacon’s 32 ETH minimum requirement. Upon joining Rocket Pool’s decentralized network of ETH nodes, you get better and greater ROI compared to staking solo outside of the system.

How does Rocket Pool actually work?

There are three pillars that make Rocket Pool run smoothly:

Smart contracts

Smart contracts accept ETH deposits and are then distributed to node operators to work out the kinks inside the beacon chain. For added convenience, these operators also disable broken smart nodes until they’re repaired.

The smart node network

The smart node network comprises many Ethereum nodes running inside smart node software, creating a big, decentralized network. This network deals with smart contracts and the network consensus that is asked for by the beacon chain. 

If a user decides to run a smart node inside Rocket Pool, they can put in a minimum of 16 ETH without fees. Because these users are doing the service a favor, they receive extra rewards in addition to the staking rewards they get for staking 16 or more ETH. 

Minipool validators

Lastly, mini pool validators are like a smart contract made up of node operators who’ve put 16 ETH or more inside their own nodes. The mini pool contract puts in an additional 16 ETH from users who want to stake but aren’t planning to take care of a node.

Upon reaching 32 ETH in total, staking occurs. A validator is then created inside the node to manage consensus duties for everyone to earn rewards from staking. How convenient!

Rocket Pool Tokenomics

Rocket Pool Protocol Token (RPL)

This is the primary protocol token that can be staked in a node, giving the network extra security. Note that it isn’t a requirement to run a smart node if you want to make use of Rocket Pool as a staking resource.

Rocket Pool Staking Deposit Token (rETH)

rETH is a token incentivized for anyone depositing into the Rocket Pool network. It’s a tokenized staking deposit that earns the staking rewards you get from the network. What’s cool about it is that you don’t need to have it locked; you can easily trade, sell, or hold it upon acquisition. With ETH2 staking deposits locked until phase 2, this token provides liquidity for patrons while ETH2 is still in phase 0 and 1. Currently, there’s no announced date on when Phase 2 is going to happen.

To be continued…

Frequently Asked Questions (FAQ)