How to benefit from providing rETH Liquidity

This is a brief explanation of where and how to benefit from the pDAO funded incentives for providing rETH/ETH liquidty.

Mainnet - Rewards start Sept 8th 00:00 UTC.
Optimism - Currently live with rewards sponsored by Beethoven and set to increase with our contribution.

Mainnet
Balancer rETH/WETH Pool

After you have deposited and received LP tokens you will need to stake them in a Gauge to earn the rewards.
For the majority of people it will be more profitable to stake your LP tokens on Aura Finance rather than in Balancer itself. Note, rewards on Aura ramp up over the course of a week.

Optimism (L2) -
Beethoven X ‘Rocket Fuel’ WETH/rETH Pool

After you have deposited your tokens stake the resulting LP tokens in the gauge, or alternatively you can deposit them in an auto-compounding service such as beefy.

FAQ
Is there rewards for providing RPL Liquidity?
Not at this time.

Do I receive RPL tokens?
No, you will receive rewards in Balancer BAL tokens / AURA tokens.

I’ve added tokens to the pool, am I done?
Don’t forget to stake the LP tokens in a gauge to earn your rewards!

Will I experience IL (Impermanent or Divergent Loss) ?
As the price of rETH tracks ETH closely increasing at a steady rate, the amount of divergent loss experienced for this pair is very low and predictable. It can be considered neglible compared to the rewards received from incentives.

Do I need to deposit both ETH & rETH?
You may deposit a mix of ETH/WETH & rETH or all of one token single sided but be mindful that if you do so you are swapping part of your deposit for the other token at the pools current ratio with associated trading fees and slippage.

What about withdrawals?
By default you receive a proportional mix of WETH and rETH when you withdraw but you may choose to withdraw single sided in one token or the other, though for large amounts doing so may be disadvantageous depending on the makeup of the pool.

Am I still earning staking yield while in the pool?
Only the part of your deposit which is rETH will be earning staking yield.

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Worth noting that there are auto compound services you can use. On Optimism there is Beefy and Pickles for example. If you don’t want to deal with claiming rewards etc.
You then only deposit to the pool but not stake your LP tokens, instead you deposit them with Beefy/Pickles

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Thank you for great guide.

a very basic question:
do I, as a RP node operator, have rETH tokens? Where are they stored?

No, node operators do not receive rETH tokens, they’re just for normal stakers in the pool.

Sorry for not understanding this well enough but can you elaborate on this?

The LP (BPT) tokens that represent your deposit are always a mix of WETH & rETH.

If you deposit 100% rETH for example, part of that rETH is swapped by the pool to WETH to give you a balanced amount of both, you pay the pools swap fee of 0.04% on this amount.

My brain is having a hard time understanding this (and I think I am confusing two different things).

If I stake 1ETH in Rocket Pool for 1 rETH and turn around and deposit the rETH in Balancer:

  • Do I continue to earn rewards for the 1ETH I deposited into Rocket Pool? If so, where do I “see” this?
  • I only earn staking rewards in the Balancer Pool for the portion of my deposit that is rETH?

The reply right above will help with this question. Wherever you “hold” (really own) rETH you are always accumulating staking yield. rETH is set up such that it is always increasing in value relative to ETH, with staking yield being the difference. It’s still early so the ratio of ETH to rETH can fluctuate in reality due to market arbitrage forces, but in theory 1 ETH will be worth 0.9 rETH then a year later 1 ETH will be worth 0.8 rETH for example. This is because staking yield continues to build for rETH, while ETH is unstaked and not earning any rewards. Similarly, WETH is equivalent to ETH in this scenario, and when you use Balancer you’re consenting to the app converting your rETH to WETH if needed to adjust your liquidity. Example: I hold 20 rETH, and I deposit it all in Balancer. Balancer will convert 8 rETH into WETH, leaving me with 12 rETH and 8 WETH that I am contributing to provide liquidity on the platform. So I will continue to reap RocketPool staking yield for the 12 rETH I own, while the 8 WETH will not receive these rewards. The idea is that you are gaining much more in rewards from Balancer/Aura that the lost RocketPool staking rewards on the 8 WETH is worth it.

