Rocket Pool Bridge Campaign

Growth
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Gm Rocket Pool community,

A message from your Depressed Bankrupt Director,

Ronin and Avalanche are exploring the idea of minting rETH and bridging the LST to their chain. Ronin has expressed minting $3M USD in rETH to bootstrap liquidity on their chain and slowly mint more with the success of the campaign. This would be highly beneficial for rETH as it will have a first mover advantage of a ETH LST on these chains. I propose the DAO should create the rETH contract address (CA) on all new chains rETH is implemented in going forward.

Currently Ronin’s new canonical bridge will be Chainlinks CCIP and Avalanche will not be adding new tokens to their canonical bridge. It would benefit the DAO to own the CA of rETH on each destination chain because it will allow the DAO to choose which bridges have permission to mint rETH and avoid rETH liquidity fragmentation. For example, currently the DAO does not own the CA on Arbitrum, this has essentially created a slow bridge (canonical) and a fast bridge (Hop Protocol), this has created liquidity fragmentation which requires LP management by the bridges. If the DAO owned the CA of rETH on each chain it would have the governance power to approve/deny bridges that could mint rETH on the destination chain.

Image provided by @Valdorff

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AlphaGrowth is working on a bridge campaign to allow a small fee to be charged on all rETH volumes going through bridges. This small fee would go back to the DAO to help fund itself other than RPL inflation. It is important for the DAO to develop a strategy that does not allow the fee to be circumvented by another bridge or bridge aggregator. Allowing the DAO and the governance process to create and have control of the CA on each chain would be the first step to this campaign.

While meeting with bridge providers and talking to community members, @Valdorff had proposed looking into using xERC-20 smart contract for rETH. The xERC-20 is not a standard adopted by the Ethereum ecosystem or wider crypto community and might prove difficult to implement. Moreover, the xERC-20 is not something that is out of the box ready for adding fee implementations for bridge volumes.

However, the xERC-20 does have some benefits such as, allowing the DAO to approve or deny which bridges rETH can be bridged on, essentially doing this on ETH mainnet rather having to do this for each chain. The DAO would also be able to stop flows per chain and set rate limits per chain. The smart contract would create a 1:1 token of rETH, essentially locking the rETH in the smart contract and then minting rETH in the destination chain, no need for Liquidity Pools.

I would also like to start a community call campaign with @ken to have different bridges speak to the community on their tech and why protocols have been using them.

In conclusion while the DAO starts the bridge community call campaign and the debate on what bridging strategy is best for rETH. The short term solution would be for the DAO to create the CA of rETH on the following new chains, Ronin and Avalanche. Below are the following options I believe are available to Rocket Pool, please vote which path you think would be most beneficial for Rocket Pool and rETH.

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I’m generally open to discussion around bridge options. For Ronin in particular, it seems CCIP is their native bridge, so there’s not even a tradeoff happening. I’ll suggest some structure here… I think you’re actually proposing many different-but-related things:

  1. Use CCIP for Ronin (this is their native bridge)
  2. Use CCIP for Avalanche (there is no native bridge – this is choosing a canonical 3rd party provider for Avalanche)
  3. Use mutable contracts for CCIP output tokens. Would need some way for the pDAO (or a delegated group) to make changes.
  4. Charge users a fee for CCIP bridging (creates a revenue stream, but might increase friction and make for small crosschain price differences)

I’m a clear “yes” on #1 and an “I don’t know” on #2, #3, and #4.

I do feel the need to correct a couple of things:

For example, currently the DAO does not own the CA on Arbitrum, this has essentially created a slow bridge (canonical) and a fast bridge (Hop Protocol), this has created liquidity fragmentation which requires LP management by the bridges.

This isn’t an accurate representation (on either Arbitrum or Optimism). There is a single canonical rETH, which is the native bridge. The Hop bridge was intended to be a helper fast bridge as shown in the bottom left design in the image you posted. This is not a failure, this is the point. There is no liquidity fragmentation – Hop’s hrETH is, to my knowledge, not used anywhere outside of the bridge and associated liquidity pool. If we had an upgradable rETH contract available, I don’t think that means we’d do anything different with Hop or any other bridge. We’d have more options, sure, and fewer guarantees (immutability is itself a feature). Using any of those options would be a separate decision.

@Valdorff had proposed looking into using xERC-20 smart contract for rETH

This isn’t an accurate representation. I summarized my position to you as “I am not currently convinced there is a mature enough solution” and introduced xERC-20 with “https://www.xerc20.com/ has some thoughts, but early days” and “I think they do currently function, but it’s not an accepted eip, so it’s kinda a weird middle ground”.

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The proposal is for the DAO to own the CA for rETH on Ronin, Avalanche, and any future chains that adopt rETH. This allows the DAO to govern which bridges can burn/mint rETH on destination chains. This will also allow for AlphaGrowth to work on its bridge campaign that will help the DAO earn fees from bridging volumes.

