The Bull Case for Rocketpool with Marceau & Ken Smith

On today's episode, we welcome Marceau and Ken Smith, two Rocketpool community members to share everything you need to know about Rocketpool, staking, and the bull case for Rocketpool, ETH, & RPL. ------ ConsenSys | Mint a Merge NFT! https://bankless.cc/themerge ------ SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ ️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ROCKET POOL | ETH STAKING https://bankless.cc/RocketPool ️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave MAKER DAO | DECENTRALIZED LENDING https://bankless.cc/MakerDAO LEDGER | SECURE STAKING https://bankless.cc/Ledger ----- Timestamps: 0:00 Intro 4:40 Guest Relationship to Rocketpool 5:45 What is Rocketpool 7:36 Rocketpool's Value Prop 9:45 Two-sided Marketplace 13:20 Rocketpool's Community 16:20 The Bull Case for Rocketpool 19:50 rETH 25:20 rETH Yield 26:30 Protocol Risk 31:05 Rebasing 38:26 Running a Rocketpool Node 43:45 Rocketpool Critiques 51:48 Institutions 57:20 Single Node Operators 59:45 Pools 1:06:00 $RPL Explained 1:10:15 $RPL Critiques 1:16:00 $RPL Bull Case 1:24:40 Closing ----- Resources: Marceau https://mobile.twitter.com/marceaueth Ken Smith https://mobile.twitter.com/shtimseht Rocketpool https://rocketpool.net/ ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:11David Hoffman?

  Bienvenidos a Bankless Nation a la cuestión de la cuestión de la bola para Rocketpool. Este es nuestro episodio semi regular de la cuestión de la bola donde agarro una comunidad, agarro y proponen a algunos miembros de la comunidad para tomar la dirección sobre quién puede presentar el mayor, mejor y más grande caso para su proyecto respectivo y token. Y hoy en el stream estamos hablando con dos miembros de la comunidad Rocketpool. Y Rocketpool es una comunidad que ha estado en la red durante mucho tiempo. Fueron uno de los pocos proyectos que pasaron por la manía de 2017 y por el mercado de la bear market de 2018 a 2020. Y fueron uno de los pocos proyectos en los que presté atención. En mi estado de 2017 no podía realmente saber qué es la diferencia entre un buen proyecto y un mal proyecto.

• 0:53David Hoffman?

  Y fueron los que salieron de la 2017 con una comunidad de entusiastas de estacas que los apoyan a lo largo de todo el camino. El equipo centralizado de Rocketpool es de alrededor de cinco personas y han sido una organización muy grassroots, de arriba a abajo. Y esta comunidad ha venido a la red de este protocolo como algo, no solo algo que existe en la capa de aplicaciones, sino un proyecto de capa de aplicaciones que también está muy cerca del metal de Ethereum y muy núcleo a la verdadera ethos de Ethereum. Al menos esa es mi interpretación de Rocketpool. Y tendremos las opiniones de Ken y Marceau sobre su perspectiva de lo que es Rocketpool realmente y lo que significa para Ethereum.

• 1:32David Hoffman?

  Rocketpool en este momento también es un patrocinador de Bankless, sin embargo, que no tiene relación con si o no hacemos shows. La comunidad detrás de Rocketpool es la razón por la cual estos dos miembros de la comunidad están aquí. Y también como anuncio adicional, Bankless en realidad estaca ahora 160 Ether con Rocketpool en nuestro Node Rocketpool. Así que esos son nuestros anuncios. Vamos a entrar en el show y más justo después de hablar con algunos de estos fantásticos patrocinadores que hacen posible el show. Lens Protocol is an open-source tech stack for building decentralized social media applications. It is the new era for social media. We all have toxic relationships with our Web2 apps. We want to break up with them, but we can't. These applications own our digital lives and all the relationships that we've made. We need to break through to a new paradigm of social networking applications that we

• 2:17David Hoffman?

  control, rather than them controlling us. Lens isn't a social media app, it's a protocol to let a thousand Web3 social apps bloom. Lens is a permissionless and transparent social graph that is owned by the user. In crypto, we say "not your keys, not your crypto," and on Lens, we say "not your keys, not your profile." With Lens, your followers go with you to whatever social media application you want to use, and instead of being trapped by an algorithm chosen by that app, Lens lets you choose the way you want to experience your social media. Lens is the last social media handle that you'll ever need to create. So in order to get started, there's a secret code word in the show notes. Enter that code word in the Google Form links, and you'll be well on your way to entering the world of Web3 social. Rocketpool is your decentralized Ethereum staking protocol. You can stake your ETH in Rocketpool and get our ETH in return, allowing you to stake

• 3:02David Hoffman?

  your ETH and use it in DeFi at the same time. You can get 4% on your ETH by staking it with Rocketpool, but you can get even more by running a node. Rocketpool is the only staking provider that allows anyone to permissionlessly join their network of validating Ethereum nodes. Setting up your Rocketpool node is easier than running a node solo, and you only need 16 ETH to get started. You get an extra 15% staking commission on the pooled ETH that uses your node to stake. You also get RPL token rewards on top. So if you're bullish ETH staking, you can boost your yield by adding your node to the decentralized Rocketpool network, which currently has over 1,000 independent node operators. It's yield farming, but with Ethereum nodes. You can get started at rocketpool.net, and you can also join the Rocketpool community in their Discord. You can find me hanging out there sometimes in the chat, so I'll see you there.

• 3:46David Hoffman?

  Arbitrum is an Ethereum Layer 2 scaling solution that is going to completely change how we use DeFi and NFTs. Some of the coolest new NFT collections have chosen Arbitrum as their home, while DeFi protocols continue to see increased liquidity and usage. You can now bridge straight into Arbitrum from more than 10 different exchanges, including Finance, FTX, Huobi, and Crypto.com. Once on Arbitrum, you'll enjoy fast transactions with cheap fees, allowing you to explore new frontiers of the crypto universe. New to Arbitrum, for a limited time, you can get Arbitrum NFTs designed by the famous artists Ratwell and Sugoi for joining the Arbitrum Odyssey. The Odyssey is an eight-week-long event where you complete on-chain activities and receive a free NFT as a reward. Find out more by visiting the Discord at discord.gg/Arbitrum.

• 4:26David Hoffman?

  You can also bridge your assets to Arbitrum at bridge.arbitrum.io and access all of Arbitrum's apps at portal.arbitrum.1 in order to experience DeFi and NFTs the way it was always meant to be: fast, cheap, secure, and fiction-free. Rocketpool is on the stream. Here I am joined on the left with Ken Smith, Rocketpool community member, and Marceau. I don't know if that is your real last name, but my last name on Zoom is Ethan. It's a good last name if that's the real one. Ken and Marceau, welcome to the stream.

• 4:57Speaker 01

  Thanks for having us. Appreciate it.

• 4:58Speaker 02

  Pleasure being here.

• 4:59David Hoffman?

  So you guys are two Rocketpool community members. Do the titles go any deeper than that? Or how would you describe your guys' relationship with Rocketpool? Ken, I'll start with you.