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Apologies, I realise I worded that a little ambiguously, you are correct that there are two distinct things.

There are the Ethereum staking rewards that you receive from staking ETH in Rocketpool, these are reflected in the value of rETH increasing vs ETH over time.
If you have deposited rETH into Balancer you are only earning these on a partial amount of your deposit. See the example from @cnduaguibe

There are also rewards for staking the Balancer BPT tokens that represent your deposit into the Balancer gauge or Aura Finance. You are earning these rewards on the full amount of your deposit.

2 Likes

for the above liquidity incentives, what if I deposited 2 ETH in BeethovenX Liquidity Pool.
The current distribution now of the pool is ~34% wETH and 66%rETH.
So the LP token I received is for ~0.68 wETH and ~1.32 rETH.

But then I decided to withdraw my provided liquidity and decided to get all in rETH. What is the mechanics here for the rETH rewards?

If I’m understanding your question correctly, you want to know how the rETH rewards from RocketPool staking work when moving your ETH into and out of Optimism. So we start with 2 ETH, stake with Optimism BeethovenX Liquidity Pool for some amount of time at 66% rETH and 34% WETH, then withdraw in 100% rETH. You would be receiving RocketPool’s staking rewards on the 1.32 rETH (66%) when you start staking your 2 ETH on Optimism, and then after you withdraw your funds (in all rETH) there would be a small fee but you would receive the equivalent in rETH and that amount would continue to gain RocketPool’s staking yield as long as you hold rETH.

So in the end you would theoretically be withdrawing an amount of rETH that is less than 2 (rETH should be continuously rising in value compared to ETH) and the final amount will be slightly lower than if you had been able to own all rETH when in the liquidity pool (but that is not how the pool works, and you should be receiving much higher rewards from Optimism than from RocketPool alone). Keep in mind, you will also be earning the Optimism rewards that will be separate from your initial investment and you can claim those rewards and convert to rETH to boost your holdings after leaving the liquidity pool.

Got this! Thanks!

So technically, I got 1.32 rETH with price equal to when I staked my 2 ETh. then once I withdraw all to rETH, i’ll get more rETH but with the current rETH price on that future date.

On your last comment, I thought RP just allocated RPL incentives to BeethovenX LP. Did OP also allocated incentives for this LP?

I was speaking generally, when using “Optimism” I just meant the BeethovenX LP. So the main goal are the incentives from RocketPool.

Copy! Thanks for your replies.

There is now also incentives live for rETH/RPL generously funded by Balancer.

Pool is here:

Please be aware that unlike rETH/ETH, this pair will be subject to divergent loss if the price of RPL deviates heavily from it’s current ratio vs ETH, please research and understand the risks involved before providing liquidity.

Found a good high 10000 foot view of options: https://defillama.com/yields?token=RETH

I don’t fully agree with their numbers, so mostly a starting point to see what’s out there:

  • not counting rETH yield
  • some numbers seem slightly off (eg, beethovenX about a percent off from the number on their own site for emissions)
  • some numbers suck (eg, reaper farm says 14.76% both here and their own site – I don’t get how that’s even close to possible just by compounding)

Hey folks just wanna let you know about 2 new incentivized pools on BeethovenX:

These are definitely more involved pools than the ones we’ve had so far - just one more option for folks that want it.

Hi there, I have a question, I’m LPing on Optimism and it says there are rETH incentives of 1.26% and BAL incentives of 5.30% at the moment. Nevertheless, in the rewards claiming section it only appears BAL tokens. Is there an specific release schedule for rETH? or is it being included in the pool somehow? I also see that other pools like rETH/OP/stables has rETH as incentive.

rETH portion is just rETH accumulating rewards as always (not a separate incentive). Roughly 50% the pool is rETH and balancer take a 50% protocol fee on non-emission yield, so this component will be around a quarter of rETH APR.