Immediate steps:

  1. The DAO takes ownership of the CA for rETH on Ronin, Avalanche, and future chains.
  2. Grant Chainlink CCIP permission to burn/mint rETH on Ronin due to it being the canonical bridge.
  3. Consider creating a Security Delegate or have the pDAO handle governance for future bridges/chains.
  4. The DAO/Security Delegate will decide through governance which bridge will be the canonical bridge for rETH on Avalanche, if approved.

This proposal aims to increase the DAO’s control over rETH and provide more flexibility in choosing bridges, while also bringing a new revenue stream to the DAO other than its RPL inflation.

I’d also like to apologize to @Valdorff for the miscommunication on the xERC20 comments, thank you for providing proper context of the conversation.

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From a technical standpoint, we’re in communication with Chainlink to gather their requirements for our team’s involvement in this project, assuming it moves forward. Our current understanding is that Chainlink will handle the technical work. We will confirm this over the coming weeks.

Additionally, we will explore what power the DAO/Security Delegate would hold over a mutable token - you mentioned bridge access control but there may be other powers and that is important when deciding whom/how that power should reside.

At this stage, it does seem that the technical cost is low/minimal and there is potentially significant rETH inflows.

I’d love to hear more from the community about the bridging fee. @Valdorff raises a valid point that a higher fee could increase friction for users, which is counter to our goals. However, I also recognize that increased revenue can be crucial in maintaining competitiveness.

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I’d also like to apologize to @Valdorff for the miscommunication on the xERC20 comments, thank you for providing proper context of the conversation.

No sweat and sorry for coming in hard. Just didn’t want my uncertainty to be read as a strong stance.

Ok… so for step 1, you’re asking the pDAO to vote to not use native bridges directly. Instead I think you’re asking for a fully mutable (read: can rug 100% of the value on the L2) contract that would be our canonical contract on each chain, and then we’d make some kind of interface to hook up with bridges. Without a bridging standard, I’m not currently seeing how supporting different bridges would work without ~full upgradability.

One option I thought of would be to simply allow the individual bridges and have our contract enable 1:1 wrapping/unwrapping. This works and doesn’t need full mutability, but it’s quite inconvenient (an extra manual tx in and out; some kinda weird thing with multiple bridges where you can run out of juice on a specific bridge – technically simple but hard UX I think).

Maybe this needs a bit more looking into the solution space to understand tradeoffs between flexibility, UX, and security.

Step 1 also asks for “ownership”, which usually needs to be a specific signer. The pDAO doesn’t have a signer, so there is an implied delegation of power here, and it’s not clear to me who that’s being delegated to.

Step 2 is sensible, imo whether or not step 1 happens (though ofc Step 1 decision should happen first since it impacts the canonical token).

Step 3: this is interesting, you’re asking for a management committee(?) that would determine which bridges to use? Would this management committee have direct power to upgrade the rETH contracts on each chain? If we had this for Arbitrum, Optimism and Base, this would be ~complete power over the $34M, $29M, and $20M on those chains.

Step 4: if the above happen, this seems sensible.

Your steps didn’t mention the bridging fee. I do think that’s an important discussion. It’s both a major benefit of doing this, and a potential bit of friction.

I put together a dune query about how much rETH is currently being bridged on Arbitrum. In the last 143 days, it was 5549 rETH, which is~16kETH per year. To get an idea of the range at this volume, a quite-low fee of .01% would yield 1.6 ETH a year, and a quite-high fee of 1% would yield 160 ETH a year. At 1%, this is similar in value to 1% commission on rETH. This assumes the fee doesn’t cause volume to slow down, includes the extreme minting period in early November (which accounted for ~30% of the total volume), and doesn’t consider possible changes in volume. One slightly promising thing is that we seem to often have runs of burning (negative orange dots) or minting (positive orange dots), instead of intermingled – this means it wouldn’t be easy to avoid volume by batching, eg.

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I’m not sure where that puts me… with a high fee, this definitely matters. With a modest fee, this might be like “nice bonus, but not changing the game”. I think something in the range of 0.1%-0.5% could be material and might not be problematic. It’s a little hard to predict the impact on volume, and that’s really critical to the idea.

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Gonna be honest here and I think I speak for at least a couple others, but I’m not exactly sure what we are talking about here. I know the words and get the general drift and know about chainlink working with the team, but can someone dumb this down slightly so I know where to start opining?

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I appreciate Val’s points, and I’d like to provide more context on the current proposals. Ronin and Avalanche are interested in minting rETH, with Ronin aiming for $2-$3M USD of rETH with the potential of minting more with a successful launch of rETH on Ronin. Avalanche is discussing minting $5-$10M USD of rETH. I’d like to express these opportunities are time-sensitive.

To address concerns, I’d like to clarify my proposals:

  1. I suggest the DAO owns the CA for rETH on destination chains. This allows the DAO to govern which bridges can mint/burn rETH and add helper bridges without creating LPs.