• 5:09Speaker 02

  Yeah, so I'm a member of the Rocketpool community first and foremost. I have a special title there. They call it Rocket Scientist. It's just somebody who knows a little bit about the protocol and is willing to share their time on Discord to help educate others. And been enjoying it ever since.

• 5:27David Hoffman?

  Marceau, same question to you.

• 5:28Speaker 01

  Yeah, no special title, just a passionate community member. And I think that's kind of what makes Rocketpool kind of special is that they have this core team that's reasonably small and really they rely on this really vibrant community to kind of stand up and provide a lot of the research and marketing and kind of just benefits to the community. So I'm just one of those guys. There's an army of us and I'm just one of them.

• 5:46David Hoffman?

  Yeah, and there's plenty of nuances about Rocketpool that really make it special in my mind. And you touched on one of them. The small, constrained size of the centralized Rocketpool team has really put a lot of emphasis on the strength of the Rocketpool community. And so the void that has been left by the team has created this like very, very strong community around them. But I don't want to get too far ahead of ourselves. Let's just start the very basic 101, speedrun the basic pitch of Rocketpool. What is Rocketpool? Why should we be excited about it? Who wants to take this one?

• 6:20David Hoffman?

  Sounds like a can.

• 6:21Speaker 02

  Yeah, yeah, let me, let me, let me shoot here. So Rocketpool is a liquid staking derivative protocol that allows any user to stake their ETH by simply swapping their ETH for a token called our ETH. And that our ETH accrues interest based upon the Ethereum staking protocol. Individuals can acquire that from a couple of different places. They can do it directly from the Rocketpool contracts themselves or their websites. They could also buy it on any, any marketplace that is selling it. Many DEXs on both Layer 1 and many of the Layer 2s sell the, the our ETH token. And simply holding it, you, you incur interest on that ETH, staked interest on it.

• 7:04Speaker 02

  Rocketpool is also kind of a two-sided protocol. Not only can you come in from the liquid staking side of the house, you can come in from the, the node operator side. So if you have a little bit more capital and you have a little bit of interest in running a validator, a node at home, you can actually become a node operator and not only earn interest on your ETH that's staked, but you can also stake other people's ETH, those, those that are deposited for our ETH and earn a commission on that. So you actually earn more rewards by staking with Rocketpool than you do as a, as a solo node, node validator.

• 7:37David Hoffman?

  And so what part of that story is Rocketpool's, like, what part of that story does Rocketpool really own? Like, what, what is unique about Rocketpool? Cause there's other staking as a service providers. I can stake my ETH with Coinbase. There's also Lido. What about that story is really unique on the Rocketpool side of things?

• 7:53Speaker 02

  Yeah, I think, I think there's, there's probably five things, but three are really what are important, right? I mean, the first thing is that this protocol is a, it's a, it's an Ethereum protocol. It's built with smart contracts on the Ethereum network. And because of that, it's entirely permissionless. It's permissionless to either acquire the our ETH, the liquid staking derivative. And it's completely permissionless to run a node and become a node operator. There is no whitelisting. There's no KYC or, or, or requirements to docs yourself to run, run a node. Because of that, it's completely decentralized. You can run it in any kind Rocketpool has the most number of decentralized geographically node operators of any sticking

• 8:34Speaker 02

  protocol. And because of both of those things, it's fully trustless. There's no requirement to have trust that the team will continue to be there to run the protocol or update the code, right? The code is a series of smart contracts. And so those, those three things really, I think, open it up that it's fully permissionless, decentralized and trustless. It also helps that it's, it's a fully open source. So you can verify this, both the code and the contracts that are there. And Rocketpool also has been very adamant about making certain that it uses the core Ethereum clients, right? Both the, the execution layer clients and the consensus layer clients, it doesn't create its own client. It just simply uses the ones that are out there

• 9:18Speaker 02

  like Geth and Basu, like Nimbus, Lighthouse, Prism. And because of that, it's got one of the most diverse profiles for the node operators that are running their validators, right? We are, we are highly, highly diverse. And because of that, it adds a level of surety and security to those that decide to stake their ETH by purchasing and are acquiring the RE token.

• 9:44David Hoffman?

  I really want to drill down on that two-sided marketplace part where the one side of the marketplace is that people with Ether demand services or abilities to stake their Ether. And there's a variety of different ways of satisfying this demand. They can stake, run their own node and stake their own Ether themselves, or they could stake their Ether with Coinbase, or they could stake their Ether with Lido, or they could stake their Ether with Rocketpool. Like this side of the equation is pretty well understood, I would say, by most in the cryptosphere. But it's that other side of the marketplace. The, the, you know, two sides of the marketplace, that's one side. The other side of that marketplace is largely constrained or restricted on most other marketplace participants. Can you run a node for Coinbase? No, you, no, you cannot.

• 10:28David Hoffman?

  24 people can run a node for Lido. Can you run a node for Stakewise? Like, no, you cannot. But with Rocketpool, that's the most open part of this whole thing. And so it actually creates an actual marketplace rather than, you know, a monopoly or a forced, forced outcome by just like Coinbase stakes with like Bison Trails, for example. Ken or Marso, can you really, let's look, double down on that point. Why is having that other side of the marketplace open for participants so important? What does that really unlock?

• 10:59Speaker 01

  Yeah, maybe just one point on the previous thing about staking providers like they're not all created equal, obviously. I mean, not to say the obvious, but Rocketpool is very, very different than than Coinbase or Lido. And I, one thing I really like about the protocol is that to me Rocketpool is really well positioned as a public good within the, within the ecosystem. And I think there's sort of four qualities that I look for in any kind of staking provider that I really want to love. One is just being kind of exclusive to Ethereum and being aligned with their ethos. One is being purely decentralized and trustless. We're all kind of reminded why this is important with things like OFAT going on. And the other two are being permissionless, like Ken mentioned, and also just not seeking rent. Like Rocketpool doesn't exist to extract commission. There's no skimming of commission to fund a treasury. They're really there to kind of serve that

• 11:42Speaker 01

  two-sided marketplace. And I think it's just a really fair model that makes it a really compelling platform as, as a, you know, a staking service. But your question was more about

• 11:53Speaker 01

  them as a node operator. I'll let maybe Ken jump in with that.

• 11:57Speaker 02

  Yeah, I mean, I mean, Marcel, I think you kind of hit it on right, which is there are these challenges to Ethereum, right? And there's, there's always going to be some threat or some challenge to it in the years ahead, right? And right now it's been about censorship, right? It's been about the influence of government entities to regulate what a node operator can and cannot include in their, in their transactions and the blocks that they propose. And, you know, certainly I'm a US-based staker. My intent is to fully comply with my government regulations, right? I don't, I don't, I don't plan to, to go counter towards them.

• 12:31Speaker 01

  No intent on going to jail?

