Following Ethereum's (ETH) transition from Proof of Work (PoW) to Proof of Stake (PoS) consensus mechanism, the responsibility of network maintenance shifted from miners to validators. Validators uphold the Ethereum network by staking their ETH tokens. Rocket Pool (RPL) is a notable staking pool that enables users to actively participate in the maintenance of Ethereum's network. By utilizing Rocket Pool, individuals can contribute to the security and operation of the Ethereum ecosystem by staking ETH.
What is Rocket Pool
Designed for ETH users, Rocket Pool is a protocol that aims to reduce the staking requirements on the Ethereum network. It operates as a liquid staking protocol, where users can securely stake their ETH in a trustless manner towards a network of node operators.
The Rocket Pool team
Rocket Pool was founded in 2016 by David Rugendyke, who also serves as the protocol's CTO. The team consists of highly skilled professionals dedicated to the project's success – Darren Langley as General Manager, Kane Wallmann as Senior Solidity Engineer, Nick Doherty as Senior Blockchain Engineer, Joe Clapis as Senior Blockchain Engineer, and Maverick (Nick Ashley) as the Marketing and Community Manager.
How does Rocket Pool work
Rocket Pool lowers the entry barrier for ETH holders seeking to stake their tokens. It enables users with smaller amounts of ETH to participate in a staking pool. Through a collaborative process, contributors pool together 16 ETH, which is matched by the Rocket Pool network with another 16 ETH from a validator. This combined total of 32 ETH fulfills the requirement to create a validator node on the Ethereum network. As the node carries out transaction validations on the Ethereum network, each contributor, known as a staker, earns proportional rewards based on their stake in the node.
Rocket Pool’s native token: RPL
RPL is the primary token used for governing the Rocket Pool protocol and can be staked on a Rocket Pool node as insurance. When creating a 16 ETH minipool validator, a minimum of 10 percent of the ETH's value must be staked in RPL as a security promise. This insurance serves as collateral, protecting against penalties or slashes that result in staking less than 16 ETH. If the operator falls short, their collateral is auctioned to compensate the protocol. In return for this insurance, node operators receive RPL rewards generated by protocol inflation. The more RPL staked, the greater the rewards.
RPL tokenomics
RPL’s circulating supply currently stands at 19,474,470 tokens, set to inflate at five percent annually. It's worth highlighting that RPL's tokenomics are closely tied to Ethereum staking, as Rocket Pool serves as a staking service on the Ethereum network.
RPL use cases
RPL is used for incentivizing network participants and facilitating governance within the ecosystem. Additionally, the token plays a pivotal role in the Rocket Pool ecosystem, enabling users to pay fees and conduct various transactions on the network.
RPL distribution
RPL takes a unique approach to inflation compared to many other cryptocurrency networks. While some networks periodically burn tokens to control inflation, RPL budgets for an annual inflation rate of five percent. The distribution of these newly minted tokens is as follows:
- 70 percent is allocated to node operators.
- 15 percent goes to Oracle DAO companies.
- The remaining 15 percent is reserved for DAO treasury organizations.
The future of Rocket Pool
With Ethereum's recent transition to a PoS consensus mechanism, the crypto industry anticipates the ongoing expansion of the network. As more users consider ETH staking as a viable option, protocols like Rocket Pool are poised to play a significant role, given Rocket Pool's close connection to the Ethereum network.
