Increase rETH demand by reducing the voter share from 9% to 5% (Sentiment Poll)

Governance
1

This is input to the open Commission Review item in the Saturn 2 scoping discussion. The priority there is clear: strengthen rETH demand. This is one concrete lever for it.

The problem

rETH supply has fallen more than 40%, from around 560,000 to around 328,000, declining for over a year. One obvious pressure is net yield. rETH takes a 14% fee on staking rewards while Lido takes 10%. Same basic staking market, higher fee, lower net yield, every year.

Exit is already being addressed

RPIP-71, RPIP-73 and RPIP-44 are in scope and together go a long way toward answering “can I get my ETH back” at fair value. That is the right work, but it does not answer the other question: why hold or buy rETH in the first place. That one is about yield.

The proposal

Reduce the voter share from 9% to 5%, leave the 5% node-operator commission untouched, and bring the total rETH rate to 10% or less.

Whatever the fee does not take stays with rETH holders, so those four points go straight to holder yield. This is not a workaround: RPIP-46 itself lists raising the holder share with a matching cut to the voter share as a way to increase rETH demand. It is the lever used as intended.

This is not about node operators. They run the validators and we want more of them, so their commission is not the lever. The target is the total rETH rate, and the voter share is where the room is. The point is a lower total fee.

This is a live governance discussion

The rETH rate moves through governance, and the Commission Review is open for input right now as part of Saturn 2 scoping. This is the moment to weigh in on the values.

What a competitive fee does

First, retention. A lower fee removes the main reason to redeem, so the outflow slows and supply stabilises. Given the trend, that alone is worth it.

Second, new demand. In the Saturn 2 scoping thread, @paladin147 argued that getting rETH’s APR even 0.1% above stETH could pull heavy minting demand from loopers, and said he would take 0% commission for six months to kick it off. A favourable spread attracts leveraged staking flow. So retention is the floor and a real spread is the upside.

For RPL holders

Value capture is a share of protocol revenue, and that revenue grows with rETH supply. The rework says it plainly: RPL holders are maximising voter share times rETH TVL, so they have an incentive to take a smaller share to grow the protocol. A smaller share of a larger supply beats a larger share of a shrinking one.

Yes, this trims near-term income for vote-eligible RPL, including for holders who back it. That is the honest cost. But a high share has not protected RPL value anyway: RPL has fallen sharply while supply bled out. Value capture is downstream of a working product, not the point of it.

Bottom line

Holding the voter share at 9% protects a percentage of a number that has dropped more than 40%, and saves neither the protocol nor RPL. A competitive fee is the one move that can grow both.

Are you in favour of the proposal?
  • Yes
  • No
  • Other
0 voters
2

RPIP-73 is about yield. Exiting validators that perform poorly and replacing them with validators that do not will increase rETH yield.

Why do we want more node operators? There’s already a very long queue. How does voter share not also hit node operators?

The nice thing about RPIP-46 is that we can change the commission at any point with a pDAO vote and without needing a protocol upgrade like Saturn 2.

I feel like now is the wrong moment to change UARS commission. If we made this change today, it would do absolutely nothing because there are 0 megapool validators actually staking at this point. Even in a few months, this would only affect about 12% of validators, the rest is still staked in minipools and not affected by RPIP-46. So lowering commission for megapools by 4% would only result in a 0.5 percentage point change or so

1 Like
3

Fair points, thanks.

On RPIP-73: agreed, exiting underperformers lifts yield for rETH holders. But even with perfect validators, the 14% fee still nets less than Lido’s 10%.

Why do we want more operators? We want more operators and more holders, both. It is fortunate we have plenty of operators queued, but that does not mean we want fewer. I agree this is not the side to push. I would even accept some decrease on the operator side if it would not drive them away, but that is risky ground, so do not touch what is working and focus on what is not: rETH demand. If operators are abundant and queued, supply is not the constraint. Demand is. The bottleneck is people wanting to hold rETH.

On voter share hitting operators: true for operators with staked RPL, their voter income trims. The 5% pay for running validators is untouched. The distinction is pay-for-work versus return-on-RPL, and the proposal only touches the second. If we want to stop a year of bleeding, the cut has to come from somewhere, and the voter share is the right place: the people securing the system should stay confident in their pay, while the RPL reward is a bonus on capital, not pay for work.

