What is Rocket Pool (RPL)?

Rocket Pool is a decentralized platform on Ethereum that provides a staking pool, presenting an annual percentage rate (APR) of up to 4.33% for ETH2 staking. Participants have the option to become part of the Rocket Pool through its decentralized node operator network or establish their nodes with just 16 ETH. 

In the latter scenario, they have the opportunity to gain commissions from ETH staking and receive extra RPL rewards by offering RPL collateral, resulting in potential earnings of up to 6.36% APR for ETH and the supplementary RPL rewards.

Rocket Pool represents a decentralized network of nodes that conduct validation tasks for the Ethereum 2.0 blockchain. Its primary objective is to cater to users lacking the minimum required ETH tokens for staking and those without the technical expertise to run a node.

Instead of mandating a 32 ETH deposit, investors can stake with 16 ETH via Rocket Pool, which automates the entire process and manages all validators without direct user involvement.

However, individuals looking to stake Ethereum face the enduring commitment of locking up their assets, even when utilizing Rocket Pool. Once staked, assets remain locked until Phase 2 of Ethereum’s Proof-of-Stake implementation.  

While Rocket Pool can't circumvent this lockup, it effectively manages risk through tokenized staking. Upon staking 16 or 32 ETH, users receive rETH tokens, representing their stake and yield. Despite the assets being locked, stakers can utilize rETH like any other ERC-20 token—selling it, engaging in DeFi platforms, or securing it in cold storage.

Who are the founders of Rocket Pool?

David Rugendyke, a senior developer in computer science, initiated the inception of Rocket Pool in late 2016. He collaborates with General Manager Darren Langley, an executive with more than 18 years of expertise in overseeing development teams, crafting application architecture, and delivering innovative digital solutions for government and financial sectors. 

Supporting them are three blockchain and Solidity engineers with a collective experience of 40 years, forming a well-rounded team for Rocket Pool.

How does Rocket Pool operate?

Rocket Pool functions by employing nodes that validate transactions for the Ethereum 2.0 network. ETH investors can initiate staking through Rocket Pool by depositing ETH and becoming a node operator. When staking 16 ETH, their deposit gets paired with another user's deposited ETH.

The node performs standard Ethereum node functions and earns a flexible APY, serving as a commission for the user-deposited ETH.

The commission earned is contingent on Ethereum 2.0's supply and demand dynamics. Node demand surges with ample ETH deposits and limited available minipools, otherwise dwindling when there's excess capacity but insufficient ETH.

Both node demand and commission rates are determined at the time of staking and minipool creation. Users can specify the minimum commission rate they're willing to accept before making a deposit.

Apart from standard nodes, Rocket Pool hosts watchtower nodes held by RP and its trusted partners. These nodes report the Beacon Chain's status back to the Ethereum PoW network. Consensus among a majority of these nodes validates the reported data.

Their primary tasks include reporting Rocket Pool's network value to RP smart contracts regularly and influencing the rETH/ETH exchange rate based on earned rewards.

Additionally, they report when validators can withdraw assets. Rocket Pool updates the relevant minipool, minting the validator's nETH tokens equivalent to their final minipool balance.

Validators must wait before withdrawing these tokens and converting them to ETH. Once Phase 2 of ETH2 launches, stakers can also exchange tokens for ETH via the nETH smart contract, as stated by the Rocket Pool team.

What sets Rocket Pool apart?

Rocket Pool offers an inclusive opportunity for ETH2 staking, irrespective of an individual's financial resources or technical expertise. Its fundamental principle is to facilitate the secure staking of ETH through a network of decentralized autonomous nodes backed by RPL collateral.

Positioning itself as a complementary service to staking providers, Rocket Pool allows these providers to optimize their returns by participating in its network, and operating nodes, and receiving rewards in ETH and RPL. Notably, even major players such as Gemini can engage with Rocket Pool by creating nodes staking 16 ETH each, utilizing Rocket Pool's staked ETH wrapper, known as rETH.

rETH represents a tokenized form of staked ETH within Rocket Pool, enabling stakers to engage with amounts ranging from 0.01 ETH to 32 ETH. Users receive rETH by staking their Ether, and this token automatically accumulates staking rewards based on the collective performance of node operators across the network. The value of rETH is safeguarded against slashing risks through insurance mechanisms, with node operators staking RPL as collateral to cover any potential penalties.

Another means of utilizing Rocket Pool is through Node Staking. Users deposit 16 ETH and are allocated an additional 16 ETH from other users depositing ETH and receiving rETH. Effectively, individuals stake their own 16 ETH and an additional 16 ETH on behalf of the protocol. 

Rocket Pool adjusts its commission rate dynamically based on the availability of ETH and the supply and demand of node operators. In this setup, node operators are incentivized to provide insurance to stakers against penalties. Moreover, node operators are required to deposit a minimum amount of RPL as collateral.

To read more about Rocket Pool, visit Suncrypto Price Explorer