In a bid to improve its capital efficiency, Rocket Pool, the second-largest liquid staking provider representing 4.3% of the sector’s capital, is cooking up a series of upgrades designed to improve capital efficiency and expand its market share, said Marceau.eth, a DAO member of Rocket Pool, in a tweet “scaling thread” on July 17.
Perhaps the most intriguing is Rocket Pool’s plan to launch a Staking-as-a-Service offering for infrastructure companies and institutional custodians. Software-as-a-Service (SaaS) has been an important model and key source of growth in the traditional software industry for years.
The moves are designed to enable Rocket Pool to scale up and compete with Lido, a leading staking solution. Rocket Pool is the second largest liquid staking protocol with a TVL of $289.7M. Users have staked 2.5M ETH via Lido since the start of the year, 20 times more than Rocket Pool’s 122,000 ETH.
The Ethereum network is currently gearing up for its forthcoming chain-merge, which will unify the existing Proof-of-Work Ethereum mainnet with the Proof-of-Stake Eth2 Beacon Chain. The shift is expected to create a new industry in staking Ether as part of the network’s new consensus mechanism.
While the Beacon Chain went live in December 2020, stakers will not be able to withdraw staked Ether until a future upgrade expected to take place at some point after The Merge, creating the use-case for liquid staking protocols. The Merge is expected to go live this quarter.
Liquid staking protocols allow Ethereum validators to earn rewards without sacrificing the ability to access their capital by issuing tradeable tokens representing their locked Ether. The sector is currently dominated by Lido, with the protocol having amassed more than 90% of ETH locked in staking derivative protocols, according to Dune Analytics.
Rocket Pool is also planning to reduce collateral requirements for minipool operators to 4 ETH from 16 ETH. Minipools currently allow validators to operate a node by combining 16 ETH collateral with 16 ETH from the protocol’s staking pool to deploy a new Eth2 validator on the Beacon Chain. The upgrade will let operators launch a node by combining 4 ETH with
Marceau tweeted the upgrade would enable more participants to operate minipools and significantly increase yield by allowing commissions to be charged on a greater sum of rETH.
Solo stakers will also be able to directly migrate to Rocket Pool after the Capella hard fork enables withdrawals from the Eth2 Beacon Chain, with the upgrade expected to ship six months after The Merge.
Marceau expects large staking providers may shift their operations to Rocket Pool to collect higher yields.
While Marceau.eth does not appear to hold an official title with the Rocket Pool company, they are very active on Rocket Pool’s governance forum and frequently tweet about forthcoming news and key milestones relating to the project. In June, Marceau also created a snapshot vote for Rocket Pool’s rETH staking derivative to be supported by leading money market protocol, Aave.
Rocket Pool’s Staking-as-a-Service offering is already drawing attention from customers, including “some big names” that are well-known within the web3 sector, Marceau said. The move would provide Rocket Pool with additional utility after withdrawals are enabled on the Beacon Chain, which will make many of the value propositions associated with liquid staking protocols redundant.
Marceau noted that the upgrades will take some time to go live due to code currently being audited and dependencies pertaining to Ethereum’s roadmap towards Proof-of-Stake.
The news has generally been well received on social media.
Liquid Staking Party
Patternedchair posted that the developments will “bring the bar to entry even lower, benefitting more participants.”
Pikag15 tweeted that they are “really excited” for the coming upgrades, stating they are a Rocket Pool node operator and “would love to use [their] node resources to run more validators as a service.”
Rocket Pool was late to the liquid staking party despite RPL rallying throughout 2021, with its decentralized staking solution going live in September 2021 — by which point more than 1.3M ETH had been staked via Lido.
While Rocket Pool claimed the distinction of the second largest liquid staking protocol at the end of 2021 Lido’s growth has continued to dramatically outpace it.
RPL is currently trading for $17.3, a 71% drawdown from its November all-time high of $59.46, according to CoinGecko. However, the token has bounced 69.5% in five days amid the recent crypto recovery.