Rocket Pool Research Report: Decentralized Ethereum 2.0 Pledge Protocol, the Next Alpha?

! Rocket Pool research report: Decentralized Ethereum 2.0 pledge agreement, the next Alpha?

Core Technology

The core technology of Rocket Pool includes the following aspects:

(1) Smart contracts: Rocket Pool uses a series of smart contracts to manage staking nodes, staking pools, reward distribution, liquidity token issuance and other functions.

(2) Pledge node: Rocket Pool allows anyone to run a pledge node, and only needs to provide 16 ETH as collateral, and the remaining 16 ETH will be provided by the pledge pool. Pledge nodes can obtain pledge rewards and service fees, and at the same time bear pledge risks.

(3) Staking pool: Rocket Pool allows anyone to participate in staking by depositing ETH into the staking pool without running nodes or locking funds. The pledge pool will distribute the deposited ETH to the pledge nodes, and give corresponding rewards according to the performance of the nodes.

(4) Liquidity token rETH: Rocket Pool issues an equivalent liquidity token rETH for each user who deposits ETH, representing the user's share in the pledge pool. rETH can be exchanged back to ETH at any time, and can also be freely traded in the market. The price of rETH will increase with staking rewards, so users who hold rETH can enjoy staking benefits.

(5) Decentralized governance: Rocket Pool uses a decentralized autonomous organization (DAO) to manage protocol parameters and upgrades. DAO is composed of users who hold RPL tokens. RPL is Rocket Pool’s governance token and an incentive mechanism. RPL holders can vote to decide important matters of the agreement, such as service fee rate, minimum pledge amount, ratio of liquidity tokens, etc. At present, star projects using similar technologies include Lido, StakeWise, Ankr, etc., and they also provide decentralized pledge services and liquidity tokens of Ethereum 2.0.

TEAM AND PARTNERS

Founder and CEO: David Rugendyke, a senior software engineer and blockchain developer who has worked in the Australian Department of Defense for 10 years. CTO: Jake Pospischil, an experienced full-stack developer and blockchain enthusiast who has held technical leadership roles in several startups. Chief Operating Officer: Darren Langley, a professional project manager and business analyst, has worked for Telstra, Australia's largest telecommunications company, for 15 years.

Rocket Pool’s partners include ConsenSys: a world-leading blockchain software company that provides technical and financial support to Rocket Pool. Gitcoin: An Ethereum-based open source project sponsorship platform that provides Rocket Pool with opportunities for community building and developer incentives. Synthetix: An Ethereum-based synthetic asset issuance platform, it has cooperated with Rocket Pool to develop a synthetic asset sETH based on rETH, which can be used in the Synthetix ecosystem.

Community Engagement

Rocket Pool has more than 43,000 followers on Twitter, and often posts about project progress, staking tutorials, community events, and more. Here are some great social media campaigns:

(1) Pledge testnet reward plan: invite users to run pledge nodes on the testnet or deposit into the pledge pool, and give RPL tokens as rewards based on performance.

(2) RPL token airdrop event: Rocket Pool conducted an RPL token airdrop event in November 2020, distributing RPL tokens worth approximately $1 million to early supporters and contributors.

(3) rETH synthetic asset mining activity: Rocket Pool cooperated with Synthetix to launch a synthetic asset sETH based on rETH in March 2021, and started a four-week mining activity to distribute SNX and RPL tokens as rewards.

Security and Auditing

Rocket Pool’s security guarantees are as follows: (1) Code audit: Rocket Pool’s smart contract code has passed multiple rounds of professional audits, including audits conducted by well-known security companies such as ConsenSys Diligence, Sigma Prime, and Quantstamp. Audit reports have been made public and can be viewed on Rocket Pool's official website. (2) Pledge insurance: Rocket Pool provides a pledge insurance mechanism for users in the pledge pool, that is, if a pledge node is punished due to bad behavior, then the pledge of the node will be used to compensate the users in the pledge pool , so that users will not lose their principal due to node errors. (3) Governance mechanism: Rocket Pool uses a decentralized autonomous organization (DAO) to manage the parameters and upgrades of the protocol, which can avoid single points of failure or malicious operations, and at the same time allow the community to participate in the decision-making and improvement of the protocol.

