[ARCHIVED] Putting ETH to work - securing Ethereum & earning rewards

1. Introduction
BitDAO’s vision is “open finance and a decentralized tokenized economy” and a sizeable treasury is held to fund work towards this goal. With The Merge and Shapella upgrades significantly derisking staking, it’s never been easier to put ETH to work in securing Ethereum, while being paid a return to do so. For DAOs, operating a physical node can be tricky, but liquid staking provides a strong alternative. Rocket Pool has been building in alignment with Ethereum’s core decentralisation values since 2016 and is today still the only established liquid staking protocol that is fully permissionless.
1.1. Proposal
By liquid staking a portion of their ETH with Rocket Pool, BitDAO can put their treasury to work earning passive income, supporting decentralisation, and helping to secure Ethereum.

2. Decentralisation
Rocket Pool is the second-largest liquid staking protocol, with around 626,720 ETH staked by over 2,698 diverse and permissionless unique node operators. Rocket Pool’s focus on decentralisation has been recognised by the Ethereum[dot]org website, being the only protocol to achieve all eight green “attribute indicator” ticks, covering the topics of open source software, audits, bug bounty program, battle tested smart contracts, trustlessness, permissionlessness, diverse clients, and a liquid staking token.
2.1. Security & risk
Since staking directly affect the fundamental security of Ethereum, this is a critical concept to consider. Along with some other smaller liquid staking protocols, Rocket Pool intends to self-limit at an appropriate size before the protocol could ever conceivably pose a security risk to Ethereum. Other protocols are less decentralised than Rocket Pool, and the past year or so has tragically highlighted the increased risk profile that often accompanies higher degrees of centralisation. In addition, by requiring node operators to have some of their own collateral at stake, Rocket Pool also provides industry-leading protection against slashing events for liquid stakers at a size many times larger than other protocols.

3. Return
As measured by rated.network, Rocket Pool’s backwards-looking validator APR is 6.27%. Staking 10,000 ETH would therefore generate 627 ETH per year minus commission (around 15%), approx 533 ETH in rewards. The liquid staking token, rETH, can also be used in DeFi at any time should BitDAO wish to do so. Currently, rETH has the industry’s second-largest list of DeFi integrations.

4. Execution
Liquid staking is very straightforward. By simply swapping ETH for rETH and holding the rETH in any wallet, staking rewards are automatically earned as rETH appreciates in value against ETH over time. This is also a much more tax-friendly option than other “rebasing” liquid staking tokens that pay out rewards separately. Using an aggregator such as the Rocket Pool website, 1inch, or cowswap, the transaction can be routed to wherever is most favourable, either directly to Rocket Pool or to secondary markets. Exiting an rETH position to claim staking rewards can be accomplished either by unstaking directly with the protocol subject to sufficient liquidity, or swapping back to ETH on secondary markets.

5. Disclaimers
Rocket Pool is not risk-free. Being highly decentralised, the main risk is smart contract security. Audits are primarily completed by senior team members at Sigma Prime and ConsenSys Diligence and are available on the rocketpool[dot]net homepage. Liquid staking is a complex topic and this proposal skims the surface in many areas for the sake of brevity. I would encourage discussing this further either below, or with the Rocket Pool community and/or Team on Discord. I am a paid contractor for Rocket Pool as the protocol’s marketing/community manager, and I hold both rETH and Rocket Pool’s utility/governance RPL token.


I’m uncertain about the potential risks associated with this venture. In my view, it might be safer to proceed without relying on a third party.


Support, what quantity would you like to put in the staking? 10K?

Personally, I would also find it interesting to spread the risk ( for example 60% RP, 20% Lido, 20% Frax )


A soft proposal of Mantle’s own liquid staking solution has just been published: [DISCUSSION] Mantle LSD


Any investment comes with risk especially with third party. Need to ensure cashflow management withstable coins for liquidity if needed at call. Just my 2 cents.


Good proportion man, Lido could be even 40%

Risk menagment and proper staking value will be fine

Spreading risk is a good idea. Rocket Pool has low tail risk because of their large backing collateral (as compared to, say, Lido) so this ratio makes sense. As other LSTs are battle tested, they should be included too, but the others are not quite there, yet (apart from Rocket Pool, Lido and Frax).

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I agree that the ETH in treasury should be earning yield, and I am a fan of Rocket Pool as a staking option. I do also agree that risk mitigation should be a top priority when it comes to allocation.

A diversified approach between top staking protocols (Rocket, Lido, Frax, maybe Ankr etc) is probably the best solution at the moment. Since there are so many LSTs being launched, I could see the allocation becoming more diversified over time.

I’m also curious how you all feel about LST indexes? Similar to an ETF, these enable diversification simply by holding a single token, while still passing back the staking yield to holders. dsETH from Index Coop looks interesting as it provides exposure to Lido, Rocket and Stakewise. The main issue in my opinion is that it lacks liquidity. Another one I recently discovered was ETH+ from Reserve Protocol. It provides exposure to Lido and Rocket and also has an overcollateralization fund in case any of the assets depeg. There seems to be growing Curve liquidity for ETH+, and if the Mantle LSD comes to fruition it could be added to the index as well.

Regardless of where the ETH is deployed, at the end of the day diversification remains critical. Would love to hear what you guys think.

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@RPMaverick In keeping with the guidelines of the forum, this discussion will be archived for the following reasons:

  • The discussion has not received a comment for over two weeks.
  • The post has not received support from delegates, large token holders, or core development teams.