• 12:33Speaker 02

  Yeah, exactly. But, but you know, so, but how does Ethereum as a whole maintain that there isn't a single government entity providing censorship, right? And so the, the way that it accomplishes that is it makes certain that it's, it's node operators are decentralized, both in different geographic entities, both in different legal jurisdictions for what they, what they have to comply with. Then there's also kind of the, the moral question, right? I mean, there's a lot of interest right now in MEV, especially with the merge coming and the transfer of the MEV coming from the miners that are earning it right now to the potential for stakers to earn that. And there's a lot of moral and ethical considerations that you have to decide, right? There's going to be a lot of choices for stakers now about do you want to extract MEV?

• 13:17Speaker 02

  And if you do, what type of MEV do you want to extract? Is there a line in it that perhaps is not ethically right to extract?

• 13:24David Hoffman?

  I'd like to take a moment and just really like highlight how Rocketpool as an organization is different from the landscape, right? So like Lido is the big elephant in the room, the big whale in the room about like it's the other one out there. There's like others coming to market like Swell is another one like coming like it's taking as a service but not here yet. And then like all the other ones Coinbase, Stakewise are all these centralized operators that, you know, we know what a centralized operator is, so we can kind of, you know, move on from that. There's not too much nuance there, but how is Lido as just like an organization and a community? How does that, how's the flavor of the Rocketpool like org holistically, organization and community combined? How is that different?

• 14:07David Hoffman?

  And for people who aren't familiar with the trading chat in the Rocketpool Discord or just overall how the org works, can you guys help just like shed some light on that part of the thing on Rocketpool?

• 14:20Speaker 02

  Yeah, maybe I'll-

• 14:22David Hoffman?

  Go for it, Ken.

• 14:23Speaker 02

  Yeah, I was gonna say, I mean, I think one of the things you brought up before is that it's two-sided, right? That you actually get both parties in the Discord and chatting about this, right? You get a, you get the group of node operators that very much want to work on kind of the technical side, want to make certain that the nodes are well performing, that they're performing their duties and validation, they're thinking farther ahead in the research channels about where do we need to be to position ourself for MEV and MEV extraction? How do we provide the most capital efficient way to stake the ETH? On the other side, you get the individuals that are the RE holders, right? And they're coming in and what they want to value is to see RE basically be a substitute for ETH, right? That the recommendation would be that no one should just hold pure ETH, you might as

• 15:07Speaker 02

  well hold a yield-bearing asset, right? And get an interest-earning liquid staking derivative in your wallet. And to do that, you need RE to be integrated in as many DeFi protocols as possible, right? So that way, folks don't have a reason to swap it back other than to pay gas on the Ethereum network. And so I think by having both sides there all together in one Discord, it really adds to the value of it. You can see both sides of the coin at the same time and kind of develop and,

• 15:37Speaker 02

  you know, design a protocol that can work for both sides of the house.

• 15:41David Hoffman?

  Right. And I really think that actually does define what the important points are. I think any successful staking as a service system has two things that they need to optimize for. They have their liquid staking token and that liquid staking token, if it's successful, will accrue more yield faster than its competition, right? It simply goes up faster. And so that's one pillar that we'll touch on. And then the other, the other side of the marketplace is the node operators. And it's kind of the same question. Can your system make a node operator more profitable than other systems? And so we'll take these one at a time. What is the bull case for our ETH holders?

• 16:22David Hoffman?

  Why should I hold our ETH over any other alternative staking as a staking derivative asset? Who wants to take this one?

• 16:30Speaker 01

  Let me take a stab at it and Ken, jump in, please.

• 16:34Speaker 01

  I mean, first of all, I would say that like, I think staking is going to be a really big deal in the post-merge world. I think once we emerge from the merge event, people are going to want to chase yield. And having a staking derivative token is a really great representation of how to capture that yield, right? So post-merge yield goes up like 2X and the risk to yield, or sorry, the risk to staking goes down quite a bit just because the execution risk is removed from the equation. We're currently at about, I think, 12% Ether staked in total. It's pretty low. I think, I think we're heading towards 50%, you know, in a sort of saturated state over the course of probably two years. And that's a 4X increase to just the size of staking participation. It's pretty meaningful.

• 17:14Speaker 01

  I also think, you know, liquid staking is a really important function of this as well. You could sort of argue that that liquid staking tokens are sort of a better version of just vanilla ether, right? Because it's a productive asset. So as long as you have the right liquidity depth and the right integrations with your with your staking derivative, it's just a better form of ether. So why wouldn't you hold it? Like, I think it's easy to make the case that staking is a big deal and liquid staking isn't a really, really big deal. When we talk about like our ETH specifically.

• 17:41David Hoffman?

  Wait, so let's pause for a moment. So you were just actually talking about this, the TAM, right? The TAM of what's at stake here. So I totally agree with you. ETH staking, we call it the internet bond market. And, you know, sometimes a little bit like crazily, but not that crazy. Like, we compare the size of like the ETH staking market, which where it is, is like billions per year, and compare that to like the, you know, sovereign bond markets of global nation states. And that's kind of where we think this ether staking industry is going. And then also, you said 14 or 12% of total ETH is staked presently. And I definitely also think that's going to go up somewhere around to where

• 18:22David Hoffman?

  like the core devs kind of think minimum 20, maybe equilibrium around 30, give or take. And so not only are we just bullish as an industry on Ethereum proof of stake, and that's going up and to the right, but we also think inside of Ethereum internally, the proportion of ether that's going to be staked will also be going and maybe 2Xing or 3Xing. Any other color or like numbers that you want to slap on to like the TAM of this whole thing?

• 18:49Speaker 01

  Yeah, I think that point is really clear. I mean, I think the pie is getting bigger and it's easy to project where it's going. I think separately, I would argue that the market share, the slice of the pie that Rocketpool is likely to capture, is also probably going to go up. And I can get into the reasons as to why I think that's probably going to be the case. But I think there's a really compelling story for our ETH is a token that has kind of an interesting history. It was sort of born into the into the bear market. And there hasn't been a lot of sort of like push to grow it until now. And a lot of things are coming together in a really spectacular way in September, which I'm sure we'll get into this, but like, there's a lot of, I think, really great tailwind effects and great narratives that are kind of like all coalescing around the same time. And the teaser is like, it's incentives, it's integrations, it's the merge, it's APR going up, it's risk going

• 19:32Speaker 01

  down. Like, all these things are coming together. And they all sort of multiply and stack on top of each other in a really, really powerful way. I think September is gonna be like the most insanely bullish month for Ethereum fundamentals, at least. I don't know about the price, but like fundamentals could not be any stronger for staking right now. It's just, it's absurd.

• 19:49David Hoffman?

  Okay, so let's go into our ETH specifically. Why will our ETH in the landscape of other staking tokens, which Coinbase also entered the fray with their CB ETH, why would I hold our ETH over any other staking derivative asset?

