Rocket Pool Explained

What is Rocket Pool?

Rocket Pool is a decentralized Ethereum staking protocol that simplifies staking and strengthens network security. It enables liquid staking with as little as 0.01 ETH through rETH, a yield-bearing token, and offers node staking with an 8 ETH minimum for operators.

The protocol uses smart contracts and a decentralized network of node operators to provide trustless and transparent staking. Node operators earn rewards from their stake, pooled commissions, and Rocket Pool’s native token, RPL. rETH holders benefit from its flexibility, as it can be traded, used in DeFi, or redeemed for ETH and rewards.

With thousands of node operators across 148 regions, Rocket Pool decentralizes Ethereum’s staking infrastructure, reducing risks and improving accessibility. It plays a vital role in Ethereum’s Proof-of-Stake ecosystem.

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Rocket Pool Node Operators Explained

Rocket Pool node operators play a critical role in validating transactions and securing Ethereum’s decentralized staking infrastructure. They stake a minimum of 8 ETH along with RPL as collateral, ensuring accountability and aligning incentives with the protocol.

Node operators earn rewards from their staked ETH, a 14% commission on pooled ETH rewards, and RPL incentives. Their responsibilities include maintaining node uptime, applying software updates, and managing pooled assets securely. Consistent performance is crucial, as poor operation can result in penalties or loss of collateral.

This structure empowers individuals to participate in Ethereum’s security while earning competitive yields, offering a decentralized alternative to centralized staking solutions.

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Rocket Pool Yields

Rocket Pool offers attractive staking yields through liquid and node staking, catering to different levels of involvement. Liquid staking provides rETH holders with passive rewards, while node operatorstaking delivers higher returns for operators who manage Ethereum validator nodes.

• Liquid Staking: ~2.80% APR from Ethereum rewards, with rETH gaining value over time and offering flexibility for trading or DeFi use.
• Node Operator Staking: ~4.65% APR from ETH rewards plus up to 7.06% APR in RPL incentives, with additional earnings from commissions on pooled ETH.

This dual structure makes Rocket Pool accessible for casual stakers and rewarding for more active participants.

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How to Stake ETH on Rocket Pool

Staking ETH on Rocket Pool is simple and decentralized, allowing users to earn rewards while contributing to Ethereum’s security. With a minimum stake of just 0.01 ETH, users receive rETH, a liquid staking token that appreciates as rewards accrue.

 Here’s how to stake ETH on Rocket Pool:

1. Visit Rocket Pool: Go to the Rocket Pool staking app and connect your Ethereum-compatible wallet (e.g., MetaMask).
2. Select Amount: Enter the ETH you wish to stake (minimum 0.01 ETH). The interface will display the estimated rewards and rETH you will receive.
3. Confirm Transaction: Approve the transaction in your wallet to deposit ETH into the Rocket Pool staking contract. A small gas fee will apply.
4. Receive rETH: Once the transaction is confirmed, you’ll receive rETH in your wallet. This token accrues staking rewards automatically.

The swap rate between ETH and rETH isn’t 1:1 because rETH accumulates staking rewards, making its value gradually increase relative to ETH over time.

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RPL Token and Tokenomics

The RPL token is central to Rocket Pool’s ecosystem, serving as a utility and governance tool. Node operators stake RPL as collateral to enhance network security, earn rewards, and influence protocol governance. 

With a capped supply of 18.97 million tokens, the annual inflation rate has been reduced from 5% to 1.5% under a recent tokenomics update.

Key Updates to RPL Tokenomics:

• ETH-Only Node Operation: Node operators can now run validators with only an ETH bond, eliminating the mandatory RPL staking requirement. This increases accessibility and capital efficiency.
• Revenue Distribution: ETH revenue is shared among node operators, RPL stakers, and protocol reserves. Stakers earn additional ETH rewards based on their RPL holdings, replacing prior RPL issuance rewards.
• Megapools: Validators can now share a single Ethereum withdrawal address, reducing gas costs and enabling smaller ETH bonds (as low as 1.5 ETH), boosting efficiency.
• RPL Value Mechanisms: Surplus ETH revenue may fund RPL buy-and-burn or liquidity provisioning, creating additional value for the token.

These changes optimize RPL's utility, promote decentralization, and improve the sustainability of the Rocket Pool protocol.

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Lido vs Rocket Pool

Lido and Rocket Pool are Ethereum staking protocols with distinct models and trade-offs. Lido dominates in market share, holding approximately $37.88 billion in total value locked, compared to Rocket Pool’s $2.86 billion. 

Lido relies on a permissioned set of validators, raising centralization concerns, whereas Rocket Pool promotes decentralization by allowing anyone to run a node with just 8 ETH and RPL collateral.

Lido’s staking yields for stETH are slightly lower, averaging ~3.04% APR, compared to Rocket Pool’s ~2.8% for liquid staking and up to ~6.3% for node operators. Rocket Pool’s higher node yields reflect the added responsibilities and risks borne by operators.

Lido excels in liquidity and DeFi integrations, while Rocket Pool prioritizes decentralization, making it a stronger choice for users aligned with Ethereum’s trustless ethos.

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Bottom Line

Rocket Pool offers a decentralized, accessible staking solution aligned with Ethereum’s trustless ethos. 

While it holds significantly less TVL than Lido, Rocket Pool’s focus on decentralization, flexibility, and node operator participation makes it a compelling choice for those prioritizing security and network resilience in the Proof-of-Stake ecosystem.