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Is Rocketpool in a slow death spiral?

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by COINS NEWS 58 Views

Rocketpool has been hailed for its innovative way to provide 8 eth holders a chance to run their own Eth staking nodes and for the added decentralization they provide to Eth staking.

That being said, the incredibly poor tokenomics involved in the RPL token (required for staking collateral) present some pretty serious issues for the project long term. 10% of the unfunded eth (in the case of 8 eth mini nodes, you would need 10% of the remaining 24 eth or 2.4 eth worth of RPL) RPL is used as slashing collateral for the nodes. The use of RPL as slashing collateral instead of ETH puts a level of importance on RPL in the protocol.

Unfortunately due to Rocketpools poor design and or lack of foresight, the only significant buy pressure the token receives is when new nodes are established, peaking during the Atlas upgrade when 8 eth node functionality became an option.

Conversely, not only are nodes who remain above the collateral threshold paid more RPL monthly, but the members of the DAO also receive substantial amounts of RPL each month which place it way out of balance with the lack of buy pressure.

The result has been a steadily declining value for the RPL token, putting many validators at a loss that will take them years of staking to recoup, and more importantly for the protocol, has a large portion of validators under collateralized in the event that prolonged slashing should occur and as the token continues to drop in value due to poor tokenomics, the issue of validators being under-collateralized increases proportionally.

Further compounding the issue, the Dencun upgrade will include a method to slow entry of new validators due to Eth stakings popularity (EIP-7514)

TLDR: be wary of exposure to RPL when starting a node

Disclosure: I’m not FUDing Rocketpool, I myself run multiple mini nodes and have for quite some time, but this is unfortunately a very real problem that will only become a bigger problem.

submitted by /u/TheCryptoBaron
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