• 20:03Speaker 01

  Yeah, yeah. So I mean, just to set context, like, we launched back in, I think it was November, and since launch, our ETH, demand for our ETH has captured about a 5% market share in the market. And that is through a bear market, that is with no marketing at all, that is with no team liquidity incentives, and that is with basically zero integrations. So like, our ETH, it's awesome, but you get it and you hold it and you watch the number go up, and that's kind of all you can do with it. And that's changing in a really big way. To talk about the good things about it, like why it's fundamentally a good, a good kind of token, and I'll get into kind of like, what's the catalyst for growth here, a few reasons that make it just, I think, strictly the best product in the market. So for one, it is fully collateralized and insured. Like, there's no risk of like, a run on

• 20:47Speaker 01

  the bank, or everyone getting a haircut because a mass slashing event happened. Like, our ETH holders are just like 100% insured from any kind of catastrophic event that might happen. Also, there's just no counterparty risk. Like, sure, you put a little bit of trust in the smart contract to operate the platform, but you're really farming out, you're staking to a mesh network of operators. And if any one of them underperforms, they get penalized and not you as a token holder. So again, it's like, fully kind of collateralized. There's no collateral, there's no custody or trust requirements, there's no possibility for censorship. This is a really important thing. Right now, it's very topical. And then just, I mentioned a few minutes ago, but like, our ETH is just fully neutral, it is well aligned with Ethereum, and I think just, given

• 21:29Speaker 01

  that it has no kind of trust assumptions that go along with it, it's really well positioned to be sort of a DeFi building block, because it's sort of this neutral kind of Lego that can go in anything. It can be a good half of an LP position. It can be something you take a leverage position on. It has these great qualities that make it very, very neutral, that I think- We'll make it just kind of a fan favorite for DeFi, I think, once we get to that point.

• 21:50David Hoffman?

  And I think it's worth to note that a lot of the properties that you just said are maybe individuals are like, I have a hard time mustering up the motivation to care about those things. But it's also worth noting that DeFi apps will always suck up more demand than individuals. And so, Marso, maybe you could also talk about just like the integration side of our ETH and how demand can come from like the DeFi side of Ethereum and why those particular properties that you just talked about are actually more conducive for DeFi apps than just like the average individual who, you know, doesn't really look under the hood of things.

• 22:26Speaker 01

  Yeah, sure. I think there's two kind of catalysts that are coming that are really meaningful. So one is integrations. I'll talk about that real quick.

• 22:34Speaker 01

  So it hasn't been until recently that I think our ETH has demonstrated enough Lindy effects that it's sort of trusted in the network. So we're now whatever 10 months post-launch and we're really, I think, there's an avalanche of integrations that are coming. So some of it, I gotta be careful what I say because some of this isn't quite shareable, but like Maker is going live in about two weeks and that's obviously a major lending platform. The biggest opportunity that we are missing with our ETH is not being able to take a collateral position on it. Like people want to take leverage, they want to pull out stablecoins for farming, they want to go buy a house.

• 23:06David Hoffman?

  Do DeFi shenanigans generally.

• 23:08Speaker 01

  Right. And that use case hasn't existed until now. It's about to exist in a really, really big way with Maker and a few others that I probably shouldn't say too much about. The other side of it that I think is equally as compelling, if not more compelling, is that there has never been a native kind of incentive program for our ETH until literally yesterday. So we launched a incentive management committee. Full disclosure, I'm on the committee, so I have some kind of say as to where the funds go. But I think that is a really, really powerful force that will help us grow liquidity depth, grow those integration partnerships, and also just frankly, grow yield and grow TVL on the platform. There's a really powerful, I think, flywheel effect that's going to come from this. Once we get those incentives

• 23:48Speaker 01

  in place, I think a lot of things fall in place kind of quickly coming from that. In particular, like one thing I'll give a quick plug and then I'll stop for a second. Like one, I think really unique thing to tie it to the previous point. I think our ETH, because it is such a neutral building block that Rocketpool has such a great opportunity to go and sort of offer co-incentives to other protocols. Where we can go and approach some, some protocol, let's say Maker. Like, let's say Maker is providing incentives on MKR ETH to keep, you know, liquidity on their token. We can go to them and say like, hey, guys, what like, why don't you move your, your liquidity program over to Maker, our ETH? And we'll pitch in some of the incentives. So you get like co-incentives, you get a higher yield because you've got half of your LP is now productive suddenly.

• 24:34Speaker 01

  And then Rocketpool benefits tremendously because we are growing along with that pool. It's sort of like almost free growth for us. So that is one, I think, really exciting property of liquidity incentives. We're going to start pushing, I think, pretty hard and it's a big kind of opportunity for us. So like call to action to your viewers, like if you're part of a DAO and you want sort of like free boosted yield on your liquidity program. Reach out to us because there's, there's a lot of, I think, opportunity there for that.

• 24:58David Hoffman?

  And it does make sense that the integrations would start to snowball after Maker specifically. Maker being kind of like the basement of DeFi, the bottom tier, the bottom foundation. Like when, once you're collateral in Maker DAO, then you're kind of, it opens up the doors to becoming collateral and like the remainder of, of DeFi. So it does kind of make sense that that is the right, the right order of operations here. Well, let's talk about strictly just the yield of our ETH. Like, how will our ETH accrue more or less yield than the others taking derivative assets in the landscape?

• 25:31Speaker 01

  Yeah, I'm not sure that I would argue that it does, to be honest. I mean, all the tokens are going to take, they're all going to get the beacon yields minus whatever commission they charge. And, and you know, they're all kind of about the same 10 or 15%. It's all kind of like just a rounding error, to be honest. I think where, what I would argue is more meaningful is what is the return per unit of risk that you're taking on for the underlying, right? So like, I would, I would argue that holding our ETH basically has zero risk because it's, it's fully insured and it, there's no counterparty risk. There's no trust assumptions. So like the denominator is like zero, there's like no risk discount that I would apply to it. And I don't want to pick on any particular protocol, but like if you look at other tokens, they do come with trade offs, right? And so you can, you can think of like, what is the percent likelihood that project X will go underwater and go to zero?

• 26:17Speaker 01

  And it's, it's not zero percent, right? So you have to apply sort of a discount. Given that. So I think, you know, I would argue that it isn't just the raw APR that matters. It's more like the risk adjusted return for, for that token that really kind of shines.

• 26:30David Hoffman?

  You, you said it a couple of times, so let's go ahead and dive into it. Is the risk really zero? That some sort of black swan event will happen with Rocket Pool and like accidentally like lock up all of the ether? For example, like is the, you said it's fully insured. It's not like FDIC insured, so it's not, it's not that kind of insurance. You're talking about over collateralization, right? So like, can you like unpack that a little bit for us? Like what really is the protocol risk? And why, why do you seem so confident in this, in saying that the risk of our ETH is lowest?

• 26:59Speaker 01

  Yeah, yeah. Good question. And I'll probably pass it over to Ken here in a second because Ken has done some really great research on kind of risk modeling. But what I mean specifically is certainly we're not FDIC insured, but there is more than 100% of the collateral backing the issued token. So if we can sort of fully redeem down to zero and still kind of make everyone whole, if, if we had a massive kind of run on the bank type of event.

