The Bull Case for Rocketpool with Marceau & Ken Smith

Transcript

welcome bankless Nation to the bull case for Rocket pool this is our semi-regular bull case episodes where I grab a community grab it and they propose a few community members to take the lead on who can present the biggest and best and most bullish case for their respective project and token and today on the stream we're talking to two members of the rocket pool community and rockapole is a community that's been around for a very long time they were one of the few projects that made it through the 2017 Mania and through the 2018-2020 bear market and they were one of the few projects that I paid attention to couldn't in my naive state of 2017 couldn't really tell what the difference between a good project and bad project

was and they were the ones that rose out of the 2017 with a community of each staking enthusiasts supporting them all the way through and through the the centralized team of Rocket pool is about like 5 people and they've been this very like Grassroots bottom-up organization and this community has just come around this protocol as something not just something that exists in the app layer but an app layer project that also is very close to the metal of ethereum and very core to the true ethos of ethereum at least that's my interpretation of Rocket pool we will get Ken and marceau's uh takes on their uh their perspective of what rocket pool really is and what it means to ethereum rocketpool in this current moment is

also a bank list sponsor however that has no relation to whether or not we do shows the community behind rocket pool is the reason why these two community members are here and also as an added disclaimer bankless actually does stake uh right now A 160 ether with rocket pool uh on our on a rocket pool node so those are our disclaimers we're going to get into the show and more right after we talk to some of these fantastic sponsors that make the show possible lens protocol is an open source Tech stack for building decentralized social media applications it is the new era through social media we all have toxic relationships with our web 2 apps we want to break up with them but we can't these applications own our digital lives and all the relationships that we've made we need to break through to a new

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entering the world of web3 social rocketpool is your decentralized ethereum staking protocol you can stake your eth in rocket pool and get reth in return allowing you to stake your eth and use it indeed by at the same time you can get four percent on your eat by staking it with rocket pool but you can get even more by running a node rocketpool is the only staking provider that allows anyone to permissionlessly join their network of validating ethereum nodes setting up your rocket pool node is easier than running a node solo and you only need 6p to get started you're getting an extra 15 staking Commission on the pooled Eid that uses your node to stake you'll also get RPL token rewards on top so if you're bullish e-staking you can boost your yield by adding your node to the decentralized rocket pull Network which

currently has over 1 000 independent node operators it's yield farming but with ethereum out you can get started at rocketpool.net and you can also join the rocketpool community in their Discord you can find me hanging out there sometimes in the chat so I'll see you there Arboretum is an ethereum layer 2 scaling solution that is going to completely change how we use D5 and nfts some of the coolest new nft collections have chosen arbitrum as their home while D5 protocols continue to see increased liquidity in usage you can now Bridge straight into arbitrum for more than 10 different exchanges including Finance FTX huobi and crypto.com once on average from you'll enjoy fast transactions with cheap fees allowing you to explore New Frontiers of the crypto Universe new to Arbitron for a limited time you can get arbitrum nfts designed by the famous artist ratwell and sugoi for joining the

arbitrub Odyssey The Odyssey is an eight week long event where you complete on-chain activities and receive a free nft as a reward find out more by visiting the Discord at discord.gg arbitrum you can also Bridge your assets to arbitrarm at bridge.arbitrum.io and access all of arbitrim's apps at portal.arbatrum.1 in order to experience defy and nfts the way it was always meant to be fast cheap secure and fiction free rocket pool is on the stream here I am joined on the left with Ken Smith of rocketpool Community member and Marceau I don't know if that was your real last name but last name on Zoom is uh eth uh good last name if that's the real one uh Ken and Marcel welcome to the Stream thanks for having us appreciate it yeah

pleasure being here so you guys are too rocket pool community members do the titles go any deeper than that or how would you describe your guys's relationship with rocket pool Ken I'll start with you yeah so I'm uh a member of the rocket Polo Community first and foremost I have a special title there they call a rocket scientist it's just somebody who knows a little bit about the protocol and is willing to share their time on Discord to help educate others um and uh um been enjoying it ever since Marcelo same question to you yeah no special title just a passionate Community member and and I think that's kind of what makes rocketpool kind of special is that they have this core team that's reasonably small and really they rely on this really Vibrant Community to kind of stand up and provide a lot of

the research and marketing and kind of just benefits to the community so I'm just just one of those guys there's an army of us and I'm just one of them yeah and there's plenty of nuances about rocket pool that really make it special in my mind and you touch on one of them the the small constrained size of the centralized rocket pool team has really put a lot of emphasis on the strength of the rocketpool community uh and so the void that has been left by the team has created this like very very strong Community around them uh but we I don't want to get too far ahead of ourselves let's just start at the very beginning basic 101 speed run the basic pitch of Rocket pool what is rocket pool why should we be excited about it who wants to take this one sounds like I can yeah yeah let me let

me let me shoot here um so rocket pull is a liquid staking derivative protocol that allows any user to stake the wreath by simply uh swapping their Eve uh for a token called reef and that re the cruise interest based upon the ethereum staking protocol um individuals can acquire that from a couple of different places they could do it directly from the rocket pool contracts themselves or their websites they could also buy it on any any Marketplace that is selling it uh many dexes on both layer one and many of the layer twos sell the the re token and simply holding it uh you you incur uh interest on that e-staked interest on it

rocket pool is also kind of a two-sided protocol not only can you come in from the liquid sticking side of the house you can come in from the the node operator side so if you have a little bit more capital and you have a little bit of interest in running a a validator a node at home you can actually be become a node operator and not only earn interest on your eth at staked but you can also stake other people's Eve those those that are deposited for arief and earn a commission on that so you actually earn more rewards by staking with rocket pole than you do as a as a solo node node validator and so what part of that story is rocket pools like what part of that story does rocketpool really own like what what is unique about rocket pool because there's

others taking as a service providers I can stake my teeth with coinbase there's also Lido what about that story is really unique on the rocket pool side of things yeah I think I think there's there's probably five things but three are really what are important right I mean the first thing is that this protocol is a it's a it's an ethereum protocol it's built with smart contracts on the ethereum network and because of that it's entirely permissionless it's permissionless to either uh acquire the re the liquid uh staking derivative um and it's completely permissionless to run a node and become a node operator there is no white listing there's no uh kyc or uh or or requirements to dox yourself to run run a node because of that it's completely decentralized you

can run it in any country rocketpool has the most number of decentralized geographically node operators of any sticking protocol um and uh because of both of those things it's fully trustless there's no requirement to have trust that the team will continue to be there to run the protocol or update the code right the the the code is the series of smart contracts um and so those those three things really I think open it up that it's full fully permissionless decentralized and trustless it also helps that it's um it's a fully open source so you can verify this both the code and the contracts that are there and rocketpool also has been very adamant about making certain that it uses the core ethereum clients right

both the uh the execution layer clients and the consensus layer clients it doesn't create its own client it just simply uses the ones that are out there like Geth and Basu like Nimbus Lighthouse prism um uh and because of that it's got one of the most diverse profiles for the node operators that are running their validators right we are we are highly highly diverse and because of that it adds a level of Surety and security to those that decide to stake their ease by purchasing and are requiring The Reef token I really want to drill down on that two-sided Marketplace part where uh the one side of the marketplace is that people with ether demand services or abilities who stake their ether and

there's and you know a variety of different ways of satisfying this demand they can stay run their own node and stake their own ether themselves or they could stake their ether with coinbase uh or they could stake their ether with Lido or they could stake their ether with rocket pool like this side of the equation is pretty well understood I would say by most in the cryptosphere but it's that other side of the marketplace the the you know two sides of the marketplace that's one side the other side of that Marketplace is largely constrained or restricted on most other Marketplace participants can you run a node for coinbase no no you cannot uh 24 people can run a node for Lido can you run a node for stake wise like no you cannot but with rocketpool that's the most open part of this whole

thing and so it actually creates an actual Marketplace rather than you know a monopoly or a forced forced outcome by just like coinbase Stakes with like bison Trails for example um Ken or more so can you really let's dump down on that point why is having that other side of the marketplace open for participants so important what does that really unlock yeah maybe just one point on the previous thing about um staking providers like they're not all creative equal obviously I mean not to say the obvious but rocketpool is very very different than than coinbase or Lido and I one thing I really like about the protocol is that to me rocketpool is really well positioned as a public good within the within the ecosystem and I think there's sort of four qualities that I look for in any kind of staking provider that I really