  2. Using Ronin and Chainlink as an example, the DAO owned CA ( potentially an 8/8 multisig, 2 from Labs, 2 from IMC, 2 from GMC, 2 from DAO) grants access to Ronin’s canonical bridge Chainlink’s CCIP for wrapping/unwrapping rETH. This solves all UX and security issues

  3. I propose the DAO has more input in rETH’s movement and who benefits from it. Currently, bridges earn value from transferring tokens, while the DAO earns nothing.

Regarding fees, we’re discussing a tiered structure with multiple bridges:

  • 20 bps for transactions between $0-$1K
  • 10 bps for transactions between $1K-$10K
  • 5 bps for transactions between $10K-$100K
  • 2 bps for transactions above $100K

However, Chainlink can only implement a flat fee structure at this time, with a proposed flat fee of $5. While the current bridging volume is low, AlphaGrowth plans to bring high-yielding opportunities to drive volume and increase revenue.

I understand the revenue may seem minimal, but it’s a step towards a more sustainable funding model for the DAO, reducing reliance on RPL inflation.

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Lemme try a 101:

Ronin CCIP bridge

Every L2 has a bridge they use that they consider native. Ronin are using Chainlink’s CCIP product as their native bridge. We have previously supported native bridge work for rETH, so this part isn’t novel yet.

Ronin minting and Avalanche minting

Folks are interested in making a bunch of rETH – this is pretty much purely positive for us.

Bridge fee

One thing CCIP enables is charging a fee. Eg, every time you bridge you pay $5. The idea is that this could be a novel source of DAO revenue.

Token contract address ownership

Thus far, the tokens on L2s have been immutable. They are just basic ERC-20s that have no owner that can change any of their behavior. SSJ2 is talking about having these contracts owned by the DAO (I am still not clear on the mechanics of that, and think it likely that’s a delegated group). This would allow some flexibility like later allowing an extra bridge to mint the token (eg, axelar in addition to CCIP). It might also allow things like enforcing pauses or rate throttles or maybe fees on the bridges. I’m not the clearest on what could be done, nor on how it could be guardrailed. At the extreme of “fully upgradable”, that allows a rogue L2 contract owner to take 100% of the value of the token on the L2.

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the DAO owned CA ( potentially an 8/8 multisig, 2 from Labs, 2 from IMC, 2 from GMC, 2 from DAO) grants access to Ronin’s canonical bridge Chainlink’s CCIP for wrapping/unwrapping rETH

Thanks for the concrete suggestion. I think we do need to balance security with not getting rekt because someone lost a key. One possibility is making it a multisig of multisigs like 3/3 (IMC, GMC, Labs aka dev team) or even 3/4 with those same folks and security council once we make one of those.

Regarding fees, we’re discussing a tiered structure with multiple bridges […] However, Chainlink can only implement a flat fee structure at this time, with a proposed flat fee of $5

I added both of these and a ten bps across the board structure to https://dune.com/queries/4755318. I got $790 for flat $5, 5.5 ETH for flat 10bps, and 1.6 ETH for tiered bps (I approximated your tiers using $3k ETH to avoid the complexity of grabbing market prices etc). Annualizing that, we get $2000, 14 ETH, and 4 ETH respectively. Again – this is Arbitrum, and a specific time frame, so I’d guess this to be somewhat higher than most L2s in most time periods.

Honestly, I don’t think this amount is a big direct needlemover. That said, I do still think it’s interesting because (a) it’s exogenous yield – that’s pretty cool, and (b) it normalizes the idea of charging for things. Essentially, I think (b) is a worthy discussion, and this is a pretty low-stakes entry point to it. Also… there’s an interesting perspective available… the IMC spends ~20ETH per year on arbitrum incentives. So maybe it can be seen as more of a needlemover if we, eg, use it for the L2 it’s servicing.

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Thanks. And I’m slowly incorporating this into my brain. I agree the money is not much. But the idea and where it can lead it good. Plus it’s like grocery shopping, one thing might be a small amount but a bunch of little things and suddenly it’s a lot of money.

I guess my next question is,

Thus far, the tokens on L2s have been immutable

So us owning the contract is about collecting the fees (and the other things you mention like throttling etc.), but why does Ronin care? Why would they mint rETH so that we can collect fees?

As an aside, and as a GMC member, I really don’t like committees being on this multisig. I’m not saying I would necessarily try my hardest to stop it, but I don’t think we are legally setup for such a thing (which is why legal entity status matters, but that’s another discussion).

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I think we could probably collect fees without owning the contract. It’s more about flexibility and like “If chainlink doesn’t pay, then…” – this is what SSJ2 talked about with swapping the bridge provider, eg.

why does Ronin care? Why would they mint rETH so that we can collect fees?

I doubt they care about ownership or fees. I think they just want rETH on their chain cuz it’s awesome.

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