• 27:23Speaker 01

  And there's, there's no point where your, like the custody is all managed by smart contracts. So there's no point that like a bad operator could just run away with the funds. There's no, like, we're kind of in a can't be evil. Kind of situation. And when we say that it's fully insured, what really what we mean is like, given the reasonably worst case scenario, which is like a mass slashing event takes off, takes out half the network and all the validators basically go to zero. Like do the our ETH holders incur any damage from that? And the answer is like, not, not really, because the, the penalties come out of the, the node operator side primarily first, but that's probably getting into more of Ken's territory. I'll maybe let him kind of jump in on that.

• 28:00Speaker 02

  Yeah, I mean, I mean, to that point, I would probably add that, you know, Ethereum as a whole is a very forgiving protocol, right? I mean, I think it was envisioned by the core devs that you would not need to be a professional node operator. You do not need to have a, you know, a large data center or high-speed connection to do it. They really envisioned that home, home stakers, individuals like myself, could run a, run a node on their bookshelf behind them. And simply, you know, secure and protect the network. And because of that, the, the penalties for actually attacking the network right now are fairly forgiving, right? As, as long as, um, you know, there isn't a non, non-f finality event that occurs, as long as a large portion of the network, uh, you know, close to 51% attack

• 28:44Speaker 02

  doesn't happen, that if for some reason something is misconfigured on a node and, and a slashing event happens, the node operator does not actually receive that large of a, of a penalty, uh, probably, you know, one ETH or two ETH, even, even post the merge here with, um, with Bellatrix out there and the higher, higher penalty fees. So at that, at that case, the node operator has already put enough collateral on that they, they incur that loss to the, to the protocol. The RE folder, um, has been fully insured and they, they receive their, their contribution back. Uh, because it's been, um, somewhat dispersed throughout the entire mesh network of nodes.

• 29:27Speaker 02

  The individual RE folder probably won't even see, uh, any, any loss in APR. It's just so minor that it gets, it gets, uh, kind of lost in the average variance of the randomness of each, uh, each validator and how it performs. You know, there, there certainly are perhaps maybe these catastrophic Armageddon events, right? The entire network goes down. There's multiple bugs and multiple clients. The core devs cannot get, uh, you know, consensus achieved in a couple of weeks and the protocol comes down. But it, but at that case, I'd argue it's not a rocket pull problem. It's, it's an all of Ethereum problem. Right? And we've got much bigger problems than, uh, than, than Rocket Pull.

• 30:04David Hoffman?

  Right. Yeah. We don't like to think about that. Um, okay. So that's, is that the conclusion on? Like the bull case for our ETH that we're like, is pretty damn like robust and anti fragile. And also it's all already decently well penetrated into the market share of 5% is what Marceau said. And that was before any sort of like, like liquidity incentives around that. Is that Tybo on the bull case for our ETH or is there anything else missing?

• 30:31Speaker 02

  I would, I would just add one thing that wasn't mentioned, which is that our ETH is not a rebasing token. And this, this provides an advantage in two ways. For some folks, because of their, their tax authority, it may be much more advantageous to, to hold and possess our ETH than other, other liquid staking derivatives. And secondly, that the fact that it's not rebasing allows it to be much more integratable with other DeFi things, not only on the main net, but also on other layer twos. So it's one advantage that it has that not all of its competitors have.

• 31:04David Hoffman?

  Well, let's dive into that a little bit more for the listeners that don't know what rebasing is or are just unfamiliar with the nuances behind this and also taxes in relevant jurisdictions. Can you just start from a little bit higher level on like, why a non rebasing staked derivative token is good? And overall, just what rebasing is?

• 31:24Speaker 02

  Yeah, maybe, maybe I'll, I'll let Marceau talk about that.

• 31:28Speaker 01

  Sure thing. So, I mean, people are probably most familiar with Lito's STEs and that's what's called a rebasing token. And so what happens when you hold that token is that it is pegged one to one with the price of Ether. And all, all gains that are, that are received from staking are then kind of issued as new tokens. So you get, I think it's a like every 24 hours, you get a drip of like a small incremental gain on, on your total unit. So your, your number of units goes up over time. And that's sort of nice because it keeps pegged with Ether one to one. So it's very kind of intuitive. But it also means you're getting an income event in the US.

• 32:02David Hoffman?

  taxable event.

• 32:03Speaker 01

  Every taxable event every 24 hours. And it's kind of a, kind of a headache to integrate. It's also like Ken mentioned, really difficult to do rebasing across different chains. So like to do rebasing to L2 is kind of. Technically complicated. And for both kind of tax and just kind of technology reasons, it's actually a lot better to do what is called non rebasing, which is where you don't get more units of the token, but the the value of the token goes up relative to ETH. So if you look at the ratio of our ETH divided by ETH, it is like slightly trending up, right? And the the rate of return up is just the rate of return of of the beacon chain. So, you know, there's pros and cons. You can argue one way or the other, but we like it because we think it's more kind of composable, more integratable, and also just simpler from a tax perspective. It's it's a it's

• 32:46Speaker 01

  a good model. And it's also what Coinbase just came out with, too. So I think that's kind of a nice vote of confidence. This is the kind of superior model when it comes to how to issue out rewards from the beacon chain.

• 32:57David Hoffman?

  So just to regurgitate this and make sure I understand. So staked ETH from Lido is a rebasing token, and that has nice, just like, it's intuitive in that, like, one staked Ether equals one Ether all of the time. And so it's just one to one, that's just what it equals. And so if you deposit one Ether, you get one staked Ether. If you wait a year, that one staked Ether will be still worth one Ether. But then that begs the question, all right, well, then where does my yield come from? And so if you're holding staked Ether, you're getting dripped more staked Ether from the Lido protocol as as the form of that's where your yield comes from. But when a transaction on Ethereum occurs, and it's into your wallet with tokens, that's a taxable event.

• 33:40David Hoffman?

  And so since your yield is being paid to you, that's just like regular income tax, rather than having this alternative, which is that with Rocketpool, I think it started off as one our ETH equals one ETH, and then our ETH grew has grown from there. And so like, I don't know where it is now, but like, maybe it's like 1.5 our ETH equals one ETH. And then tomorrow, it'll be 1.6, and the day after will be 1.7. Not actually, these are fake numbers.

• 34:07Speaker 01

  Not quite that high.

• 34:08David Hoffman?

  Not not quite that that high. That would be hyperinflation. But that the idea here is that there will be, it's not intuitive, it's no longer intuitive. So that's the trade off that we've made. But I mean, the intuition, the intuition costs versus not having to pay taxes, like, yes, I'll pay those intuition Costs because I get more money that way. And I guess that's actually a little bit more bullish on the fundamentals of the protocol. Because, I mean, protocols and nation states generally don't talk, but they talk through their users that live in those nation states. And so if the users are fundamentally having to sell their RE to pay for their taxes, then that would be bad. And so this mechanism means that this does not have to happen. And not only at the individual level, but basically at the protocol level.

• 34:49David Hoffman?

  Because if all users are selling small like income taxes of worth of RE, then that actually does show up in the TVL of the protocol.

• 34:59Speaker 01

  Yeah, I mean, you know, not tax advice, but that matches my understanding.