want to love one is just being kind of exclusive to ethereum and being aligned with their ethos one is being purely decentralized and trustless we're all kind of reminded why this is important with things like ofac going on and the other two are being permissionless like Ken mentioned and also just not seeking wrench like rocketpool doesn't exist to extract commission there's no skimming of commission to fund a treasury they're really there to kind of serve that two-sided Marketplace and I think it's just a really fair model that makes it a really compelling platform as as a you know staking service but your question was more about um them as a node operator um I'll let maybe Ken jump in with that yeah I mean I mean Marcel I think he kind of hit it on right which is there are these challenges to ethereum right

and there's there's always going to be some threat or some challenge to it in the years ahead right and right now it's been about uh censorship right it's been about uh the influence of government entities to um regulate what a node operator can and cannot include in their in their transactions and the blocks that they propose and you know certainly I'm a us-based taker uh my uh intent is to fully comply with my government regulations right uh I don't I don't I don't plan to uh to go counter towards them no intense I'm going to jail yeah exactly um but but you know so uh but how does ethereum as a whole maintain that there isn't a single government entity providing censorship right and so the way that it accomplishes that is it

makes certain things that it's it's node operators are decentralized both in different Geographic entities both in different legal jurisdictions for what they what they have to comply with then there's also kind of the the moral question right I mean there's a lot of interest right now in Mev especially with the merge coming and the transfer of the Mev coming from uh the miners that are earning it right now to the potential for stakers to earn that and there's a lot of moral and ethical considerations that you have to decide right there's going to be a lot of choices for stakers now about do you want to extract Mev and if you do what type of Mev do you want to extract is there a line in it that perhaps is not ethically right to extract I'd like to take a moment and just really like highlight how rocket pool as

an organization is different from the the landscape right so like Lido is the big uh the big like elephant in the room the big whale in the room about like the it's the other one out there um there's like others coming to Market like swell is another one like coming like it's taking as a service but not not here yet and then like all the other ones coinbase like stake wise are all these centralized operators that you know we know what a centralized operator is so we can kind of you know move on from that it's not it's not too much Nuance there but how is Lido as just like an organization in a community how does that how's the the flavor of the rocket pool like org holistically uh organization and Community combined how is that different and for people who aren't familiar with um the trading chat

in uh The Rocker pool Discord or just overall how the org Works can you guys help just like shed some light on that part of the thing on the on Rocket pool yeah maybe maybe I'll go for a con yo I was gonna say I mean I mean I think one of the things you brought up before is that it's two-sided right that you actually get both parties in in the Discord and chatting about this right you get a you get the group of node operators that very much want to work on kind of the technical side want to make certain that the nodes are well performing that they're uh they're performing their duties and validation they're thinking farther ahead in the research channels about where do we need to be to position ourselves for Mev and Mev extraction how do we provide the most Capital efficient way to stake the

eth on the other side you get the individuals that are the re folders right and they're coming in and what they want to value is to see our eth basically be a substitute for eth right that that the recommendation would be that no one should just hold pure if you might as well hurt hold a yield bearing asset right and and get an interest earning uh liquid staking derivative in your wallet and to do that you need re to be integrated in as many defy uh protocols as possible right so that that way folks don't have a reason to swap it back other than to pay gas on the ethereum network and so I think by having both sides there all together in one Discord it really adds to the value of it you can see both both sides of the coin at the same time and uh kind of develop and

um uh you know design a protocol that can work for both sides of the house right and I I really think that actually does Define what the important points are I think any successful is taking as a service system has two things that they need to optimize for they have their liquid staking token and they that liquid staking token if it's successful will accrue more yield faster than this competition right it simply goes up faster and so that's one pillar that we'll touch on and then the other the other side of the marketplace is the node operators and it's kind of the same question can your system make it a node operator more profitable than other systems and so we'll take these one at a

time uh what is the bull case for our ease holders why should I hold our eth over any other alternative staking as a a staking derivative asset who wants to take this one um let me take a stab at it and jump in please um I mean first of all I would say that like I think staking is going to be a really big deal on the post merge world I think once we emerge from the merge event people are going to want to chase yield and having a staking derivative token is a really great representation of how to capture that yield right so post merge yield goes up like 2X and the risk to yield or the sorry the risk of staking goes down quite a bit just because the execution risk is removed from the equation um we're currently at about I think 12

ether staked in total it's pretty low I think I think we're heading towards 50 percent you know in a sort of saturated State over the course of probably two years and that's a 4X increase to just the size of staking participation it's pretty meaningful um I also think you know liquid staking is a really important function of this as well you could sort of argue that that liquid staking tokens are sort of a better version of just vanilla ether right because it's a productive asset so as long as you have the right liquidity depth and the right Integrations with your with your staking derivative it's just a better form of ether so why wouldn't you hold it like I think it's easy to make the case that staking is a big deal and liquid staking is gonna be a really really big deal when we talk

about like our eats specifically right so let's let's pause for a moment so you were just actually talking about this The Tam right The Tam of what's at stake here so uh I totally agree with you it's staking we call it the internet bond market uh and you know sometimes a little bit like crazily but not that crazy like we compare the size of like the eat staking Market which where it is is like billions per year and compare that to like the you know Sovereign Bond markets of global nation states and that's kind of where we think this ether staking industry is going uh and then and then also you you said 14 or 12 of total eth is staked presently and I definitely also think that's going to go

up somewhere around to where like the core devs kind of think minimum 20 maybe equilibrium around 30 give or take and so not only are we just bullish as an uh industry on ethereum proof of stake and you know that's going up into the right but we also think inside of ethereum internally the proportion of ether that's going to be saked will also be going and maybe 2xing or 3xing uh any other color or like numbers that you want to slap onto like the Tam of this whole thing yeah I think that point is really clear I mean I think the pie is getting bigger and it's easy to project where it's going I think separately I would argue that the the market share the slice of the pie that rocket pool is is likely to capture is also probably going to go up and I can get in the

reasons as to why I think that's probably gonna be the case but I think that's a really compelling story for our eth is a token that has kind of an interesting history it was sort of Born Into the into the bear market and there hasn't been a lot of sort of like push to grow it until now and a lot of things are coming together in a really spectacular way in September which I'm sure we'll get into this but like there's a lot of I think really great Tailwind effects and great narratives that are kind of like all coalescing around the same time and the teaser is like it's incentives it's Integrations it's the merge it's APR going up it's risk going down like all these things are coming together and they all sort of multiply and stack on top of each other in a really really powerful way I think

September is gonna be like the most insanely bullish month for ethereum fundamentals at least I don't know about the price but like fundamentals could not be any stronger for staking right now it's just it's absurd okay so let's go into re specifically why will our eth in the landscape of other staking uh tokens which coinbase also entered The Fray with their their CB eth uh why why would I hold our eth over any other staking derivative asset yeah yeah so I mean just to set context like we launched back in I think it was November and since launch re demand for arith has captured about a five percent market share on the market and that is through a bear Market that is with no marketing at all that is with no team liquidity incentives and that is with

basically zero Integrations so like our eth it's awesome but you get it and you hold it and you watch a number go up and that's kind of all you can do with it and that's changing in a really big way um to talk about the good things about it like why it's fundamentally a good a good kind of token and I'll get into kind of like what's the Catalyst for growth here a few reasons that make it just I think strictly the best product in the market so for one it is fully collateralized and insured like there's no risk of like a run on the bank or everyone getting a haircut because a mass slashing event happened like our etholders are just like 100 insured from any kind of catastrophic event that might happen um also there's just no counterparty risk like sure you put a little bit of

trust in the smart contract to operate the platform but you're really farming out you're staking to a mesh network of operators and if any one of them underperforms they get penalized and not you as a token holder so again it's like fully kind of collateralized there's no collateral there's no custody or trust requirements there's no possibility for censorship this is a really important thing right now it's very topical and then just I mentioned a few minutes ago but like our eth is just fully neutral It is Well aligned with ethereum and I think just given that it has no kind of trust assumptions that go along with it it's really well positioned to be sort of a defy building block because it's sort of this neutral kind of Lego that can go in anything it can be a good half of an LP position it can be something

you take a leverage position it has these great qualities that make it very very neutral but I think will make it just kind of a fan favorite for D5 I think once we get to that point and I think um it's worth to note that a lot of the properties that you just said are maybe individuals are like oh I have a hard time mustering up the motivation to care about those things but it's also worth noting that defy apps will always suck up more demand than individuals and so Marcel maybe you could also talk about just like the integration side of our eth and how demand can come from like the D5 side of ethereum and why those particular properties that you just talked about are actually more conducive for defy apps than just like the average

