Proposal - rETH - Rocketpool staking token as collateral

Rocket Pool is a decentralised Ethereum staking protocol. Stake as little as 0.01 ETH and receive a tokenised staking staking deposit rETH. Run your own node with 16 ETH

Reasons why rETH (Rocket Pool) is best in class, and the pristine ETH derivative that will (eventually) take over the ETH ecosystem as a derivative asset to be built on top of:

  1. Purely decentralized, open source, trustless, permissionless, etc. Rocket Pool aligns well with the Ethereum ethos. This is kinda the whole point.
  2. rETH simply increases in value instead of rebasing, so income is generated as capital gains rather than income. More tax-efficient => higher post-tax yield.
  3. Because of the lack of rebasing, it is more L2-compatible. AFAIK stETH hasn’t yet figured this part out.
  4. Staking will be a big deal post-merge, with an estimated yield of 13.9% (up from current 5.2%) according to Justin Drake.
  5. Low(est?) fees. Currently 8.92% (vs. 10% for stETH, 15% for Kraken, 25% for Coinbase). This will float based on demand.
  6. Due to it’s trustless design and composability, rETH is the most likely to be adopted by DeFi as a building block for collateral and lending.
  7. MEV will be captured and fairly accrued to rETH holders. This will likely not be the case for CEX staking, for example.
  8. For those optimizing yield on their ETH, being able to stack staking yield + DeFI lending yield will offer the best overall return.
  9. Fully redeemable for ETH prior to the merge, provided there’s enough incoming ETH liquidity.
  10. Rocket Pool encourages non-majority clients, increasing the health of the beacon chain.
  11. Depositors are effectively fully insured from any type of incident, due to the RPL bond that each node operator must put up. rETH is insured by over 100% of it’s value. In the case that there is a slashing on the Rocket pool network. The penalty will come from the node operator and not rETH holders. There is no other ETH staking derivative that has this kind of insurance or will ever come close to it.

We all know there are many different DEFI yield farming strategies and I believe that there will be many strategies for rETH. Since rETH should never be less in value against ETH and it’s coming from the Rocket Pool protocol, which follows the Ethereum ethos, I think that it’ll be accepted as collateral for many of the lending dapps on Ethereum. When this does happen rETH holders will be able to collateralize their rETH for ETH to deposit back on Rocket Pool. This will create a positive feedback loop where the first rETH holders to implement this strategy will yield probably around 20-40% on their ETH instead of the average 5-8% just from staking rewards.

Of course, there will be many more advanced yield farming strategies. This is just an example of a simple one that could be profitable for rETH holders as well as the protocol that accepts rETH as collateral.

Currently there is 35,000 rETH in circulation and growing with no platform to borrow against. There is high demand for rETH in DEFI and the community is looking for somewhere to use their rETH. If WePiggy were to allow rETH as collateral it would be the first protocol to do so and give massive amounts of publicity for WePiggy and attract a lot of collateral.

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This is another well written proposal, I don’t know much about rETH but hopefully someone else who is more familiar with it can post an opinion.

Great that WePiggy can be the first protocol to use rETH which means it will get a lot of users involved (35,000 ETH is around $110m). Also it will bring more publicity to WePiggy. However, it would not fit in with WIP34 which is to focus on Mainstream Assets only. Thanks for posting the proposal, we’ll have to see what other community members think.

Thank you so much for your nice proposal. I have done some research for rETH here.

1 Official website: https://rocketpool.net/
2 Eth2 Liquid Staking @eliasimos analytics: https://dune.xyz/eliasimos/Eth2-Liquid-Staking


3 The trading liquidity of rETH on Curve

Base on above info, I can give out some points here:
1 rETH totoal 74,464 ETH (shows on its website), it’s not bad from all the ETH2 staking projects. While, Lido takes almost 90% of the share…

2 I’m not sure it can be used as collateral or not, we have evaluated some other projects before, the result is NG, technically.

3 Compared with the total deposits, rETH’s trading liquidity is not so good, for small depositors, the staking gas cost is too expensive for them; for bigger depositors, due to the low trading liquidity, in extreme market condition, the protocol may meet big problem on liquidation, become insolvent.

4 We’re actively implementing the WIP34, details here: WIP34:调整 WePiggy 协议主营方向,专注主流资产借贷,逐步下架长尾资产,开发和部署预言机风控模块 / Adjust the Main Business Direction of WePiggy Protocol, Focus On Mainstream Asset Lending, Gradually Delist Long-Tail Assets, Develop and Deploy Oracle Risk Control Module.

It is about adjusting the main business direction of WePiggy protocol and gradually delist long-tail assets.

Actually, rETH should be considered as one kind of long-tail asset, same as stETH,ankrETH and other ETH staking tokens, so I’m not supporting this proposal, at this moment.

When would be a good time? Check out here:
“The current WePiggy lending protocol serves as the main protocol to support mainstream core assets in crypto market. At the same time, the core development team will plan and develop special lending products for long-tail assets as soon as possible to completely isolate the risk between mainstream core assets and long-tail assets.”

It means that, after we have launched a special lending product for long-tail assets, we will be able to launch it.

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Awesome job, Victor.
I’m also not very familiar with Rocket pool, and I’m not interested in ETH staking tokens.
Although it seems not bad, in a bear market, it’s better to control the risks. No more long-tail assets listings.
That will be great to list rETH when the new product is ready.

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Hi @Victor.Z_WePiggy,

Thank you for taking the time to look into rETH. I am Langers from the Rocket Pool core team. I would be happy to answer any questions you have.

A better picture of where Rocket Pool is, in regards to the ETH staking market, is DeFi Llama.
Rocket Pool is the second largest ETH staking provider after Lido in just two months of operation.

The Curve pool you referred to is not Rocket Pool rETH but a token from Stafi. Our current liquidity positions are here:

  • Uniswap: $5.44m total liquidity with 67.15 ETH
  • Balancer: $587k total liquidity with 97 ETH
  • Rocket Pool deposit pool: $2.8m liquidity with 935 ETH
    I would include links but I don’t seem to be able to post them here.

I would be happy to help with any technical discussion regarding using rETH as collateral. One thing to note is that rETH is not a rebasing token like other liquid staking tokens. It is a standard ERC-20 that accrues value against ETH over time (its quantity does not increase just the exchange rate).

We understand the need to mitigate risk, if you can give us some guidance on the level of liquidity that would be acceptable, it would be appreciated. As the original proposal said, there is a strategic nature to Ethereum staking tokens - they are very popular and have great potential in the DeFi landscape.

Look forward to working with you now or in the future.

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Thank you for correcting me on the trading liquidity issue.

Base on UNI-V3, the rate is not bad, liquidity seems better than Stafi one.
image

Base on Balancer, the rate is not bad, just liquidity is not so good.

Although rETH is not a rebasing token, but I guess the rETH maybe similar as xSUSHI or something?
If so, it gets other risks for a lending protocol.

Anyway, I think we can continue this topic, in the future, when our new lending product special for long tail assets goes live.

Thank you so much for your proposal~ And, if you like, you can share more details for rocket pool.

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