A Beginner’s Guide to Rocket Pool (RPL)
Ethereum 2.0 needs a high amount of liquidity to serve the users that are joining the crypto space. Staking is one of the best ways the platform can use to attract more investors. However, staking is a risky business because users may lose their investment if they’re involved in malicious activity.
Similarly, the users need to run a node to take advantage of their staked tokens. But Ethereum 2.0 has introduced staking pools to accommodate investors who want to stake their tokens without worrying about losing their investment.
The staking pools are somehow similar to mutual funds where a huge number of investors deposit their funds to earn passive income. The staking pools are primarily designed for users that are less tech-friendly.
Rocket Pool is one of the leading staking pools that are helping crypto investors with making more money from their digital assets.
What is Rocket Pool (RPL)?
Rocket Pool is a decentralized network of nodes that is designed to simplify the Ethereum staking for all types of users. The users can either choose to run a node by staking their ETH tokens or they can participate in tokenized staking to secure their investment.
In the case of tokenized staking, the users are required to lock their rETH (ERC-20) tokens. The users don’t have to worry about losing their investment if they opt for tokenized staking because the platform takes responsibility for their assets. But those, who have locked ETH tokens, may lose their tokens in case of malicious activity.
Traditionally, the users need to stake 32 ETH tokens to become node operators. Rocket Pool eliminates this limit by allowing them to stake as low as 0.01 ETH tokens. Thus, the platform provides equal earning opportunities for crypto investors even if they don’t have 32 ETH tokens or the technical skills and assets to run a node.
The platform connects two service providers who are willing to run a node. Two service providers can create a mini pool to earn staking rewards. They’re both required to arrange 16 ETH tokens each. They can collect the required amount of ETH tokens from other community members.
They’re then responsible for distributing staking rewards among the investors who have contributed to building the mini pool.
Understanding the Features of Rocket Pool (RPL)
Rocket Pool isn’t the only staking pool on Ethereum. But it stands out with a set of unique features.
Dual Token Model
Rocket Pool uses two different tokens to run its operations. RPL is the native token that provides governance power to the token holders. It also enables users to earn staking rewards. rETH is the second token of this platform that facilitates the users who are willing to participate in Ethereum staking but don’t have the required amount of tokens or technical knowledge.
The users can generate rETH tokens by staking their ETH tokens. They can begin with as low as 0.01 ETH tokens. rETH tokens can be traded to earn rewards from the platform.
rETH Tokenized Staking
ETH token holders can participate in rETH tokenized staking to earn rewards from the Beacon Chain. The Rocket Pool node operators create a new Beacon Chain validator when a user deposits rETH tokens. The users receive rETH tokens as a reward depending on the amount of ETH tokens they deposited.
The network also calculates the duration of the investment to determine the rewards for investors. The value of rETH is directly proportional to that of ETH. Thus, the users can easily convert their rETH tokens into ETH through Rocket Pool. They can also use these tokens on other platforms to buy products/services.
Security
Rocket Pool incorporates the socialized risk management system to prevent investors from major losses. Rocket Pool minimizes the risk of malicious activities by binding the token holders to stake their tokens for at least 24 hours. Furthermore, the platform’s auditing reports are generated by some of the most reputable auditing firms.
Node Staking
Node Staking is designed for users who have enough knowledge to run a node but don’t have the required tokens. These users can become node operators by staking only 16 ETH tokens. The remaining 16 tokens will be collected from the staking pools.
No Lock-up of Tokens
Rocket Pool enables users to deposit or withdraw their funds whenever they want. However, the platform has a 24-hour locking time to prevent malicious behaviors.
Rocket Pool Brief History
Rocket Pool was introduced by David Rugendyke in late 2016. The mainnet was planned to be launched in October 2021 but it got delayed due to some technical issues. Therefore, the mainnet was finally launched in November 2021. The Rocket Pool team has consistently addressed all the bugs that appeared within the Rocket Pool ecosystem over time.
The reason why Rocket Pool became so popular is that it doesn’t ask users to lock their tokens. According to January 2023 data, Rocket Pool has more than 216,000 ETH tokens staked. And more than 1,400 node operators are running network nodes.
Rocket Pool Tokenomics
RPL is the native token of Rocket Pool that is used to pay transaction fees. It also provides governance rights to the token holders. Moreover, the users can stake their RPL tokens to earn rewards. With a circulating supply of 10.2 million tokens, RPL has a market cap of $424 million. It ranks among the 100 best cryptocurrencies in terms of market cap.
Conclusion
Rocket Pool is a decentralized protocol designed to simplify staking for ETH token holders. The users can choose to become a node operator by staking 16 ETH tokens or they can join another node operator by staking as low as 0.01 ETH tokens. The interesting part is that the users don’t have to lock their tokens on this platform.
If you need more information about how Rocket Pook works, feel free to get in touch with us.