individual who you know doesn't really look under the hood of things yeah sure I think there's two kind of catalysts that are coming that are really meaningful so one is Integrations I'll talk about that real quick um so it hasn't been until recently that I think our eth has demonstrated enough Lindy effects that it's sort of trusted in the network so we're now whatever 10 months post launch and we're really I think there's an avalanche of Integrations that are coming so some I gotta be careful what I say because some of this isn't isn't quite shareable but like maker is going live in about two weeks and that's obviously a major lending platform the biggest um opportunity that we are missing with arith is not being able to take a collateral position on it like people want to take leverage they want to pull

out stable coins for farming they want to go buy a house D5 Shenanigans generally right and that use case hasn't existed until now it's about to exist in a really really big way with maker and a few others that I probably shouldn't say too much about um the other side of it that I think is equally as compelling if not more compelling is that there has never been a native kind of incentive program for our eth until literally yesterday so we launched a incentive management committee full disclosure I'm on the committee so I have some kind of say as to where the funds go but I think that is a really really powerful force that will help us grow liquidity depth grow those integration Partnerships and also just frankly grow yield and grow tvl on the platform there's a really powerful I think flywheel effect

that's going to come from this once we get those incentives in place I think a lot of things fall in place kind of quickly uh coming from that in particular like one thing I'll give a quick plug and then I'll stop for a second like one I think really unique thing to tie it to the previous point I think our eth because it is such a neutral building block that rocketpool has such a great opportunity to go and sort of offer co-incentives to other protocols or we can go and approach some some protocol to say maker like let's say maker is providing incentives on mkr eth to keep you know liquidity on their token we can go to them and say like hey guys what like why don't you move your your liquidity program over to maker Aries and we'll pitch in some of the

incentives so you get like co-incentives you get a higher yield because you've got half of your LP is now productive suddenly and then Rocket Fuel benefits tremendously because we are growing along with that pool it's sort of like almost free growth for us so that is one think really exciting property of liquidity incentives we're going to start pushing I think pretty hard and it's a big kind of opportunity for us so like call to action to your viewers like if you're part of a Dao and you want sort of like free boosted yield in your liquidity program reach out to us because there's a lot of I think opportunity there for that and it does make sense that the Integrations would start to snowball after maker specifically maker being kind of like the basement of D5 the bottom tier the bottom Foundation like

once your collateral and make her Dao then you're kind of it opens up the doors to becoming collateral and like the remainder of of D5 so it does kind of make sense that that is the right the right order of operations here well let's talk about strictly just the yield of our eth like how will our eth accrue more or less yield than the other is taking derivative Assets in the landscape yeah I'm not sure that I would argue that there does to be honest I mean all the tokens we're going to take they're all going to get the beacon yields minus whatever commission they charge and you know they're all kind of about the same 10 or 15 it's all kind of like just a rounding error to be honest I think where what I would argue is more meaningful is what is the return per

unit of risk that you're taking on for the underlying right so like I would I would argue that holding our eth basically has zero risk because it's it's fully insured and if there's no counterparty risk there's no trust assumptions so like the denominator is like zero there's like no uh risk discount that I would apply to it and I don't want to pick on any particular protocol but like if you look at other tokens they do come with trade-offs right and so you can you can think of like what is the percent likelihood that Project X will go underwater and go to zero and it's it's not zero percent right so you have to apply sort of a discount um given that so I think you know I would argue that it isn't just the raw APR that matters it's more like the risk-adjusted return for for that token

that really kind of shines you said it a couple times so let's go ahead and dive into it is the risk really zero that some sort of Black Swan event will happen with rocket pool and like accidentally like lock up all of The Ether for example like is the you said it's fully insured it's not like FDIC insured so it's not it's not that kind of insurance you're talking about over collateralization right it's like can you like unpack that a little bit for us like what really is the protocol risk and why why do you seem so confident in this in saying that the risk of our youth is lowest yeah yeah good question I'll probably pass it over to Kenny in a second because Ken has done some really great research on kind of risk modeling but what I mean specifically is certainly we're not FDIC

insured but there is more than 100 of the collateral backing the issue token so if we can sort of fully redeem down to zero and still kind of make everyone whole if we had a massive kind of run on the bank type of event um and there's there's no point where your cut like the custody is all managed by smart contracts so there's no point that like a bad operator could just run away with the funds there's no like we're kind of in a canopy evil um kind of situation and when we say that it's fully insured really what we mean is like given the reasonably worst case scenario which is like a mass slashing event takes off takes out half the network and all the validators basically go to zero like do the our etholders incur any damage from that and the answer is like not not really

because the the penalties come out of the the node operator side primarily first but that's probably getting into more of Ken's territorial maybe I'll let him kind of jump in on that yeah I mean I mean to that point I would probably add that you know ethereum as a whole is a very forgiving protocol right I mean I think it was envisioned by the core devs that you would not need to be a professional node operator you do not need to have a you know a large data center or high-speed connection to do it they really envisioned that home homesteakers individuals like myself could run a run a node on their bookshelf behind them um and simply you know secure and protect the network and because of that the the penalties for actually attacking the network are right now are are fairly

forgiving right as as long as um you know there isn't a non non-finality event that occurs as long as a large portion of the network uh you know close to 51 attack doesn't happen that if for some reason something is misconfigured on a node and and a slashing event happens um the node operator does not actually receive that large of a of a penalty uh probably you know one ether two weeks even even and post the merge here with um with bellatrex out there and the higher higher penalty fees um so at that at that case the node operator has already put enough collateral on that they they incur that loss to the to the protocol the re folder um has been fully insured and

they they receive their their contribution back uh because it's been um somewhat dispersed throughout the entire mesh network of nodes the individual re folder probably won't even see uh any any loss in APR it's just so minor that it gets it gets uh kind of lost in the average variance of the randomness of each uh each validator and how it performs you know there there certainly are perhaps maybe these uh catastrophic Armageddon events right the entire network goes down there's multiple bugs and multiple clients the core devs cannot get uh you know consensus achieved in a couple of weeks and the protocol comes down but it but in that case I'd argue it's not a rocket pull problem it's all ethereum problem

right right and we've got much bigger problems than uh than than rocket pull right yeah we don't like to think about that um okay so that's is that the conclusion on like the bull case for our eth that we're like uh is pretty damn like robust and anti-fragile and also it's all already decently well penetrated into the market share of five percent is what uh Marceau said and that was before any sort of like uh like liquidity incentives around around that uh is that typo on the bull case for our ether is there anything else missing I would I would just add one thing that wasn't mentioned which is that our eth uh is not a rebasing token and this this provides an advantage in two ways for some folks uh because of their their tax

Authority uh it may be much more advantageous to to hold and possess our eth and other other liquid sticking derivatives um and secondly that the fact that it's not rebasing allows it to be much more integratable with other defy things not only on the mainnet but also on other layer tubes um so it's one advantage that it has that not all of its competitors have well let's dive into that a little bit more for the listeners that don't know what rebasing is or just unfamiliar with the nuances behind this and also taxes uh in relevant jurisdictions can you just start from a little bit a higher level on like why a non-rebacing staked derivative token is good and overall just what rebasing is yeah maybe maybe I'll let Marceau talk

about that um sure thing so I mean people are probably most familiar with Lido's steth and that's what's called a rebasing token and so what happens when you hold that token is that it is pegged one-to-one with the price of ether and all all gains that are that are received from staking are then kind of issued as new tokens so you get I think it's a like every 24 hours you get a drip of like a small incremental gain on on your total units so your number of units goes up over time and that's sort of nice because it keeps Peg with ether one to one so it's very kind of intuitive but it also means you're getting a income event in the U.S taxable event yeah every it talks about every 24 hours and it's kind of a kind of a headache to integrate it's also

like Ken mentioned really difficult to do rebasing across uh different chains so like to do rebasing to L2 is kind of technically complicated and for both kind of tax and just kind of Technology reasons it's actually a lot better to do what is called non-refacing which is where you don't get more units of the token but the value of the token goes up relative to eth so if you look at the ratio of r eth divided by eth it is like slightly trending up right and the rate of return op is just the rate of return of of the beacon chain so you know there's pros and cons you can argue one way or the other but we like it because we think it's more kind of composable more integratable and also just simpler from a tax perspective it's it's a it's a good model and it's also what coinbase

