Ethereum staking pool – ETH Passive Income

14th Apr 2019
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Not investment or financial advice. This is not an endorsement or recommendation to buy, sell or hold.  The staff of this site may own the asset/s mentioned on this page. Investing is risky and you may lose all your capital. Do your own research. See full disclaimer.

We receive no direct payments from the mentioned companies. Some links on this page are affiliate links, at no extra cost to you, we may receive commissions when you use them. However, we try our best to keep our articles fair and balanced.


   

Ethereum is a cryptocurrency smart contract platform. Its ledger is decentralized, this means that the ledger holding all the balances needs to be maintained by many different entities rather than a central one. This ledger maintenance (i.e. the movement of funds) is at the root of cryptocurrency systems. Ethereum is currently using a PoW system to maintain its ledger this is a very energy intensive process. In PoW (Proof of Work) it is the miners who process blocks, earn the block rewards as a passive income. Ethereum is planning to switch to PoS (Proof of Stake). In this system, any investor can set up a node which can process blocks and maintain the Ethereum ledger. This process is known as staking.

There is no confirmed date when the switch from PoW to PoS will take place.

There are essentially two ways to stake ETH. Solo or in a staking pool. Setting up and maintaining an ETH node will require some technical knowledge and ongoing maintenance.

RocketPool is an ethereum staking pool, it will allow stakers to stake Ethereum and earn block rewards as passive income, the key advantage is that investment is much more passive then running a node yourself.

The RocketPool ETH staking nodes will validate blocks on the ETH blockchain and in return, it will pay a passive income to the those who participate in the pool.

Interview with David Rugendyke, the founder of Rocket Pool and current CTO.

David Rugendyk, CEO and CTO of RocketPool
David Rugendyk, CEO and CTO of RocketPool

Can you introduce yourself and your role in RocketPool?

I’m David Rugendyke, the founder of Rocket Pool and current CTO. I started work on Rocket Pool back in late 2016 when Vitalik Buterin released the Mauve paper, which included early specifications for Proof of Stake in Ethereum. We have a compact and talented team here, including Jake Pospischil who is our current senior developer and Darren Langely who is another talented developer.

What is the relation between RocketPool and Ethereum?

Ethereum has long aimed to transition to a new a form of blockchain consensus called Proof of Stake, this is a much more energy efficient form of consensus in which people can deposit a sum of ETH and earn interest on it.

Rocket Pool is creating a decentralised staking network for Ethereum which removes several barriers to entry for users who wish to ‘stake’ their ETH and earn passive income in the form of interest on it. If you wish to stake your ETH outside of Rocket Pool, you’ll need at least 32 ETH + the ability to securely manage a full Ethereum node and keep it online 24/7.

With us, you can simply deposit your ETH for a fixed term of 3, 6 or 12 months and our network performs all the necessary actions to earn interest on that deposit.

What are the basic mechanics of staking Ether using RocketPool as a staker? 

There are 2 main user types in the Rocket Pool network.

The first is users/businesses who wish to stake their ETH, without running any Ethereum nodes as would be required to, if you stake outside of our network. This user type can simply send ETH to Rocket Pools smart contracts on the Ethereum network, where it will begin staking for them using our decentralised staking network. This user type does not require any tokens to use our network.

The second user type is those users / businesses which wish to stake and run a node in our network. For running a node in our network, this user type can earn extra rewards on top of their interest earned in return for providing the network with this service.

So they stand to gain more by participating with us, than they would outside of Rocket Pool and they have the added benefit of being in control of their own node. For our network to run at optimal capacity, we require our RPL tokens to be deposited by this user type when they stake.

If the network has a lot of capacity to onboard new users, the amount of RPL required for a node operator to stake goes up, this is because the capacity isn’t needed at this time. On the opposite hand, if the network is running near capacity and urgently needs new node operators to join, the amount of RPL required drops significantly to incentives new nodes to join the network. This mechanism also prevents several attack scenarios as outlined in our whitepaper.

What are the benefits of staking Ether with Rocketpool?

It’s easy and secure and you investors earn passive income.

Single users can start staking within seconds if they login to our site using MetaMask or another Web3 enabled device. We have a recent video of our next beta in action, which shows the interface and how quickly you can get started.

Security for deposits also scales linearly, if your deposit is bigger than 4 ETH. It does this using a method we’ve deemed “chunking”, where all deposits great than 4 ETH are broken up into chunks of 4 ETH in size, then randomly assigned to nodes in the network. This means that should any single node fail, it will only affect a portion of your deposit and not all of it.

Will the earned stakes be automatically staked?

Rocket pool

The passive income paid out in Ethereum is compounded when staking, but not automatically staked again once your deposits term is over. We leave this up to the user if they want to stake again since staking times can range from 3 months to a year.

What are the requirements to run a RocketPool Smartnode?

You’ll need at least 16 ETH and some of our Rocket Pool tokens called RPL. You’ll also need our Smart Node software, which can install everything needed to join your node to the Rocket Pool network and get staking quickly.

What are the potential returns of running a RocketPool Smartnode?

There are 2 main factors to this.

The first is the current amount of validators participating in the Ethereum blockchain. If there are only a small amount of overall Ethereum validators, the rewards given to stakers is high, if there are lots of validators, the rewards given gets lower as it is split between more validators. At the moment, it’s estimated that if around 10mil ETH is staked, the return will be between 4-5%. This is a lot of ETH, so you can expect early on, this return rate will be higher.

The second is the fee that nodes in the Rocket Pool network have voted to charge. If you participate as a node in our network, you can vote for a fee you think is appropriate for a node to earn and the network will use something close to the median value being voted by all nodes.

So if you run a node in the Rocket Pool network, you will have two sources of passive income

  • getting rewards from the Ethereum network
  • fees earned by your node in Rocket Pool

How can RocketPool be used to create additional income streams to crypto businesses?

We’ve specifically designed Rocket Pool with a smart contract API which allows an established or new business, be in a wallet, hedge fund or other, to easily onboard their users into our network.

This takes all the hard work out of offering staking services as the Rocket Pool network does all the heavy lifting using its decentralized infrastructure. Those users which the businesses on board need never even know their using Rocket Pool in the background. So opportunities are fairly great in this regard, users can start their own custom pools, businesses could instantly offer staking services etc.

Rocket Pool enables institutions to create alternative passive income streams easily and on demand.

When do you expect RocketPool to go live?

We’re hoping shortly after staking is introduced on the Ethereum network. We certainly want to be among the first and we are already approaching our second beta release soon. But of course, any release date will take a back seat to rigorous security audits of our platform and the results from those. We will also launch in a scaled manner to monitor the progress and performance of the network.

Would you like to add further information?

If anyone wishes to find out more about us, please visit www.rocketpool.net and be sure to read our whitepaper, it has all the extra details anyone could wish for.

Generating passive income with ETH staking
Generating passive income with ETH staking

We thank David Rugendyke for the interview.


Not investment or financial advice. This is not an endorsement or recommendation to buy, sell or hold.  The staff of this site may own the asset/s mentioned on this page. Investing is risky and you may lose all your capital. Do your own research. See full disclaimer.

We receive no direct payments from the mentioned companies. Some links on this page are affiliate links, at no extra cost to you, we may receive commissions when you use them. However, we try our best to keep our articles fair and balanced.


   

Author: Jim Reynolds
Jim Reynolds. Is passionate about finance, passive income and cryptocurrencies. He writes about his passions on NodesOfValue.com. He has worked in the tech and financial industry for a few decades. He holds a masters in business admin and a bachelors in IT. All his writings are not investment advice.


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