ITSA Insight: Rocket Pool’s Liquid Staking and Smart Nodes

Ethereum Staking and Rocket Pool

Natively Ethereum does not support pooled staking, but many third parties are offering additional services. In addition, there are different types of staking solutions:

  • Solo staking — As the name suggests, this model requires you to run your node and deposit 32 ETH to become a validator. It is technically the most demanding way to be part of the validator network. The model also offers the highest rewards because one is not dependent on third parties.
  • Staking as a service(SaaS) — SaaS offers users to deposit 32 ETH for a validator but delegate node operations to a third party. This way, they avoid dealing with hardware.
  • Pooled staking — Staking pools are a collaborative approach to allow many with smaller amounts of ETH to obtain the 32 ETH required to activate a set of validator keys.
  • Centralized exchange staking— Many centralized exchanges like Coinbase, Binance, or Kraken provide staking services for their users. This is the easiest way to get into Ethereum staking. However, users depend entirely on the centralized exchange to keep their funds safe. These also offer lower staking rewards.
Figure 1: Rocket Pool’s market share compared to other staking solutions (source: messari.io)

Rocket pool’s offerings

ETH token holders can simply stake their tokens for rewards or become paid node operators. There is a two-sided market, where stakers are paying the service providers, and service providers are paid to run the nodes. Node operators are paid both in ETH and Rocket Pool’s native token, RPL. Rocket Pool’s nodes need to deposit only 16 ETH instead of the 32 ETH required by Ethereum. The other 16 ETH are covered by the staking pool, where stakers have deposited their tokens. When depositing ETH, node operators must also deposit a minimum amount of RPL to act as collateral in case they incur any penalties because of slashing. These types of validators are called minipools.

Figure 2: rETH staking infographic (source: medium.com/rocket-pool/)

RPL Token and Governance

Rocket Pool is governed by a two DAO structure — the Protocol DAO (PDAO) and the Oracle DAO (ODAO). The Protocol DAO governs the protocol’s configuration settings(Inflation of the token, distribution awards, bond recovery, min and max of RPL to run a node, etc.) and is made up of the user’s staked RPL tokens. The Oracle DAO provides services such as connecting the Beacon and ETH1 chains and includes elected members by the community. The members of the ODAO hover around 15, depending on the configuration. The ODAO members run special nodes similar to the Rocket Pool nodes. These nodes appear the same as the validator nodes yet have different tasks by providing services to the DAO and validating token balances between chains. Rocket Pool’s ODAO will monitor blocks produced by node operators and apply a 10% ETH penalty if the Fee Recipient is not set appropriately, for example. The RPL token is an integral part of the protocol and serves many purposes. To join the DAO, a new member must be first invited and post an additional RPL bond that acts as a good behavior bond. If the member acts maliciously, other DAO members can propose to slash their stake. The RPL token is also part of the rewards structure of the protocol. It is also used as insurance for the rETH value protection, with nodes staking RPL as insurance in case of failure to meet network demands.

The classification of RPL according to the ITC:

Figure 3: The RPL Tokenbase entry (source: https://itin.itsa.global/F2W89VRP4)

The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

  • The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
  • The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
  • ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.

Remarks

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International Token Standardization Association

International Token Standardization Association

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The International Token Standardization Association (ITSA) is a not for profit organization working on holistic market standards for the global token economy.