Making variable minipools (currently LEB8s) truly variable

The current situation

As we all know you currently must stake 10% of your borrowed ETH as collateral, else you will not
be getting any RPL staking rewards. We also know this leads to many node operators being undercollateralized in market situations like right now (ETH rising against RPL). Additionally to that NO’s often have funds they get from staking rewards which sit in their cold wallets in form of ETH or rETH as you can not utilize it fully while staking as the necessary funds for running an LEB8 and LEB16 have a big step in it (10.4 ETH vs 17.6 ETH).

My proposal

What I am suggesting is the ability for NO’s to top up their ETH share of the minipools they are running – so basically the opposite to a bond reduction.
With a LEB8 your exposure to RPL is already high. Taking me as example I do not feel comfortable topping up my collateral if ETH potentially pumps more than RPL. So, wouldn’t it be great if I could instead simply use ETH instead of RPL? I have already read about similar suggestions on discord and various forums but not like them I do not want ETH as collateral but rather simply “buy more shares” of the minipools I am already running.

Some example

Bob runs a LEB8 but because of the current RPL/ETH ratio he only has a collateralization of 2ETH in RPL. He has 4 rETH in his cold wallet as 4.5 ETH would not be enough to spin up another minipool. If he wants to get rewards at the next checkpoint he ether has to swap some rETH for RPL or borrow some RPL using his rETH as collateral in a MAKER vault.

In a not so distance future Alice is in the same position. But recently rocketpool deployed their new protocol version following the Dencun Ethereum upgrade. She checks the deposit pool and sees that it still has a capacity of 30%. This is important as a bond-increase can only be executed if there is enough room in the deposit contract. She swaps her 4 rETH for 4.5 ETH and executes a bond-increase on her minipool. This is not free – additionally to the gas costs also 1% of the bond-increase amount gets burned from her staked RPL. But she is fine with that, she checks her node and sees that her variable minipool now has a bond of 12.5 ETH and she is staking RPL worth 1.955 which is above the needed 1.95.

Final thought

I know, even though 1.955 is still close to 1.95 and the ETH/rETH ratio should change between Bob and Alice I think this example explains my point. Instead of holding rETH it would be great to have some other way to utilize the ETH or rETH sitting in your wallet directly on your node. Also the Idea with the 1% burn of RPL tokens was something I came up while writing this. The rocketpool eco system is now at a point where we really have to think about some use cases for RPL. This was just a little idea, where we as node operator could burn some RPL to get some major benefits from the protocol.

I have no idea if this is technically possible to implement, this is simply a draft where I would like to hear some thoughts of the community.

Cheers rocketeers!

I think this is (almost) mathematically equivalent to holding rETH. Let’s say you have 8 bonded ETH and are earning commission on 24.

  • Option 1: add 2 ETH per your proposal, now you earn commission on 22 ETH
  • Option 2: get 2 ETH of rETH. You earn commission on 24 ETH and pay commission on 2 ETH for a net of 22 ETH

It’s not quite the same since the rETH earnings are based on the performance and commission of all NOs, but it’s extremely close.

Thats true. Basically you have to compare the avg commission all rETH holders pay (the weigthed average of all nodes) to the commission you get on your node if you use borrowed ETH instead of your own.

Nether the less, if you would do a bond-increase you would lower your RPL exposure (can be a good or a bad thing) and the minimum bond would also sink.

In the scenario presented, the reason it’s not mathematically the same is that you’d start getting RPL rewards again, whereas you wouldn’t if you held rETH. No comment beyond that, but I do get OPs point.

I think this is an interesting proposal. Wouldn’t it be better to bond via rETH vs Eth?

Personally I would rather bond using rETH as my motivation is to support ETH and I don’t like that I’m forced to speculate on RPL.

As long as the total rETH + RPL is above the 10% threshold, the the NO should earn RPL prorated to the amount of RPL they have.

Or, if that is hard technically, then maybe have two types of minipools; one set that is boned via RPL and another than is boned via rETH.

Well, people are discussing the concept of using ETH (or even rETH) as slashable collateral inside rocketpool. But I think it may be hard to get this realized politically. Currently the only two usecases for RPL are the collateral requirment and the voting power it gives. Yes there is also the aspect of binding RPL as DAO member, but this comparably not relevant.

No one knows how the market would react to such a change. The protocol is governed by the DAO, so defacto people who stake RPL. Changing the collateral scheme drastically would potentially destabilize RPL and this would mostly affect people who use RPL. So this may be really hard to get through a vote.

The above proposal takes this into account and tries to stay on the site where it could pass a vote.

Also, maybe its sufficent if we are simply able to create minipools with bonding values between 8ETH and 16ETH. If this dynamic change on the go would be to hard to implement simply being able to create a 12 ETH minipool would be a greate improvement as well.