just came out with too so um I think that's kind of a nice vote of confidence this is the kind of superior model when it comes to how to issue out rewards from the beacon chain so just to regurgitate this and make sure I understand so steak teeth from Lido is a rebasing token and that has nice just like it's intuitive in that like one staked ether equals one ether all of the time and so it's just one to one that's just what it equals and so if you deposit one ether you get one staked ether if you wait a year that one six ether will be still worth one ether but then that begs the question all right well then where does my yield come from and so if you're holding stake to Ether you're getting dripped more staked ether from the Lido protocol as as the form of

that's where your yield comes from but when a transaction on ethereum occurs and it's into your wallet with tokens that's a taxable event and so since your yield is being paid to you that's just like regular income tax rather than having this alternative which is that with rocket pool it I think it started off as one our eth equals one eth and then our e screw has grown from there and so like I don't know where it is now but like maybe it's like 1.5 our eth equals one eth and then tomorrow it'll be 1.6 and the day after it'll be 1.7 not actually these are fake numbers not not quite that high not not quite that high that would be hyperinflation um but that the idea here is that there

will be it's not into it's no longer intuitive so that's the trade-off that we've made but I mean the intuition the intuition costs versus not having to pay taxes like yes I'll pay those intuition costs because I get more money that way and I guess that's actually a little bit more bullish on the fundamentals of the protocol because I mean protocols and nation states generally don't talk but they talk through their users that live in those nation states and so if the users are fundamentally having to sell their arief to pay for their taxes then that would be bad and so this mechanism means that this does not have to happen and not only at the individual level but basically at the protocol level because if all users are selling small like income taxes of worth of our eth then that actually does show up in the TV L

of the protocol yeah I mean you know not tax advice but that matches my understanding I think long-term bankless listeners should know that they should not be getting tax advice from me the one thing I'd point out too is like if you look at that as a against the against the commission You could argue that a non-rebasing token has a higher yield because it has less of a tax drag so the real return for a non-reducing token is actually higher than some of the competitors who do rebase because they have a higher tax uh treatment towards them depends on your jurisdiction obviously but I think that's a kind of a nice way to look at it because you are there is a hidden fee there in the form of taxes of course yes yeah yeah I do I do take that argument I accept that argument uh Ken any any

comments on this or what's going on in your in your brain no I think I think you've covered the re side very well okay all right well that's just one side of the marketplace that's the art side I also want to get into the other side of the equation uh the bull side the bull case for being a node operator with rocketpool and then also we'll have to because of where that conversation leads get into the RPL token of course we're going to get into these conversations and more the bull case for the actual RPL token here right after we get to some of these fantastic sponsors that make the show possible Juno is bringing crypto friendly banking straight into your checking account with Juno you can send money from your Juno checking account straight onto a layer 2. like polygon optimism arbitrum and they have

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the wallet icon to get started and we are back with our bull case for Rocket pool and we're going to touch on the other side of the marketplace the node running a side of this Marketplace and this is the unique side for Rocket pool because you can't run a node on a staking as a service protocol other than rocket pool that's like the unique thing that rocketpool brings to the table the whole protocol permissionless side of things uh so why would I run a node with rocketpool though like convince me I should why should I go right after this stream is over go spin up a rocket pool node yeah the the short answer from that is you're going to earn more running a rocket pole validator than you will running a solo validator just pure and

simple so there's an incredible Financial incentive for anybody who wants to do that um there's some other auxiliary um uh uh arguments towards it too and that you're actually doing a public good right there are individuals we've just learned about that want to have arief that don't have the either the capital requirement or the technical ability to run a node but still want to possess a a stake to eat derivative in their wallet and so by writing a node you actually help provide lift to the protocol you stake uh eth on behalf of the r ethers and at the same time you as a node operator earn it earn a commission and so it's it's probably worth maybe just mentioning I think to the to the folks here that like one of the things I always hear in the ethereum community is

that everyone should be running a note right and they kind of stop at that they say for the health of the network everybody run a note and this is this is Costless it requires no if you can you can run a node at home um but the the big barriers people don't know how to do it right they you know everybody says you should run a node and help decentralize the network one of the things I'd encourage anybody to do listening to this podcast right now is just simply if you have an old computer 10 years old 12 years old uh could be a laptop could be a little desktop or server right whatever it doesn't take much literally a Raspberry Pi you can you can stake with simply go over to rocketpool download it software it's got a great installer a great interface they've got a Dev there by the name of

Joe who has just made this thing so easy it's literally just a couple of clicks and commands you download the software you get to pick whatever ethereum clients you want your consensus layer your execution layer you let it sync and you'll be up running a node on the network right now for that you're not going to make anything but you're going to help protect the network and relay relay the uh the blockchain right it'll be a basic Patriot of the ethereum blockchain yeah absolutely and I cannot think of a more easier way to actually run a node than to just simply download the rocket pole installer and go ahead and do that that's interesting you're saying it's easier than like if I wanted to run a note I'd probably go to ethereum.org and like start there and they would Point me off in a different

direction it's going to be different for every single client but you're telling me like it's actually easiest rocketpool has made it easier than ethereum.org to go run an ethereum node is that what you're saying but by far I know there's efforts from the East acre Community such as wagyu to kind of make it a simple one-click installer and I know that they've been working great on that uh but I gotta say maybe I'm a little biased but I think the rocket Bowl stack is just the easiest thing because it's incentivized for Rocket pull to continue to upgrade that so there are constant releases right and you can imagine as we're approaching the merge there's a number of technical releases that are being provided and Rocket pool is just keeping up on that right so you can simply use the rocket pull software you're running all the major clients

right and you can you can run your own node now what people are probably more interested in though is to actually become a validator and this is where the staking aspect comes so not instead of just being a relay on the network and protecting it and transmitting and verifying that um uh you know that the transactions are meeting the protocol requirements now you want to actually be a validator you actually want to attest on the network and say yes that last block met all the ethereum requirements and and it is correct that's the correct head those transactions are all processed correctly I'm going to vote Yes for it or I'm going to vote no for it and to do that you have to be a validator and Rocket pull they they call them many pools but it's the same thing it's a validator and for that you have

to put some collateral down if you are just a solo a solo validator you have to come up with 32 eth of collateral and that that is a large Financial barrier for most people people but rocket pull right now actually decreases that down to 16 eighth and some collateral that we'll talk about on the RPL token 1.6 eighth of the RPL token um but there's actually plans coming up here for something called a low eth bonded mini pull after uh kind of analysis and a lot of thorough research we've actually discovered that that 16 if is much more collateral than what you actually need to protect against the the the foreseeable or the likely uh attacks that could happen on on a validator

right and so there's plans in the work to do something called a low eth bonded mini pool that would reduce that initially down to 80. so you only need 80th plus about 2.4 each worth of the RPL token uh but there might even be plans later on if we get some improvements to the core protocol something called Force forced exiting that could reduce that down to 40th and at that level you know it becomes much more affordable for everyday individuals to be able to put enough capital on to move their node to a validator and actually start earning youth Rewards I think one of the common criticisms of rockapole that I've heard is that it's Capital intensive of a model and so to produce uh you just lock up a lot of a lot of ether in order to produce uh

enough uh supply of other of more space right where you know Lido all the Lido operators they don't have to stake up any eth because it's a trusted system a rocket pool because it's trustless also comes with this burden of over collateralization and that's limited the scale of how much our eth can come to Market because all every single node operator also needs to come with a bond but if we if we go and go into the future and take it on the assumption that this this Bond goes from 16 eth per node down to four each per node and Ken I'm going to ask you like how the calculus actually comes out that that's like justifiable and not overly risky but like say for example if we think that 30 million ether will come to

