Hello everyone. Rocket Pool launched recently, and a few ohmies and Rocket Pool community members have gathered together to draft a proposal for Olympus to invest some of its treasury with Rocket Pool. Before we make a formal OIP proposal, we’d love feedback from the Olympus community and DAO on our draft. Please let us know if this proposal interests you! And please comment with additional information you’d like to see, questions you feel this proposal leaves unanswered, etc.
Overview:
We propose that we stake 5% of our eth reserves, 340 eth at the time of writing, with Rocket Pool.
Rocket Pool is a decentralized, permissionless, community-owned, non-custodial eth2 staking service. Since its conception in 2016, it has remained committed to the principles of decentralization and non-custodial trustlessness that is core to Ethereum and DeFi. Our networks must not be beholden to any one party - nor only to wealthy participants. By removing technical and financial barriers to staking and validation, Rocket Pool makes these services available to everyone. Of course, Ohmies don’t need to be reminded of the importance of decentralization. Olympus embodies the same ethos, building new community-owned financial infrastructure for the world, and demonstrating the power of trustless, cultural coordination.
Rocket Pool has held 5 public betas over the life-span of Eth2 development, and completed its 4-tiered rollout on Mainnet on November 21st. The network has since amassed a TVL of over $140 million and is composed of 402 Node Operators registered from 55 different time zones. All signs point to Rocket Pool being a pillar of Ethereum going forward.
Rocket Pool Details:
Users deposit eth into Rocket Pool’s staking contract, and receive a token called rEth in return.
This token represents your share of the staking pool. Its exchange rate with eth increases over time as staking rewards accrue. For example, upon deposit, the exchange rate may be 1 rEth = 1.01 eth. A few years later when withdrawing, the exchange rate may have increased to 1 rEth = 1.15 eth.
When you’re done staking, you can exchange rEth back for eth using the same Rocket Pool contracts.
rEth is a ERC-20 token, so it can be transferred, swapped, deposited, or used in any number of potential defi integrations
The site to stake is https://stake.rocketpool.net/ and a breakdown of token addresses can be found in the #resources channel of the Rocket Pool discord, and in this medium article from the Rocket Pool team: https://medium.com/rocket-pool/rocket-pool-rpl-token-upgrade-new-addresses-e96c12c55adf
Returns:
~5%. This is the eth2 staking APR, minus a roughly 10% commission paid to node operators.
In the short term, as more people stake on the beacon chain this APR will trend downwards by a percentage point or so.
After the merge, when priority fees are paid to stakers instead of miners, this is projected to increase to nearly 25% APR.
Risk:
Eth2 staking itself is a very low-risk investment. Black swan liquidation events you might see in lending protocols, for example, are impossible.
One potential source of lost funds is from getting slashed, an event where a staker’s funds are taken away as punishment for behaving dishonestly. Rocket Pool places all of this risk on node operators’ shoulders, ensuring that rEth holders will never lose funds during slashing events.
Rocket Pool is very new, and so its contracts haven’t had the long-term battle testing of other staking providers. However, there are several factors helping to mitigate Rocket Pool’s risk:
Rocket Pool has had 5 betas, operates a permanent testnet, and has gone through a total of 5 audits. Recent security audits include:
Consensys Diligence: https://consensys.net/diligence/audits/2021/04/rocketpool/
Sigma Prime: https://rocketpool.net/files/SigmaPrimeAudit.pdf
Trail of Bits: https://github.com/trailofbits/publications/blob/master/reviews/RocketPool.pdf
Rocket Pool launched with a successful several-week staged rollout, letting the team carefully monitor the protocol’s health as they slowly increased the limits on investment.
Rocket Pool has established a $100,000 bug bounty with ImmuneFi.
Exit Liquidity:
Even though Rocket Pool is an Eth2 staking provider, withdrawals will be available before the merge. This is because they have a deposit pool containing eth recently deposited by stakers, which hasn’t been paired with a node yet. As long as there is eth in the deposit pool, rEth holders can burn their rEth to get eth back.
The deposit pool isn’t guaranteed to have eth in it. In an emergency, rEth is a ERC-20 token, meaning it can be swapped freely in dexes. There is already liquidity on Uniswap to exchange eth and rEth, although this would subject us to slippage and should be used as a last resort.
Future Integrations:
rEth is an ERC-20 token, so it’s capable of being integrated into defi protocols, bridged to other networks, etc. Proposals are underway to accept rEth as collateral in Maker and Abracadabra, among others.
A star example in this case is Alchemix. Alchemix lets users take out risk-free, zero-liquidation loans, which repay themselves over time. Alchemix V2 will support many kinds of collateral, and it is very likely that rEth will be supported as collateral. With this integration, we could take out a loan on our rEth deposit, and use that loan to generate further yield, all with zero risk of liquidation.
Allocation Process:
Initially, this would be a one-time deposit of 5% of the treasury’s eth: 350 eth as of this writing.
At some point in the future, we’re hoping to make a proposal to increase this allocation to 10%, but that will be contingent on Rocket Pool establishing itself as a reliable, stable, robust service.
If Olympus DAO decides it’s a big fan of Rocket Pool, a possible future alternative to one-time deposits is rEth bonds!
Community Growth and Network Mutualism:
- Rocketpool and Olympus communities have little overlap, despite their aligned principles and goals for decentralization. Most likely this is a product of time (Rocketpool conceived in 2016 and Olympus in 2021). This presents an opportunity for our networks to attract investment and participation from each other’s members. This network effect is innately 3,3. A Node Operator with sOHM now has a second reason to hodl their staked OHM.
We also have some final thoughts on some more intangible benefits of staking with Rocket Pool. Olympus DAO is inextricably linked to Ethereum, and Rocket Pool represents an investment in a decentralized future for Ethereum. Rocket Pool is the only staking protocol that supports Ethereum’s vision of a blockchain secured by a decentralized, permissionless Proof of Stake network.
Rocket Pool has already started delivering on its promise of decentralization. 400+ node operators have registered so far from 55 different time zones, and dozens more are signing up every day. By supporting Rocket Pool, Olympus DAO will be directly supporting a secure, decentralized network on which the world’s first decentralized reserve currency can flourish.