• 35:03David Hoffman?

  Certainly not. I think long-term bankless listeners should know that they should not be getting tax advice from me.

• 35:08Speaker 01

  The one thing I'd point out too is like, if you look at that as a against the against the commission, you could argue that a non rebasing token has a higher yield because it has less of a tax drag. So the real return for a non rebasing token is actually higher than some of the competitors who do rebase because they have a higher tax treatment towards them. Depends on your jurisdiction, obviously, but I think that's kind of a nice way to look at it. Because you are, there is a hidden fee there in the form of taxes, of course.

• 35:33David Hoffman?

  Yes. Yeah. Yeah, I do. I do take that argument. I accept that argument. Ken, any, any comments on this or what's going on in your, in your brain?

• 35:41Speaker 02

  No, I think, I think you've covered the RE side very well.

• 35:45David Hoffman?

  Okay. All right. Well, that's just one side of the marketplace. That's the RE side. I also want to get into the other side of the equation. The bull side, the bull case for being a node operator with Rocketpool. And then also we'll have to, because of where that conversation leads, get into the RPL token, of course. We're going to get into these conversations and more. The bull case for the actual RPL token here, right after we get to some of these fantastic sponsors that make the show possible. Juno is bringing crypto-friendly banking straight into your checking account. With Juno, you can send money from your Juno checking account straight onto a layer two, like Polygon, Optimism, Arbitrum. And they have ZK Sync and Starknet support on their way. You can skip the ACH wait times, you can skip all the gas fees and go straight from your checking account to an Ethereum layer two in seconds.

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• 38:27David Hoffman?

  And we are back with our bull case for Rocketpool. And we're going to touch on the other side of the marketplace, the node running side of this marketplace. And this is the unique side for Rocketpool because you can't run a node on a staking as a service protocol other than Rocketpool. That's like the unique thing that Rocketpool brings to the table, the whole protocol permissionless side of things. So why would I run a node with Rocketpool though? Like convince me. I should, why should I go right after this stream is over, go spin up a Rocketpool node?

• 38:58Speaker 02

  Yeah, the, the short answer from that is you're going to earn more running a Rocketpool validator than you will running a solo validator, just pure and simple. So there is an incredible financial incentive for anybody who wants to do that. There's some other auxiliary arguments towards it too, in that you're actually doing a public good, right? There are individuals we've just learned about that want to have our ETH that don't have the, either the capital requirement or the technical ability to run a node, but still want to possess a, a stake ETH derivative in their wallet. And so by running a node, you actually help provide lift to the protocol. You stake ETH on behalf of the RETHers and at the same time, you as a node operator earn a, earn a commission.

• 39:40Speaker 02

  And so it's, it's probably worth maybe just mentioning, I think to the, to the folks here that, like one of the things I always hear in the Ethereum community is that everyone should be running a node, right? And they kind of stop at that. They say for the health of the network, everybody run a node. And this is, this is costless. It requires no ETH. You can, you can run a node at home. But the, the big barriers, people don't know how to do it, right? They, you know, everybody says you should run a node and help decentralize the network. One of the things I'd encourage anybody to do, listening to this podcast right now is just simply, if you have an old computer, 10 years old, 12 years old, it could be a laptop, it could be a little desktop or server, right? Whatever. It doesn't take much, literally a Raspberry Pi you can, you can stake with.

• 40:20Speaker 02

  Simply go over to Rocketpool, download its software. It's got a great installer, a great interface. They've got a dev there by the name of Joe, who has just made this thing so easy. It's literally just a couple of clicks and commands. You download the software. You get to pick whatever Ethereum clients you want. Consensus layer, your execution layer, you let it sink and you'll be up running a node on the network, right? Now for that, you're not going to make anything, but you're going to help protect the network and relay relay the blockchain, right?

• 40:50David Hoffman?

  You'll be a basic patriot of the Ethereum blockchain.

• 40:54Speaker 02

  Absolutely. And I cannot think of a more easier way to actually run a node than to just simply download the Rocketpool installer and go ahead and do that.

• 41:01David Hoffman?

  That's interesting. You're saying it's easier than like, if I wanted to run a node, I'd probably go to ethereum.org and like start there and they would point me off in a different direction. It's going to be different for every single client, but you're telling me like, it's actually easiest Rocketpool has made it easier than ethereum.org to go run an Ethereum node. Is that what you're saying?

• 41:19Speaker 02

  By far, I know there's efforts from the East Daker community such as Wagoo to kind of make it a simple one-click installer. And I know that they've been working great on that, but I gotta say, maybe I'm a little biased, but I think the Rocketpool stack is just the easiest thing because it's incentivized for Rocketpool to continue to upgrade that. So there are constant releases, right? And you can imagine as we're approaching the merge, there's a number of technical releases that are being provided and Rocketpool is just keeping up on that, right? So you can simply use the Rocketpool software, you're running all the major clients, right? And you can, you can run your own node. Now, what people are probably more interested in though, is to actually become a validator. And this is where the staking aspect comes. So now instead of just being a relay on the network and protecting it and transmitting and verifying that,

• 42:04Speaker 02

  you know, that the transactions are meeting the protocol requirements, now you want to actually be a validator. You actually want to attest on the network and say, yes, that last block met all the Ethereum requirements and it is correct. That's the correct head. Those transactions are all processed correctly. I'm going to vote yes for it, or I'm going to vote no for it. And to do that, you have to be a validator and Rocketpool, they call them mini pools, but it's the same thing. It's a validator. And for that, you have to put some collateral down. If you are just a solo. A solo validator, you have to come up with 32 ETH of collateral. And that that is a large financial barrier for most people. But Rocketpool right now actually decreases that down to 16 ETH and some collateral that

• 42:47Speaker 02

  we'll talk about on the RPL token, 1.6 ETH of the RPL token. But there's actually plans coming up here for something called a low ETH bonded mini pool. After kind of analysis and a lot of thorough research, we've actually discovered that that 16 ETH is much more collateral than what you actually need to protect against the foreseeable or the likely attacks that could happen on a validator, right? And so there's plans in the work to do something called a low ETH bonded mini pool that would reduce that initially down to 80. So you only need 80 plus about 2.4 ETH worth of the RPL token. But there might even be plans later on, if we get some improvements to the core protocol, something called forced exiting, that could reduce that down to 4 ETH.

• 43:32Speaker 02

  And at that level, you know, it becomes much more affordable for everyday individuals to be able to put enough capital on to move their node to a validator and actually start earning ETH rewards.

• 43:42David Hoffman?