Market well then rocket pool if rocket pool is if you're so bullish on Rocket pool that you think that rocket pool will dwarf a hundred percent of the market of staking as a service uh providers because it's a protocol well then you would actually only need so you know 30 million divided by four 7.5 million you would need 7.5 million worth of eth to just be node operators uh and so like all of a sudden like instead of having 15 million ether become needing to be I'm doing that math wrong anyways the idea is that like it requires much fewer node operators uh to be to Rocket pool to eat up a larger market share of total eat stake derivative tokens uh and so that is a has been historically one of

the big critiques about rocket pools like it's too Capital intensive to really scale uh but if you're telling me that we can go from 16 Each Bond down to four youth Bond and and you can really kind of grow I really think that takes the complete ceiling out of the potential of Rocket pools constraint on our eth growth uh that is if we get there um so can I'll let you respond to anything that came up to your mind there but also if you could explain why the risk is such that we are actually able to do this in rocket pool yeah so uh excellent questions in there right let's let's just take the first case first right which is let's take the the current model which is right now rocket pull requires 16 8 of the node operator and that's paired with 16 eth from the

pool of re depositors right and so in that case um what what do you earn as the node operator right you're earning 16 you're earning interest on your 16 eighth and you earn What's called the node operator Commission on the other 16 each from the r ethers right and that no commission let's just keep it easy let's call it 15 right now okay um so already right now being a rocket pull node operator you are not only your interest and your yield right both from the beacon chain both from Mev if you just decide to extract it and both from tips and inclusions after the merge comes up here right but you also earn the node commission right 15 on the r ethers now what happens when when they introduce here perhaps as early as the

end of this year they're low each bonded mini pool let's just take the first stuff let's go from instead of the node operator having to deposit 16 eth right they now have to deposit only eight right well they're earning the node commission not on 16 it's not a one for one it's now on 24 East and so that does two things it increases your leverage right your leverage has gone up from 16 to 24 you get one point x leverage on there but for the the protocol what it sees is actually a 3X increase in terms of the lift capacity the ability to stake our E's right if for instance we grew no more node operators but we introduced the um 8ef LED we would be able to stake already three times the amount of eth on the re side as we are

doing right now so it grows grows it grows the protocol quite exponentially and it you know goes even higher when you go down to four eth right just just to pause really just to clarify that where again we're talking about this two-sided Marketplace and what you're saying is that with this uh technological advancement one side of the marketplace can actually stay in the same spot and that allows the other half that Marketplace to grow first like if it goes from 30 uh 16 East down to eight it takes off the the weight of the other side of the marketplace by 50 and if it goes from eight to four then like it can allow the other side of the marketplace to grow by another 50 so it takes off one constraint from the supply side and says like oh turns out with just like a

snap of the fingers technological innovation we like Tech we can actually grow the supply side of Rocket pool node validators by like first we double it and then if we can do it again then we'll double it again and that's without inducing any more of demand there's no marketing behind that that's just like Straight Tech yeah exactly and it's and it's kind of interesting I know this may be a little too Technical and so forth but it's it's fascinating to watch how the numbers actually work in there one of the things that rocketball could do is they could actually lower that node commission uh to you know lower levels of what it's historically been yet still generate because they're paying that node Commission Now not on 16eath they're paying it on 24 East you can actually deliver more eth returns to a node

operator and at the same time reduce the node commission that our ethers are paying to have their stake D so it's kind of a win-win I think that's that's actually the really really important point and so as a e Staker I get really excited if I can and so I say I have 32 eth and I'm super excited to get my like 4.1 percent yield on my staked ether because I'm going to run a node but then I discover rocket pool and I realize I can actually cut up my 32 ether into two chunks of 16 ether and then I can not only am I going to get that four percent of the ethereum yield but I'm also going to charge the other 16 ether that comes into each one of my nodes so now I now there's two sets of those I get to

charge that 16 ether 15 of their rewards and so my 32 ether is getting four percent but I'm also charging another 32 ether 15 of their total staking rewards and so that boosts the yield but then we do this again when we cut it down from 16. so that that what I just said was the current standard of rocketpool that's where we are today but you're saying like you can cut this down again and so I have 32 eth or and I can run one note on ethereum and stake for four percent yield or I could cut that 32 eth up into four units of eight and then the other side and so I only have uh four units of eight and so I actually multiply the charge the commission that I can get by four so it's 4 times 15

times 30 32 ether uh no even more than that even more you go 24 24 and 24 24 96 right yes yeah so 15 times 96 times the East stake rate uh again bankless listeners will know I'm bad at math um but like so that's where that's why you use the leverage word the where you can get leverage on your yield but what you're saying there is like well actually we don't actually have to pay that all to node operators they can take they still take leverage and still definitely juice up their yields a little bit less so we'll just take that down a notch and then we'll also lower the fee of whole of our eth token holders and so the fee comes down and it makes our eth more attractive and uh you

know you could even I don't know how low that fee can go but that's probably one of the levers that rocketpool has to make our eth really attractive as a Buy and Hold derivative asset if it's the lowest one that has the lowest fee like the CBE from coinbase that's 25 that's nuts uh and so like if rocketpool can be like the lowest fee charging staking derivative token because of this Innovation that weighs a straight up argument as to why you would want to hold re yeah exactly we we think we can Target 14 node commission when we introduce the AE uh uh LED mini pool and uh still generate for the node operator returns that are that are in uh double double

digits is this where we should start the conversation to turn to RPL or is there other parts about like the node operators that we should touch on first no I think I think it's probably a good a good a good talk about RPL right I mean because this is the thing that you know causes people to scratch their heads a little bit and say I don't get how this falls in the tokenomics of rock and roll okay real quick one thing if I can like on the Node operator side there's a series of technological improvements that are coming and the low respawn in many pools is a really important one but just to kind of complete it out here real quick um we just launched the smoothing pool for Revenue smoothing that's an important kind of value for node operators we also have this kind of

creative SAS design staking as a service design that's being built on top of rocketpool so that enables companies to come and bring their their clients to the platform that's a meaningful kind of growth uh strategy for us and then also I mean I'll just quickly gloss over this but there's this really kind of neat idea about a solo Staker migration where we can where rocketpool can just sort of like ingest validators by pointing them at the Smart contracts and then just a very natural way to kind of grow the protocol where they don't actually have to exit they just have to like sort of update their their solo validators to point to rock a pool and that's just an immediate kind of benefit to them because they get commissioned and all that kind of good stuff on top so LEDs low wreath bonded mini pools is super

cool it's like a 7x in terms of Supply but that's like one of like four juicy things that are coming so just putting that out there yeah wait I will since you did bring them up I do want to go into them uh and so what one sounds like a white list kind of thing where like there's just like this like front end to Rocket pool that targets larger institutions can you just explain that a little bit more how's that yeah yeah so it's called SAS staking as a service and what it is is just building the smart contract layer such that other companies can run rocket pool as they're kind of like infrastructure underneath their staking operation right so you could have a company theoretically like Kraken that Stakes with rocket pool but has a white labeled product on top of it and they can call it whatever they want it

can do their own their own product and they just run kind of Rocket pool onto the hood and then they get all those juicy benefits like commission and and reward structures um and things like that and one other thing that's really cool about it is that just because of the way that it operates like being a node operator is sort of three jobs in one you're like you have to run a node which is you know some Linux expertise you have to put up collateral and on the each side and the RPL side and with the SAS model that actually separates the functions cleanly to three separate people so you can have a person running nodes for somebody else you can have someone taking The Ether side you can have someone taking the RPL side it's really attractive for like large depositors who just want to go

like 100 pure ether for example so it's a really compelling case for more kind of institutional buy-in whereas in the past rocketpool has really catered well to kind of the retail side of the market why if I'm cracking if I'm Jesse why would I uh want why would I give up my control oversaking of ether and just doing it with like my own like cloud service or whatever and why would I give that over to Rocket pool like what's the incentive there yeah I mean there's nothing to give up there's trust in smart contracts to operate the way they're intended and there's been a lot of kind of diligence by the team to make sure that that works but you are in no way in the process trusting rocketpool rocketpool can try around tomorrow and be evil and try to steal your money and they just can't do it and that's the

rocket pool is charging a fee that cracking would have otherwise been able to charge themselves right uh rocketpool doesn't take any any commission well the node operator fee the node operator well that'd be a benefit though if you're Jesse oh see that as a benefit because you get to charge the commission on either side of the oh Kraken also runs nodes oh they don't just give you ether they also run the nodes yes I mean I mean if you were cracking as a mistaking service yes not cracking as a token holder yes yes okay I see and so that you're saying the incentive is that like Kraken could like make a deal with bison trails and like have some sort of proprietary deal with some Commercial Business or that commercial relationship could instead be rocket pool and Rocket pool

is like pretty competitive on that front it could happen it could happen without okay yeah I mean bankless itself can start marketing itself as a staking company and provide its members with uh you know a staking service and you're basically just using a white label product you know same as same as Kirkland does right they put their label on a product but it's some other manufacturer that makes the Kirkland products we like okay why would bankless do this why would we why would we do this couple of reasons probably to provide service you can create a management fee for providing the service right uh charge uh charge a slice of the of the Returns on it um perhaps maybe you've got some excess RPL token that you've invested in that you'd like to have