On timing: Today the change moves the blended rate barely at all, which means it costs current revenue almost nothing. But every validator that migrates to megapools lands on whatever number we set. Hold it at 9% and revisit later, and we re-fight this exact discussion once revenue dependence has built up around 9%. Set a competitive rate now, and the protocol grows into it as migration happens, with new minting decisions made against the forward rate, not the blended legacy one. Cheap now, expensive to fix later.

And doing it now sends a clear signal to rETH holders: hold on a little longer and the yield will be competitive with Lido. That signal alone could work against the outflow.

4

Did you have AI do the writing for this one …

“The network says it plainly”

“It’s not X, it’s Y”

I am in favor of this idea

I am also in favor of human written proposals - but that ship has likely sailed

2 Likes
5

Yes. I did the research with AI assistance and used it to put the post in better shape. English is not my first language, the argument and the position are mine.

Since you are in favour, vote on the poll. That is what it is there for.

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6

Insofar as we want to increase reth’s share, the obvious lever to me is no_share, not voter_share. Second, as knoshua notes, we need to get folks over to megapools in order for our levers to do much of anything. Finally, I don’t think this is our core issue. We have bigger fish to fry on extreme underperformers and guaranteed exit liquidity.

Even once those are dealt with: if we match commission, we should expect to underperform professional NOs on average. They can also more easily go down if push really comes to shove, which I don’t think it will. I don’t think we should be trying to go punch for punch on apy b/c we will lose that race every time, so opting into that framing seems like a bad move. I’m not saying we shouldn’t care about yield, but don’t see the point in framing as “matching”.

Our foci should be on decentralization, risk profiles, diversification, etc instead.

2 Likes
7

I think it’s great you are thinking about this. Always good to see someone who is not one of the usual suspects getting involved.

I would be more inclined to look at NO share if the time comes (and it might) to cut commission (I see val has already suggested the same). Either way, I don’t think it’s quite time for this. We need more migrations before such cuts really amount to anything. Yes, a bit of a chicken and egg situation since there is not enough rETH, but I think the other Saturn 2 drivers will get us there sooner without hindering desire to migrate when possible.

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But as far as actually impacting rETH APR, RPIP-73 will be an order of magnitude more impactful than changing megapool commission now or in the coming months. I just think talking about this now is distracting from much more important issues.

Long term I agree we should lower commission, but as you can already tell from this thread, there are important questions to figure out, like where the commission cut should come from and how low we need to go.

9

This is an automatic “no” vote from me for the use of AI, doubly so for not declaring it at the start and wasting our time. Which is a shame, because I might support the idea otherwise (and may still do so if somebody cares enough to try again without AI).

10

What difference does it make in reltation to the points raised?

11

Good points.

On megapools: you say we need folks over to megapools for the levers to do much. rETH has been shrinking for over a year and the queue does not move. Competitiveness is an urgent matter.

Underperformers and exit liquidity matter and they are in scope. This proposal competes with neither. It is a parameter, not engineering work. We can do both.

On decentralisation, I think we keep overestimating it. The market is telling us, in numbers, how much weight it actually carries: over 5,000 rETH net outflow in the past seven days alone, on a supply of 327,000. People are not choosing decentralisation over yield, they are leaving. Decentralisation wins when the economics are close, not against a structurally worse deal. For most holders comparing staking products, net yield is the first number they look at.

On which share: I am not religious about voter_share. If the review concludes the cut should come partly from elsewhere, fine. My target is the total rate. I picked voter_share because it has the most room and it is return on RPL capital, not pay for work.

12

So in general I think

  1. we do not need more NOs. We have like a million ETH of potential supply from unmigrated pools. The NO queue is basically infinite, and people leaving minipools now are hurting rETH by the large entry queue x2.

  2. There are currently zero megapools, and only like 2000 that we currently have in validator queue. Even if it passes, this amount of yield will not come close to equalizing us with Lido. Not by a long shot.

  3. Currently rpl has no value capture mechanism. With Saturn 2 we will gain voter share, and essentially value of rpl is based on this future capture. Cutting that expected value by 44% *must* have some negative effect on RPL value,possible 44%. That has direct effects on the Team payments and GMC/IMC. Essentially we could lose solvency from multiple locations. I don’t see the proposal addressing WHY RpL is important, or how these concerns would be mitigated.

    so my recs would be something more like: Cut NO share by 1% because we don’t need as many and cut voter_share by 1% to signal to rETH holders that we are serious about long term growth over short term gains. Not sure I’d go further until I see the ramifications.

2 Likes
13

This is movement, thanks. Your rec is a 2 point cut, so we agree the rate comes down.

