Saturn 2 - rETH improvements (withdrawals, protection)
What is the work being proposed?
This grant is to cover the costs of research/governance/spec development of the two features below, with the goal of inclusion in the Saturn 2 release:
- rETH withdrawal liquidity via forced exits
- rETH protection from underperforming nodes via forced exits
Is there any related work this builds off of?
This work builds off the rest of the tokenomics rework for the Saturn upgrades (Tokenomics Rework | Rocket Pool Improvement Proposals), especially RPIP-44: Integrating Execution Layer Triggerable Exits
Will the results of this project be entirely open source (MIT, GPL, Apache, CC BY license or similar)? If not, which parts will not be, why, and under what license will they be published?
The new RPIP’s will be will be available on GitHub in the same manner as other RPIPs
Benefit
| Group | Benefits |
|---|---|
| Potential rETH holders | Potential rETH holders are currently deterred by the lack of guaranteed withdrawal liquidity near the peg. With the secondary market often being the only mechanism to withdraw, a discount to peg can rapidly grow which can erase the value accrued from staking yields (an rETH holder may be forced to sell their rETH for less ETH than they started with even after liquid staking for a long period of time). Some users also complain that the protocol does not provide a direct means to withdraw their ETH (unaware of, or afraid to use secondary markets) even when rETH is relatively close to peg. This may deter them from staking more ETH in the first place, or leave them with a bad memory and cause them to dissuade others from staking with rETH. Many potential holders also compare APY when choosing an LST, and exiting significantly underperforming node operators can reduce drag on the protocol, improve the APY to be more competitive with other LSTs, and as a result attract new rETH holders |
| rETH holders | The primary beneficiary of this work is rETH holders. This work would provide stronger withdrawal liquidity guarantees, and could help rETH more consistently stay on peg (less likely for a discount to grow, since there shouldn’t be a fear of the discount growing larger as it could always be returned to peg via forced exits - instead of relying only on voluntary exits from NO’s to capture an arbitrage). This work should also improve rETH yields, since significantly underperforming NO’s could be force exited instead of causing drag on the protocol (while someone could be offline for any number of reasons including lost keys/incapacitation/death) |
| Potential NOs | Potential NOs may be not be able to join the protocol if there is not enough rETH demand due to the lack of features that would be worked on through the funding of this grant. This work could help increase rETH demand which would allow potential NOs to join (with shorter queues) |
| NOs | Existing node operators may be able to stake more nETH once more pETH is available with increased rETH demand. The threat of being exited for significantly under performing may incentivize better performance which would also provide the NO more rewards for their own nETH, and better planning for unexpected circumstances |
| Community | Higher TVL (from increased rETH demand) is the most effective marketing, and when the protocol is succeeding, the community tends to have higher morale |
| RPL holders | With the tokenomics rework, when rETH TVL increases, the amount of ETH earned per staked RPL increases (more revenue split among the same supply of RPL). This work could increase the attractiveness of rETH which is currently the critical blocker of protocol growth (and long term RPL value) |
Which other non-RPL protocols, DAOs, projects, or individuals, would stand to benefit from this grant?
None
Work
Who is doing the work?
The core contributors will likely be myself, @ramana , @Valdorff , @knoshua , @haloooloolo , but there may be other DAO members who meaningfully participate
What is the background of the person(s) doing the work? What experience do they have with such projects in the past?
These contributors have assisted with similar work in the past, and have expressed interest in completing this work if funding is approved
What is the breakdown of the proposed work, in terms of milestones and/or deadlines?
I recommend payment in full once the RPIPs have been completed and voted on / approved by the DAO.
How is the work being tested? Is testing included in the schedule?
The work will be tested through discussions and implementation by the core team (and audits prior to Saturn 2 release). Testing is not included in the grant schedule, except to the extent that the team engages in discussion
How will the work be maintained after delivery?
The core team will implement the RPIPs in Saturn 2
Costs
What is the acceptance criteria?
RPIPs completed and successfully voted on (passing vote) by the pDAO
What is the proposed payment schedule for the grant? How much USD $ and over what period of time is the applicant requesting?
The request is for $25,000 and the work would likely need to be completed in the next 2-3 months to be included in Saturn 2. I would recommend giving primary discretion to the core contributors on how to split the funding (including expectations on the front end, and judgement after the work is completed). If someone else meaningfully contributes (or one of the core contributors previously listed doesn’t meaningfully contribute), I’d recommend giving the core contributors a chance to revise the list of core contributors after the work is completed, through a discussion/vote.
I would recommend the core contributors rank each other prior to payment (and rank anyone else who meaningfully participates), and try to build consensus on how payment should be divided prior to the GMC making their final decision. For any disagreements, I would recommend the GMC have the final say on the exact amounts paid out per person.
My personal preference would be splitting the funding into categories (something like 50% toward writing the actual specs, 25% for research / discussion (any modeling / consensus building), 25% for governance (updating explainers / forum polls/updated, preparing vote text, etc). But I think this could be up for discussion among core contributors
How will the GMC verify that the work delivered matches the proposed cadence?
The RPIPs will be public along with the final snapshot result.
What alternatives or options have been considered in order to save costs for the proposed project?
I have asked if the core team would consider contributing to funding this grant since the responsibility for this work falls on the team if the DAO does not step up to help (which could delay Saturn 2, or result in these features not being included). I proposed a cost that felt conservative relative to the amount of time required to research, develop, and complete the governance for these features. I also reached out to the contributors to confirm how much payment they would require help complete this work. Without this funding there is a lack of sufficient incentive / motivation for DAO members to contribute, which has led to this topic stalling since the ideas were first discussed last fall in the rETH incubator.
Have you already been compensated by the RP protocol in any way for this work?
No
Conflict of Interest
Does the person or persons proposing the grant have any conflicts of interest to disclose? (Please disclose here if you are a member of the GMC or if any member of the GMC would benefit directly financially from the grant).
Not that I’m aware of
Will the recipient of the grant, or any protocol or project in which the recipient has a vested interest (other than Rocket Pool), benefit financially if the grant is successful?
Not that I’m aware of