fully stake to earn a return on I know we haven't talked about that RPL token and perhaps maybe you want to you need more eth to be able to provide that uh that value to actually stake the RPL token okay okay all right yeah I can actually see a lot of a lot of companies right small management firms individual investment folks especially for folks that don't trust the larger companies right they don't understand do it they go to their financial advisor the financial advisor says Hey I just recently reached out to this small company that's providing staking services for ethereum they hand hold they provide a white glove um uh concierge service right here's their phone number the person running the node yet you can see that it's all been invested on a smart contract you

don't have to worry about that individual running away with the funds right right right yeah it's really just pushing the duty it's like pushing it's like a sales layer it's like a sales like hey you guys go do the hard work of going making sales uh okay that makes sense um let's get into the uh where you talked about Marcel with ingesting single solo node operators because I think that's actually really interesting competitive advantage that rocketpool might have if there's like independent nodes and like the rocket pool protocols just like says hey come come join us uh can you talk about that a little bit yeah yeah so I mean right now rocketpool has about 1.6 of the market so it's pretty small minority of the market right Room to Grow certainly but it's a small player in the market and when the withdrawal hard Fork happens there's a

technical Improvement that lets you sort of redirect towards a different um uh fee withdrawal address so you could as part of that change point it towards rocketpool and then basically convert your solo validator you've been running at home since since Genesis into two or maybe four mini pools just kind of automatically through the rocketpool software and the reason to do that is is honestly really compelling because you get the smoothing pool which kind of Smooths your rewards over time so if you're a home validator you probably get like you know a proposal a year or something like that and your revenue is very spiky having it be smooth is very appealing for for one you also get extra commission you also get extra RPL rewards and we'll talk about that in a minute but like it's just sort of strictly better from a yields

perspective and a variance perspective to have rocket tool be what's kind of managing your back end of the software stack and not just doing it with your kind of Native Native clients at home so it's really kind of creative way to bootstrap growth and just like ingest and like give them a big like bear hug and welcome them into that rocketpool family I think it's it's a really cool thing that we can do that is very very unique to the circumstances around them around withdrawals and also rocketpool is a technology layer right and and the the reason why I wanted to take the time and talk about the staking as a service and also ingesting the solo operators well first off those are two like barbells right like one is going after the big people that are like funnels for like

the rest of the world into rocket pool but then also it's like the remaining single node operators are given like a very low barrier into like joining rocket pool so it's like rocket pool as a system is like going after both ends of the spectrum like the big boy institutions but also like the remaining solo stakers that that exist on ethereum uh and like the idea here like the bull case for Rocket pool in my mind is synonymous with how many independent validators there are uh which I think also brings us to the conversation of RPL because there's like a one-to-one relationship of how many Independents taking validators there are in rocket pool and the RPL token so who wants to let's start at the very beginning who wants to lead us into the conversations around why the RPL token exists and what it does

yeah I guess I guess I could start with it the one thing I may if I if I could that we we touched on but we didn't cover in depth and it would be a shame for not mentioning it is the smoothing pool uh and and I think this is one thing that I don't think people have figured out it was just just launched this week as part of the Redstone upgrade to Rocket pull and and what it does uh real briefly is that you know post merge here right we think that um the returns that a validator gets are going to be made up about 50 from the beacon rewards uh we think about 40 now this is on average about 40 percent of it is going to be the inclusion tips and that doesn't change with gas prices everybody's still paying about one to

two gray to move their transaction through metamask or whatever their wallet or their choice is and then you know most most models show that about 10 percent of the returns are going to be in this Mev right something I call proposer payment values the amount of of uh of Mev that's actually paid to the block proposer right now what's misleading about that is that's an average right Mev is actually a very rare thing right these large Arbitrage opportunities that occur where somebody could make 20 50 100 200 each from uh you know placing a flashbots transaction in there are actually pretty rare and so what happens is sure on average you get that but for most validators they're not going to see any Med or if they do it's just going to be a very small amount

that you know much less than even a fraction of what the inclusion tips are one way or two-way right um so what the smoothing pool does is it's it's kind of a play off the old mining community that says all of the validators that are in rocket pool can opt in it's an opt-in choice but already I think we've got about 30 percent of our node operators that have opted into it already um and uh almost almost as many of our mini polls that have opted in but what it does is it Smooths thems it basically says that okay what we'll do is we'll share those rewards in a in a 28-day reward period we'll collect all of that Mev all of that ppb ppv proposer payment value that's made to the proposers and will distribute it equally based upon on the contributions of everybody in the

pool and so what that does is it is it reduces the variance right if you're a solo operator and you're thinking hey I might I might win this Lottery right at this large Mev it's going to be a lottery and that Lottery isn't one that you can play Forever there's a lot of push push and a lot of thought among the core developers in the ethereum community about is Mev good is proposer Builder separation needed do we have to worry about ofax sanctions and so forth and and they keep looking at perhaps removing the ability to order the transactions by the proposer so there's only in my opinion a narrow window that we can actually chase this game and so if you join the smoothing pool you're much more assured you've got a much more probable outcome of getting some share of that Mev versus if you don't join a

smoothing pool that um you know you're just you're playing the odds and the odds are unfortunately that most people will not win any substantial Mev and this is one thing I think that really attracts rocketful in fact the smoothing pool is so I think unique among it that we'll start to to see other other protocols that allow node operators will also be contributing and creating smoothing pulls of Their Own so the question I have the critique I have that I'm hoping you can cover is is doesn't this just take money from the people that are very good at extracting Mev and giving it to the people that aren't as good as extracting Mev yeah so the the people that are good at extracting Mev those are going to be the Searchers and the builders right the Searchers are going to look for The

Unique Arbitrage run the very fast computers find find the best way to do it but eventually they'll know who the next proposer is right let's say for instance it's marceau's node right they have to decide if I'm the Searcher and I found a let's say a hundred each block I got to decide how much I'm willing to bid in one of these relays like flashbots or other relays that are coming up and perhaps maybe I decide to pay him 70 of it so I put a 70 if if bounty on that and if I win that auction through the relay Marcel will propose that block I'll take 38th and I'll give him 70th so really it's just the proposer that lines up and so the way as a node operator you you get your share is you want to have as many block

proposers as needed so the only way to do that is either be very rich and run a lot of nodes yourself or join a smoothing pool because if I'm in the smoothing pool and marceau's in the smoothing pool and he gets that 70 eth we'll share it among some Fair sharing method and usually that sharing method that we're looking at is the number of added stations so if we both had two nodes operating for 28 days they both did equal work we'll share that reward 50 50. I'm getting the gist of like there's this pattern that I always find in crypto that like it's like a Peloton a bicycle Peloton where like the more people that are in the Peloton the more efficient it is is that also the same way that the smoothing Pool Works is that like actually when the smoothing pool has more buy-in buy more and more

node operators it actually becomes a more competitive product it gets much more certain on your returns right the variance like so like right now like if I'm by myself maybe I'll win that hundred youth block I probably will never win it even over five years and in five years they've removed Mev they've the the protocol has changed we've got proposer Builder separation there's now a fixed ordering I can't change anything I can't extract that anymore but if I join a poll and there's a lot of people in it we'll have that many more proposal opportunities and perhaps one of those is one of these Lottery blocks and if we win then we all share the proceeds will I ever see a hundred each in one no probably not but I'll receive one 100 they're one one thousandth of that return and I'll do

that month after month after month so in that five or three year period whenever they they invoke PBS um I'll actually have some returns in my wallet to to benefit from it cool cool cool cool all right now so that's that's another incentive to spin up a rocket pool node and join the rocket pool system like it's another like perk uh in a sea of perks of being a rocket pool node operator and again like I said like we were about to go into before we were done the smoothing Pro Rabbit Hole uh every single node comes with an rpr RPL sidecar uh who wants to take us down the RPL Rabbit Hole like what what the token is and what does it do uh and overall will eventually end up at the bull case

for that who wants to who wants to lead us here maybe maybe I'll start and Marcel can finish right so so so what what is rpr RPL is the native token of Rocket pole it why do we have it well we first have it because it was initially the Ico offering in 2017 when the ideal first came right it was offered to investors investors could push uh could purchase it right there was no um there was no uh lock up period right everybody gets so old of a token now everybody has it it's very well distributed uh among the um the larger shareholders of it um and it funded the dev team for the period of 2017 to 2021 when the protocol finally launched and staking was