  I think one of the common criticisms of Rocketpool that I've heard is that it's capital intensive of a model. And so to produce, you just lock up a lot of a lot of ether in order to produce enough supply of other of more space, right? Where, you know, Lido, all the Lido operators, they don't have to stake up any ETH because it's a trusted system. Rocketpool, because it's trustless, also comes with this burden of over collateralization. And that's limited the scale of how much our ETH can come to market because every single node operator also needs to come with a bond. But if we if we go and go into the future and take it on the assumption that this bond

• 44:24David Hoffman?

  goes from 16 ETH per node down to 4 ETH per node, and Ken, I'm going to ask you like how the calculus actually comes out that that's like a justifiable and not overly risky. But like, say, for example, if we think that 30 million ether will come to market, well, then Rocketpool, if Rocketpool is, if you're so bullish on Rocketpool. That you think that Rocket Pool will dwarf 100% of the market of staking as a service providers because it's a protocol. Well, then you would actually only need, so 30 million divided by four, 7.5 million, you would need 7.5 million worth of ETH to just be node operators. And so like all of a sudden, like instead of having 15 million Ether becoming needing to be,

• 45:07David Hoffman?

  I'm doing that math wrong. Anyways, the idea is that like it requires much fewer node operators to Rocket Pool to eat up a larger market share of total ETH stake derivative tokens. And so that is a, has been historically, one of the big critiques about Rocket Pool is like, it's too capital intensive to really scale. But if you're telling me that we can go from 16 ETH bond down to four ETH bond and you can really kind of grow, I really think that takes the complete ceiling out of the potential of Rocket Pool's constraint on our ETH growth. That is if we get there. So I'll let you respond to anything that came up to your mind there, but also if you could explain why the risk is such that we are actually able to do this in Rocket Pool.

• 45:48Speaker 02

  Yeah, so excellent questions in there, right? Let's just take the first case first, right? Which is let's take the current model, which is right now Rocket Pool requires 16 ETH of the node operator and that's paired with 16 ETH from the pool of our ETH depositors, right? And so in that case, what do you earn as the node operator, right? You're earning 16, you're earning interest on your 16 ETH and you earn what's called the node operator commission on the other 16 ETH from the our ethers, right? And then no commission, let's just keep it easy, let's call it 15% right now. Okay? So already right now, being a Rocket Pool node operator, you are not only your interest and your yield, right? Both from the beacon chain, both from MEV if you decide to extract it and both

• 46:33Speaker 02

  from tips and inclusions after the merge comes up here. Right, but you also earn the node commission, right? Fifteen percent on the reethers. Now, what happens when when they introduce here, perhaps as early as the end of this year, their low ETH bonded mini pole? Let's just take the first step. Let's go from instead of the node operator having to deposit sixteen ETH, right? They now have to deposit only eight, right? Well, they're earning the node commission not on sixteen. It's not a one for one. It's now on twenty four ETH. And so that does two things. It increases your leverage, right? Your leverage has gone up from sixteen to twenty four. You get one point X leverage on there. But for the the protocol, what it sees is actually a three X increase in terms of the lift capacity, the ability to stake our ETH, right?

• 47:18Speaker 02

  If, for instance, we grew no more node operators, but we introduced the eight ETH LED, we would be able to stake already three times the amount of ETH on the RE side as we are doing right now. So it grows grows grows the protocol quite exponentially and, you know, goes even higher when you go down to four ETH, right?

• 47:36David Hoffman?

  Just just to pause really, just to clarify that, where again, we're talking about this two sided marketplace. And what you're saying is that with this technological advancement, one side of the marketplace can actually stay in the same spot. And that allows the other half of that marketplace to grow. First, like if it goes from thirty sixteen ETH down to eight, it takes off the the weight of the other side of the marketplace by fifty percent. And if it goes from eight to four, then like it can allow the other side of the marketplace to grow by another fifty percent. So it takes off one constraint from the supply side and says like, oh, turns out with just like a snap of the fingers, technological innovation, we like tech, we can actually grow the supply side of rocket pool node validators by like first we double it and then

• 48:21David Hoffman?

  we if we can do it again, then we'll double it again. And that's without inducing any more of demand. There's a marketing behind that. That's just like straight tech.

• 48:30Speaker 02

  Yeah, exactly. And it's, and it's kind of interesting. I know this may be a little too technical and so forth, but it's fascinating to watch how the numbers actually work in there. One of the things that Rocketpool could do is they could actually lower that node commission to, you know, lower levels than what it's historically been, yet still generate because they're paying that node commission now not on 16 ETH, they're paying it on 24 ETH. You can actually deliver more ETH returns to a node operator and at the same time reduce the node commission that our ethers are paying to have their stake to. So it's kind of a win-win.

• 49:03David Hoffman?

  I think that's actually the really, really important point. And so as an ETH staker, I get really excited if I can, so I say I have 32 ETH and I'm super excited to get my like 4.1% yield on my stake to ether because I'm going to run a node. But then I discover Rocketpool and I realize I can actually cut up my 32 ether into two chunks of 16 ether. And then I can, not only am I going to get that 4% of the Ethereum yield, but I'm also going to charge the other 16 ether that comes into each one of my nodes. So now I, now there's two sets of those. I get to charge that 16 ether 15% of their rewards. And so my 32 ether is getting 4%, but I'm also charging another 32 ether 15% of their total staking

• 49:48David Hoffman?

  rewards. And so that boosts the yield. But then we do this again when we cut it down from 16. So that, what I just said was the current standard of Rocketpool. That's where we are today. But you're saying like you can cut this down again. And so I have 32 ETH or, and I can run one node on Ethereum and stake for 4% yield, or I could cut that 32 ETH up into four units of eight. And then the other side, and so I only have four units of eight. And so I actually multiply the charge, the commission that I can get by four. So it's four times 15% times 30, 32 ether. No, even more than that.

• 50:25Speaker 02

  Even more. You go 24, 24, 24, 24, 96, right?

• 50:30David Hoffman?

  Right. Yes. Yeah. So 15 times 96 times the ETH stake rate. Again, Bankless listeners will know I'm bad at math. But like, so that's why, that's why. You use the leverage word, where you can get leverage on your yield. But what you're saying there is like, well, actually, we don't actually have to pay that all to node operators. They can take, still take leverage and still definitely juice up their yields a little bit less so. We'll just take that down a notch and then we'll also lower the fee of our ETH token holders. And so the fee comes down and it makes our ETH more attractive. And you know, you could even, I don't know how low that fee can go, but that's probably one of the levers that Rocketpool has to make our ETH really attractive as a buy and hold staked derivative asset.

• 51:14David Hoffman?

  If it's the lowest one that has the lowest fee, like the CBE from Coinbase, that's 25%. That's nuts. And so like if Rocketpool can be like the lowest fee charging staking derivative token because of this innovation, that was a straight up argument as to why you would want to hold our ETH.

• 51:31Speaker 02

  Yeah, exactly. We think we can target 14% node commission when we introduce the 8 ETH

• 51:39Speaker 02

  LED minipool and still generate for the node operator returns that are in double digits.

• 51:47David Hoffman?

  Is this where we should start the conversation to turn to RPL? Or is there other parts about like the node operators that we should touch on first?

• 51:54Speaker 02

  No, I think it's probably a good, a good, a good talk about RPL, right? I mean, because this is a thing that, you know, causes people to scratch their heads a little bit and say, I don't get how this falls in the tokenomics of Rocketpool.