Sustainability and Business Model

The commercial viability and possible revenue of Rocket Pool lies in the following aspects:

(1) Pledge service fee: Rocket Pool charges a certain percentage of pledge service fee from the users in the pledge pool as the operating cost and source of income of the protocol. The service fee is determined by the DAO and adjusted according to market conditions.

(2) RPL token value: RPL token is Rocket Pool’s governance token and an incentive mechanism. RPL tokens have the following sources of value:

--- Governance rights: RPL holders can vote to decide important matters of the agreement, such as service fee rate, minimum pledge amount, ratio of liquidity tokens, etc.

---Node incentives: RPL tokens can be used to motivate pledge nodes to provide better services and performance. Pledge nodes need to provide a certain amount of RPL tokens as collateral in addition to the 16 ETH they provide.

---Liquidity incentives: RPL tokens can be used to motivate users in the pledge pool to provide more liquidity. When users deposit ETH into the pledge pool, in addition to getting rETH tokens, they can also get a certain amount of RPL tokens as rewards.

(3) Demand for rETH tokens: rETH tokens are liquidity tokens issued by Rocket Pool, which represent users’ shares in the pledge pool. There are several sources of demand for rETH tokens:

---Staking income: The price of rETH tokens will increase with the staking rewards, so users who hold rETH can enjoy staking income.

--- Liquidity trading, rETH tokens can be exchanged back to ETH at any time, and can also be freely traded in the market.

---Synthetic asset application: rETH tokens can be used as a synthetic asset on other decentralized platforms. For example, Rocket Pool has cooperated with Synthetix to develop a synthetic asset sETH based on rETH, which can be used in the Synthetix ecosystem.

Competitive Advantage

Compared with Lido, StakeWise, Ankr and other projects of the same type of track, Rocket Pool has the following advantages:

(1) Lower pledge threshold: Rocket Pool allows users to participate in pledge with a minimum threshold of 16 ETH, while other products require at least 32 ETH. This allows more users to have the opportunity to participate in the pledge of Ethereum 2.0 without the need to accumulate a large amount of funds or entrust it to a third party.

(2) Higher degree of decentralization: Rocket Pool is a completely decentralized pledge agreement, which does not depend on any centralized operators or node providers. Anyone can run a staking node or deposit into a staking pool without trusting or authorizing any third parties. Rocket Pool also uses a decentralized autonomous organization (DAO) to manage the parameters and upgrades of the protocol, giving the community full governance rights.

(3) Stronger liquidity guarantee: Rocket Pool provides users with a liquidity token rETH, which can be exchanged back to ETH at any time, and can also be freely traded in the market. This allows users not to lose liquidity during the staking period, and can also buy and sell according to market conditions. Rocket Pool has also cooperated with Synthetix to develop a synthetic asset sETH based on rETH, which can be used in the Synthetix ecosystem.

(4) More incentive mechanisms: Rocket Pool uses RPL tokens to motivate pledge nodes and users in the pledge pool to provide better services and performance. RPL tokens can not only be used as governance rights, but also as an additional source of income for nodes and users. RPL tokens can also be used to measure the value and development of the protocol.

Capital Status

Rocket Pool conducted a seed round of financing in 2017, raising about $250,000 in capital, which was mainly used for the development and operation of the project. Two RPL token sales were held in 2017 and 2020 respectively, and a total of about 1.5 million US dollars was raised, which was mainly used for the expansion and promotion of the project. In 2020, it received technical support and financial support from ConsenSys. ConsenSys provided Rocket Pool with assistance in smart contract auditing, technical consulting, and marketing.

risk assessment

The possible risks of Rocket Pool are as follows: First, technical risk. The technical implementation of Rocket Pool relies on the pledge mechanism and smart contract functions of Ethereum 2.0. If there is any technical failure or delay in Ethereum 2.0, then Rocket Pool will also be affected. The second is market risk. The market demand and competitiveness of Rocket Pool depend on the pledge demand and liquidity demand of Ethereum 2.0. If the pledge demand of Ethereum 2.0 declines or the liquidity demand is insufficient, Rocket Pool will also be affected. The third is governance risk. Rocket Pool uses a decentralized autonomous organization (DAO) to manage the parameters and upgrades of the protocol, which can improve the transparency and fairness of the protocol, but it may also bring some governance risks. For example, RPL holders in DAO may have conflicts of interest or malicious voting, resulting in protocol parameters or upgrades that do not conform to the interests or wishes of the community.