available on the ethereum network um what what does it do it actually provides I would say three functions to it right uh the first thing they throw out is they say well it's the governance token of Rocket pull right but we've heard that every everybody's got a governance token and we're not really certain what value a governance token has on a protocol right so let's pass over that one pretty quickly the the main reason that RPL exists right now is it does two things one it provides Insurance it provides a second tranche of insurance right so we mentioned that you know as we go down to low eth bonded mini pools right if we go down to 80th and so forth there are some um some possible outcomes of events that happen that you know perhaps that eight

eth is consumed up by a node operator especially the the node operator that abandons their nodes maybe they pass away or something happens to them they get hit by a bus have amnesia forget they have a node and that node begins to leak eath very slowly until it reaches some some critical level and it's kicked off the ethereum network so that RPL bonding provides a second level of insurance if there's not enough asset when that node is removed from the network to cover the investment the principle of the re folders the RPL token is auction so it provides this kind of second level of insurance but more importantly as we talked about it actually provides access to leverage right so I I think of RPL as a token that that provides the leverage right so

when you um you know if you want to get this low EV mini pool you have to put more RPL token there's kind of a more buy-in in order to get that leverage and that's what adds value to it right the token itself does inflate right now at five percent um up seventy percent of it is paid to node operators right so you earn a staked yield on it uh the other 30 percent is given to um the the Dows it's a two-party dowel system in rocket pole one called a PDL one called a no doubt different functions um but the majority of the inflation is paid to node operators okay so uh Marceau do you want to say anything because I have a few like a devil's advocate uh uh takes on an RPL I want to bring so I want to give you a

chance before I go into that yeah for sure I mean I could talk about this for a long time the one thing that I just wanted to like so Ken's explanation was brilliant the one thing that I want to maybe illustrate and plus one is to a node operator RPL is the price they pay to unlock commission so it very much has a natural kind of uh leverage property to it where if you put an x amount of RPL you get y amount of sort of leveraged yield in return so there's a direct connection between RPL and the yield that it unlocks and this is why some people feel like rpls are leveraged either because we've actually done the calculations and looked at the sort of difference between them and if you believe that ether has value because the yield that it generates RPL has about three times more

value because it unlocks that much more yield in the form of commission so I'm a big believer personally in this theory that once we are post merge we will kind of attribute value and and sort of monetize ethereum in terms of like a DCF model looking at the yield that it generates and if you follow that same logical argument to RPL it has even greater value because it effectively acts like a leveraged form of ether so it's really appealing to a node operator in addition to the things that Ken mentioned as a utility token the ecosystem but just the economics of it I think are very well designed for node operators to find it appealing but go ahead with your and you've got some questions some yeah some questions asked yeah so I've always this is a question about the RPL token has always like sat

in my brain so I haven't figured out how to answer it like it seems like there are some tokens out there some protocols out there that if the token wasn't there it would fall apart like mkr maker Dow does not work with mkr like you need the mkr token or else that thing breaks breaks down like it completes the loop uh for for Rocket pull I haven't seen that Association so uh when Ken was talking about the role of rocketpool it's like the additional Bond but like the bond is already ether like that is the bond that's why we put up a bond in the first place and then you were we're adding this like RPL token on top of that and so it's kind of like there's this product it's this RPL protocol this is our RPL network with all the pro all the uh incentives to join it that you

that we've talked about throughout this podcast but then there's like this gate and it's this gate that is RPL in order to pass through the gate you must own a sufficient level of RPL to get through the gate but the gate doesn't actually need to be there uh it could actually just be ether and ether alone and you could in theory just have a higher higher um higher Bond requirement in order to like match what was otherwise the RPL but the RPL is like retrofitted onto the system in a way that I think is less like organic like maker Dao and more like kind of kind of uh it's like it's just like it's like given this role rather than like actually needing to be a part of the protocol so that's my critique to that like what would you

guys say to that argument Ken you want to talk about me too uh why don't you take first stab at it sure yeah I mean first of all I think that's a semi-fair technique I think you can defend the the position of RPL in the ecosystem in a few different ways one is that it has kind of an important function of just aligning incentives between the team and their sort of Oda that runs the Oracle and also between node operators it's an incentive mechanism for them and then um it also acts as a secondary form of collateral for arith at a minimum of 10 collateral for that um it's it's also the mechanism that allows us to do things like the lower eastbounded mini pools because it right now it's sort of a secondary form of of um of collateral and it's sort of

treated second after ether but once we flip to low responded mini pools it's actually the primary form of collateral or arguably it's the primary form of collateral so we're sort of swapping out the role of ether with the role of RPL and RPL is really being positioned as sort of like the collateral layer and ether is just really you know the military yeah yeah The Ether layer yeah so it is changing a little bit I mean I think you could ultimately design a protocol that looks like rocketpool without a native token or at least for collateral you just need to have governance and things like that but it does really help to make the tech come together beautifully and like governance and incentives come together beautifully that I think would be a worse product without a token like rocketpool in the center of all of it

right I do like the idea of like rock the RPL token being like this fractal microcosm off of ether where like ether is the collateral for ethereum but then rocket pool is the collateral for Rocket pool and what does Rocket pool but it it does it validates ethereum and I also like that inverse relationship where like on a normal rocket pool mini pool with 16 ether you have like a relatively low RPL requirement in in the total Capital size proportion but then as you go down to like the lower Bond requirement pools it actually inverts uh and so like there's an inverted relationship there between let's like as you get more leverage on your yield you have to pay more uh collateral to protect against that leverage so I do I

do think that makes sense and overall I just like the imagery of like RPL being a little sidecar to the ethereum motorcycle that's kind of how I think about it yeah the other thing I would probably add is that I think it aligns incentives right I mean you need some way to fund a Dev team right you need some way to fund the team that is marketing and Integrations right uh that is the educational Outreach and the support Outreach for the node operators when they have they have difficulties right and you either do that because by either becoming rent thinking right you take some part of the ethereum commission from this from the staking operation but that cuts into the that cuts into the profits of everyone right the profits of the re folder the node operators so

instead what you do is you create a you know a tokenomics around it that says okay rocket pool will will pay its bills and keep its Lights On by selling the RPL token that the dev team earns from their participation in the Odell and the only way that that token continues to have value is if they keep producing products and services that people want to want to use to become a node operator you need to have RPL you need to buy it and produce it so it aligns the incentives for the the team to perform for the node operators that invested in it to be committed to the protocol and then for others to have a requirement to purchase in and because it has value then you can return that as a reinsurance value right most operations of any significant size that that

staking is becoming here not only have a primary means of insurance but they go to the reinsurance market and make certain that they have layers of protection and so I I think it's actually very essential that protocols start to consider these these layers of protection yeah I think that's I think that's a perfect way of putting it better than how I put it but I would sort of summarize that as I think RPL is what lets rocketpool be non-rent seeking and to act as a public good like in the absence of RPL they would be forced to collect and to skim off the commission and to fund a treasury and to pay for things like marketing and growth so having it there is a kind of a creative way of bypassing a lot of those behaviors that we don't want to have because we want rocketpool to be a

public good cool okay all right now we've really just teased this whole Rockefeller Community it's just like really itching to to get into the bull case uh so who wants to just give me the most bullish case for for the RPL token I could take a stab at it um so I've spent a lot of time thinking about RPL as a token in the ecosystem and its role is collateral and where we're likely to go with technology efficiencies that like the Lower East bonded mini pools and it's really fun to project this forward and one thing I really like about the RPL token is that it's very modelable if you take certain assumptions and work backwards from there you can derive a price and assign it probability likelihood of occurring and things like that so I have my own

set of assumptions about where staking participation is likely to go and where rocketpool is likely to kind of fit into the ecosystem I'll share that in just a second but if you take some reasonable assumptions you can like kind of directly calculate a price because of its role as a utility token and collateral in the ecosystem is a very direct connection it is not at all driven by like speculation it is just pure fundamentally like goodness driven so anyways like I I think we are heading towards a world where staking participation is really high you said 30 million I think we're probably closer to 60 million honestly when and this is probably like a two year time frame right 60 million in two years I could see 60 million in like 10 years I've never heard anyone say 60 million