On RPL value: the math assumes TVL stays fixed. Value capture is share times TVL, and the TVL term is shrinking every week. 9% of a bleeding base has not protected RPL or the team this past year. But the solvency concern is fair, and phasing the cut could address it.

Reading the responses so far, my sense is the No votes are going to the specific 4 point voter share cut rather than to cutting itself.

We need to discover what the community is willing to do: how much we are willing to cut and in what proportions.

1 Like
14

I voted “other” as I’m in favor of rates going down to retain/attract rETH demand. I don’t think dropping from 9->5% immediately is wise, but I would support smaller drops to the voter and/or NO shares.

1 Like
15

I agree with you on most issues. I don’t agree in this case. Nobody argues that this should take precedence over dealing with underperformers and exit liquidity, we can deal with more than one (or two) issues at the same time. But what is clearly wrong is that these would be “bigger fish to fry”. On beaconcha.in Rocketpool has a 96.9% score and Lido 99.6%, a 2.7% difference. So reducing comission from 14% to 10% would be a change with bigger magnitude than underperformers (including non-performers) and non-professional performance overall combined. And while decentralization may be our strong suit, it doesn’t follow that we can just charge whatever we want for it without being punished by the market. Even those who value the health of the protocol and prefer us over Lido will measure that preference against their returns.

What annoys me most is that this 14% commission has somehow become the starting point for all commission discussions even though it originated from a time when all of the commission went to NOs and we were heavily NO-restricted. There is no reason at all to talk about 14% as a starting point. Instead the starting point should be a competitive rate. Lido and Binance charge 10% and they’re the biggest and second-biggest players. That should be the starting point. Since RPL takes the lion’s share of the 14%, it would have to eat most of the reduction, but of course we can also reduce NO-share. CSM offers 3.5% and they have just about enough NOs to absorb new ETH. So it seems entirely reasonable to reduce NO-share to 4%.

And while I don’t like an AI written proposal, unless we close this one and open another one then this is what we got.

3 Likes
17

The biggest issue with all of this is that we have a bootstrapping problem. We need more rETH to get more megapool validators and we need more megapool validators for commission changes to have any noticeable effect.

Minipools have a fixed commission.

18

This is wrong, because we wouldn’t be changing commission for everyone, so it wouldn’t be 14% to 10%. Closer to 14% to 13.5% and underperformers are indeed more impactful.

19

The problem with this is that they have significantly lower bonds. This means that their 3.5% commission translates to higher overall yield than our 5%. It also means that they need significantly less total ETH from node operators to serve the same capacity.

21

It wouldn’t change commissions for everyone immediately, but it would change the headline commissions. Every additional reth mint pays only 10% commission and the overall rate will steadily approach that value.

If you start at 14% instead, even though there really is no reason to, you’ll have a hard time convincing people that you’ll reduce the rate eventually once you have enough TVL in Saturn 2. I mean how does that work? You reduce the commission rate because rETH demand is too low. That’s the whole point. But if rETH demand is so low that Saturn 2 TVL never takes off then you won’t reduce commissions because it doesn’t really matter? There’s obviously a problem with that approach.

1 Like
22

I also think it would be important to increase the demand for rETH. It has been said that there are already enough NOs, but interest in rETH is necessary not only for development, but also to maintain the current number of validators.

New validators are currently practically impossible to create in significant quantities. This can be ignored, but it will not do any good to the reputation of the project, and will channel new capital (and additional capital of the current rocketpool NOs) elsewhere. Or you can start increasing the bond (maybe 6, 8, 16 eth bonds), but this stepback will only neutralize the advances of the Saturn 1. I don’t think either of these would help the length of the queue.

It is useful to remove extreme underperformers, but I’m not sure it is the bigger fish because the current number has been accumulating for long time. This will be a one-time boost to the queue, and then it will not have a continuous effect. What Rocketpool needs is a continuous stimulation of demand for rETH.

It is also unlikely that those who can’t wait the queue will convert their ETH to rETH. They have the hardware and learned the method, so they will run validators elsewhere.

The reasonable way is to reduce the current 14% fee. Rocketpool should reach the 10% rate of competitors. The commitment to decentralization alone does not help Rocketpool in the competition, because even those who value this most cannot join at the moment. The project would have to be competitive in terms of profit as well.

The rETH supply in the past year decreased by about 21%, while the amount of ETH staked in CSM has tripled. Due to the abundance of funds CSM validators are already running with bonds of less than 4 ETH, which was a promising plan in Saturn 2, but is not a realistic expectation now. I think the difference is clearly in the fees.

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