Rocket Pool - Stake your Ethereum to the Moon!
This is The Weekly Coin, a weekly newsletter highlighting high potential lower cap Cryptocurrency projects.
Hot and fresh out of the oven, a steaming cool coin I think you'll find it interesting. It's been around for a minute but I'm surprised it's not talked about much. Hell, even I overlooked this coin around a year ago. Goes to show there are a lot of good projects out there we all overlook. Side note, did you guys know I do all the designs for these emails as well? Trying out my design skills. Ok, on to the details of Rocket Pool.
Rocket Pool is a first of its kind, Proof of stake ethereum infrastructure service. Individuals and businesses who want to earn interest on their ether over a fixed term can use Rocket Pool's decentralized network of node operators to participate in staking.
What Is Rocket Pool?
Currently, Ethereum is using the time tested Proof of Work (POW) consensus algorithm. I'm sure you know how POW. If you don't here's the rundown; miners run hardware and compete against each other to complete transactions on the network and get rewarded. Ethereum is moving away from POW to Proof of Stake or POS. What is Proof of Stake? Well, essentially POS is a consensus algorithm that decides on who validates the next block, according to how many coins you hold. Why move to POS? POS attempts to make Ethereum is even more efficient, secure, and decentralized. Here's some good info on POS here and here.
To stake your Ethereum you are required to lock up 32 ETH in a smart contract which at the time of writing this is $6336. You will also have to keep an Ethereum node online 24 hours a day which if your internet is wonky you can be penalized. Not everyone has the finances to stake 32 ETH as well as the time and resources to run a node. Also, once Ether is staked on Ethereum, users don't have the option to withdraw their funds early if they need liquidity.
What Rocket Pool aims to do is bring staking to the average Joe and in a decentralized way. You'll only need 1 ETH to stake, you don't have to run a node if you don't want to and there are fewer risks as opposed to staking your ETH traditionally on ETH 2.0. Rocket Pool solves these issues by basically being a staking matchmaker.
What is the use of the RPL Token?
The token used in Rocket Pool is Rocket Pool Protocol Token or RPL for short. RPL acts as a balancing token. It is used to determine the capacity of the decentralized node operator network. A node operator is required to deposit a set amount of ETH as well as a matching amount of RRL. This RPL: ETH ratio is dynamic and is dependent on the network utilization, i.e;
- If the network has plenty of capacity, then node operators need more RPL to join.
- If the network is reaching capacity, then node operators need less RPL to join.
Subsequently, node operators are incentivized to join the network when it needs more capacity and they are disincentivized to join the network when it doesn't.
Upon reading I asked myself if the only use of the token is to balance out the network what would incentivize those who aren't going to run a node to buy RPL? Well because of the RPL: ETH ratio a node operator will need more RPL to stake more ETH and increase their staking returns. More RPL means being able to unlock more profit from your node. See where I'm going with this? Thus even if you aren't going to operate a node the price can still go up
Staking pools will absolutely be the way most people stake their ETH once ETH 2.0 is alive and kicking. Eventually, other staking pools are going to show up, but so far there's only Rocket Pool which gives them a very nice position to the market. Think about how Bitcoin gained dominance because it was the first boy out of the gate.
Even if you don't invest in the Rocket Pool by buying their token I think its a platform that might be of some interest to those who want to take a part in ETH 2.0 but wouldn't have the means otherwise. Hey, The Weekly Coin doesn't always have to cover coins you should invest in. I think I can also cover projects you might also want to use.
Rocket Pool 2.0 Beta wrapped up late last year and had 50,000 test net Eth staking and close to 1,000 users over 60 days. I think that's because people are seeing the value of the project. I too think its gonna be something interesting and honestly this would be something I would invest in and maybe even run a node.