in two years I think it's our saturation level I think we get there sooner than folks realize okay like immediately post merge ether was just purely yield generating it's an internet Bond like you like to say I think the value for um a staking is super clear post merge and even more importantly post withdrawals because on the entire cycle is complete so let's say six months to withdrawals and then 18 months to kind of hit saturation is kind of how I'm thinking about it and I'm targeting roughly you know it's more like 50 to 60 million In fairness but I'm looking at about half the supply being staked and when you look at rocket pool we have currently earned about a five percent market share since we've launched it's 1.6 in total but since launch it's been five percent given all the excitement around the technology improvements given

all the excitement around the quivian incentives Integrations that are coming given the renewed focus on decentralization I think getting to eight to ten percent market share is pretty justifiable and then the last kind of variable that I look at pretty closely is to what degree are node operators collateralizing their mini pools with RPL and the answer there is a little bit technical it's a little bit um speculative in nature but for reasons I can get into if it's interesting I think the the collateral rate is likely to stay pretty high it's currently at 80 percent I think we Trend down to maybe 60 over time but still quite High the minimum is 10 so if you put those in a calculator and you project it forward with those numbers you arrive at like to be honest what is kind of moon boy math

like not intentionally but that's just like what it looks like because the value prop for RPL is so good like when I look at the likelihood of events the probability of them occurring with those numbers I'm personally targeting a 0.18 number on the ratio which is about a 12x performance against ether in its current form so that's pretty significant gain against ethereum which it's really hard to out-compete ethereum and you know it's a little bit speculative obviously but I feel really good about the sort of inputs and being able to justify where I think we can go with the information we have about what's coming so in any case it's modelable and it's it's kind of fun to play around with the numbers and see what see what you get right uh so just to run through some of the assumptions you're assuming 60 million ether Stakes

which I I think is very very high I think we are going to be if we get above 30 million staked by end of 2024 I think I'll be surprised um I I could see it like I could see myself getting surprised I'll give myself like a 20 chance that we break 30 million ether stage by the end of 2024 but these are just my personal shooting from the hip numbers I haven't put too much thought into this and I think the other assumption in there is that there's also a variable in how much RPL node operators can stake and so we haven't talked about that yet but the minimum is 10 and you're saying like the average right now is like 80 or 90 as in like people are staking 32 ether but they're staking like 28 ethers worth of RPL on average and probably that's going

to come down but you're not saying it's going to come down too much and so when you multiply and then also you're saying that rocket pool is going to eat into the market share of staking as a service token so rocket pool like penetration will like 5x rocket pool uh like uh therefore like rock and pull nodes will spin up so more rocket pool will be collateralized uh and then you're also saying just like more total nodes staking validator staking ether will also come onto the market I definitely agree with that in like a 2X at least whether you by a year from now or so and so like you're throwing all these numbers together uh and then you're saying well this much RPL will be staked and it was and if that's true then uh there's probably going to be something like a 12x appreciation versus ether is

that like the accurate like summary of this yeah totally fair summary and maybe what I'll do is to put a spreadsheet up on Twitter just so people can kind of put input their own numbers but it's very directly modelable and so you mentioned 30 million either I think we'd probably disagree on that but that's fine like that would just be a 2X discount on my numbers then so if I'm projecting a 12x increase if you put in the same numbers and believe my other assumptions you should be projecting a 6X in Grace versus either the important one yeah versus ether yeah USD doesn't matter in this equation because it's just strictly um valued in terms of collateral Against The Ether pair right so it's yeah I don't even think about dollars necessarily but um yeah you mentioned the the collateralization rate I mean we can

definitely get into that if it's if it's valuable on the one hand you have new entrants coming in who are likely to come in with low collateral because they are more likely Heath Maxis right like if they were RPL Maxes they would have already been in the ecosystem so new entrants are likely to kind of push the average down but the sort of like counter-intuitive thing is that to enter the ecosystem they have to buy RPL to collateralize their node and doing that naturally pushes the price up which then naturally increases the collateralization of everyone else in the in the marketplace so you have kind of this push and pull effect where the average will Trend down over time but by the act of new people coming online it's going to necessarily increase the price which will also increase the average collateralization so you have to kind of

like speculate as to which of those two forces has a greater pressure right and I've been looking at this really closely for the past couple months because we've kind of gotten to that spot where everyone knew was coming in at minimum collateral and I think there's a reason why our staking percentage or sorry our collateral percentage has stayed so high and it's because the price of the RPL token is just so justifiable in terms of like when new people come online it it has to go up and and RPL number go up has been very consistent for the past six months despite being in this kind of like terrible bear market so it's interesting Dynamics we'll see how it plays out but I'm overall more bullish on the collateral rate than I think some other people are but still you can put in your own numbers and assume whatever you want

and it's still very modelable and it's still even in a very conservative like kind of almost like failure scenario uh type of situation it still I think holds its value really well and it's it's kind of worth modeling every different type of possibility Ken what are you thinking about right now no I mean it's I mean it's hard to beat Marceau on the the inputs that you use to do it right now what what you want to value and what you want to uh kind of predict as what will happen to each of those five input variables in a spreadsheet I mean I'll leave I'll leave that up to the viewer here to do but the one thing I will say David to your thought about how much ethereum is going to be staked I think that's going to be very interesting if you look at ethereum

versus some of the other eve Killers out there like Avalanche like cardano right they're at like 50 70 of their collateral state right and ethereum is only at 11 so you know I think it's got a ways to go I think a lot of people are waiting for this merge uh I I've got complete confidence in it right uh but I think a lot of people are on the sidelines and just saying let's see the merge go and and then and then we'll decide to get into ethereum staking afterwards I I think two things will really drive that I think one that the you know as you've said many times the price the merge is not priced in and the reason for that is my my opinion is pricing is is all supply and demand and not until the merge happens does the supply start to dwindle right and then

the demand can just hold where it is and once that Supply starts to dwindle we'll see price action and then I think uh they'll also see The Return of tips and inclusion fees and all of a sudden no matter how you're staking you're earning by most models about twice the amount of APR those things are going to combine in and I think a lot of people are really going to want to get into the staking staking aspect and once they do that they'll they'll find rocket pull to realize the advantage and just the way the tokenomics are designed the RPL token will easily go up well guys you didn't didn't never had to actually convince me in the first place but I appreciate you guys coming on and giving I think a very comprehensive of not just like the bull case for RPL but

just like an overview of the rocket pool landscape is there any conversation point that we haven't touched on yet you guys want to bring up I don't think so I think we covered it I think I think I I think one of the things I mean certainly we mentioned in the beginning that we're just community members and I will say that uh maybe the Hidden Gem of of Rocket pull is really the community that it has uh there's a channel in the Discord called trading don't let that name throw you it's really our community channel right uh we not only talk about rocket pool explain uh explain all these different very aspects to new people uh but more importantly we're just a whole bunch of people that are very excited about ethereum and so most of the topics in there are just about the ethereum

community in whole so if if you've stayed with us this long in the episode I certainly invite you all to drop by the rocketball Discord especially the training channel channel and say hi yeah I definitely agree even in the rocket pool commercial I mentioned like oh I'm in the rocket pool Discord uh so come say hi there that that's sometimes that like towards the end of the day uh usually after I like crack a beer uh I pull up I like close down the bank close HQ Discord and I pull up open the rocket pool trading Discord and just see what all the uh what all the people are doing in there um but overall like also it just feels like a very I use this analogy before we started live streaming but just like Athenian group of like hodgepodge uh hobbyists of eat stickers

uh I was like oh I'm staking over here doing this I'm also trading and I'm also doing this and I'm also doing that uh so it's much more just than a Discord channel of like people that focus on like one thing it's actually just like a a community that people talk about all their stuff including their life their life events so it's just a kind of a cool Community like fireplace there so Ken Marceau thank you for taking a break from Trading uh and coming onto Bank lists to talk about rocketpool I appreciate it our pleasure thank you yeah thank you so much it was fun uh so I know you guys we we have a document that we're looking at there's the uh the sign off at the the risk and disclaimer is at the end of the document if you guys want to scroll down either of you

two want to read that it's all yours Ken oh yeah hang on I don't uh I wasn't following the document here but hang on let me get down there right now I'd love to love to do that um ethereum is risky crypto is risky Defy is risky you could lose what you put in but we're headed west on the frontier uh but we're glad we're but we're glad you're with us on this binklist journey oh yeah sorry it is the shorthand that we that we have in there I need to write it up fully awesome Ken Marcelo thank you so much for joining me here on Bank list cheers guys cheers