• 52:05Speaker 01

  Okay, so yeah. Real quick, one thing if I can, like on the node operator side, there's a series of technological improvements that are coming. And the low ETH bond in mini pools is a really important one, but just to kind of complete it out here real quick. We just launched a smoothing pool for revenue smoothing. That's an important kind of value for node operators. We also have this kind of creative SaaS design, staking as a service design that's being built on top of Rocketpool. So that enables companies to come and bring their clients to the platform. That's a meaningful kind of growth strategy for us. And then also, I mean, I'll just quickly gloss over this, but there's this really kind of neat idea about a solo staker migration where we can, where Rocketpool could just sort of like ingest validators by pointing them at the smart contracts. And then just a very natural way to kind of grow the protocol where they don't actually have to exit.

• 52:50Speaker 01

  They just have to like sort of update their solo validators. To point to Rocketpool and that's just an immediate kind of benefit to them because they get commission and all that kind of good stuff on top. So LEDs, low earth bonded mini pools is super cool. It's like a 7X in terms of supply, but that's like one of like four juicy things that are coming. So just putting that out there.

• 53:08David Hoffman?

  Yeah, well, since you did bring them up, I do want to go into them. And so one sounds like a whitelist kind of thing where like there's just like this like front end to Rocketpool that targets larger institutions. Can you just explain that a little bit more? How does that work?

• 53:20Speaker 01

  Yeah, so it's called SaaS, staking as a service. And what it is, is just building the smart contract layer such that other companies can run Rocketpool as their kind of like infrastructure underneath their staking operation, right? So you could have a company theoretically like Kraken that stakes with Rocketpool but has a white labeled product on top of it and they can call it whatever they want. It can be their own their own product and they just run kind of Rocketpool under the hood and then they get all those juicy benefits like commission and reward structures and things like that. And one other thing that's really cool about it is that just because of the way that it operates, like being a node operator is sort of three jobs in one. You're like, you have to run a node, which is, you know, some Linux expertise. You have to put up collateral and on the ETH side and the RPL side. And with the SaaS model, that actually separates the functions

• 54:05Speaker 01

  cleanly into three separate people. So you can have a person running nodes for somebody else. You can have someone taking the Ether side. You can have someone taking the RPL side. It's really attractive for like large depositors who just want to go like 100% pure Ether, for example. So it's a really compelling case for more kind of institutional buy-in. Whereas in the past, Rocketpool has really catered well to kind of the retail side of the market.

• 54:27David Hoffman?

  Why, if I'm Kraken, if I'm Jesse, why would I want, why would I give up my control over staking of Ether and just doing it with like my own like cloud service or whatever? And why would I give that over to Rocketpool? Like, why, what's the incentive there?

• 54:43Speaker 01

  Yeah, I mean, there's nothing to give up. There's trust and smart contracts to operate the way that they're intended. And there's been a lot of kind of diligence by the team to make sure that that works. But you are in no way in the process trusting Rocketpool. Rocketpool can turn around tomorrow and be evil and try to steal your money and they just can't do it.

• 54:58David Hoffman?

  But Rocketpool is charging a fee that Kraken would have otherwise been able to charge themselves, right?

• 55:03Speaker 01

  Rocketpool doesn't take any commission.

• 55:05David Hoffman?

  Well, the node operator fee, the node operator stake.

• 55:07Speaker 01

  Well, that'd be a benefit, though. If you're Jesse, you see that as a benefit because you get to charge the commission on the other side of the.

• 55:13David Hoffman?

  Oh, Kraken also runs nodes. Oh, they don't just give you ether, they also run the nodes.

• 55:20Speaker 01

  Yes, I mean, I mean, if you were Kraken as a staking service, not Kraken as a token holder.

• 55:25David Hoffman?

  Yes, yes, okay. I see. And so you're saying the incentive is that like Kraken could like make a deal with Bison Trails and like have some sort of proprietary deal with some commercial business, or that commercial relationship could instead be Rocketpool and Rocketpool is like pretty competitive on that front?

• 55:45Speaker 01

  It could happen.

• 55:45David Hoffman?

  It could happen.

• 55:46Speaker 01

  I'm good with that.

• 55:46David Hoffman?

  Okay.

• 55:47Speaker 02

  I mean, Bankless itself can start marketing itself as a staking company and provide its members with, you know, a staking service and then you're basically just using a white label product, you know, same as same as Kirkland does, right? They put their label on a product, but it's some other manufacturer that makes the Kirkland products we like.

• 56:03David Hoffman?

  Okay, why would Bankless do this? Why would we, why would we do this?

• 56:09Speaker 02

  Couple of reasons, probably to provide service, you can create a management fee for providing the service, right? Charge a, charge a slice of the, of the returns on it. Perhaps maybe you've got some excess RPL token that you've invested in, that you'd like to have fully staked to earn a return on. I know we haven't talked about that RPL token. And perhaps maybe you want to, you need more ETH to be able to provide that, that value to actually stake the RPL token.

• 56:35David Hoffman?

  Okay, okay. All right.

• 56:37Speaker 02

  Yeah, I can actually see a lot of, a lot of companies, right? Small management firms, individual investment folks, especially for folks that don't trust the larger companies, right? They don't understand to it. They go to their financial advisor, the financial advisor says, I just recently reached out to this small company that's providing staking services for Ethereum. They handhold, they provide a white glove, concierge service, right? Here's their phone number, the person running the node, yet you can see that it's all been invested on a smart contract. You don't have to worry about that individual running away with the funds.

• 57:08David Hoffman?

  Right, right, right. Yeah, it's really just pushing the duty. It's like pushing. It's like a sales layer. It's like a sales layer. Like, hey, you guys go do the hard work of going, making sales. Uh, okay, that makes sense. Um, let's get into the, uh, what you talked about, Marcel, with ingesting single solo node operators. Because I think that's actually a really interesting competitive advantage that Rocketpool might have if there's like independent nodes. And like the Rocketpool protocols just like says, hey, come, come, come join us. Uh, can you talk about that a little bit?

• 57:37Speaker 01

  Yeah, yeah. So, I mean, right now Rocketpool has about 1.6% of the market. So it's a pretty small minority of the market, right? Room to grow, certainly, but it's a small player in the market. And when the withdrawal hard fork happens, there's a technical improvement that lets you sort of redirect towards a different, um, uh, fee withdrawal address. So you could, as part of that change, point it towards Rocketpool and then basically convert your solo validator that you've been running at home since, since Genesis into two or maybe four, um, mini pools, just kind of automatically through the Rocketpool software. And the reason to do that is, is honestly really compelling because you get the smoothing pool, which kind of smooths your rewards over time. So if you're a home validator, you probably get like, you know, a proposal a year or something like that. And your, your revenue is very spiky.

• 58:21Speaker 01

  Having it be smooth is very appealing for, for one. You also get extra commission. You also get extra RPL rewards. And we'll talk about that in a minute, but like, it's just sort of strictly better from a yields perspective and a variance perspective to have Rocketpool be what's kind of managing your backend of the software stack and not just doing it with your kind of native, um, your native clients at home. So it's, it's a really kind of creative way to bootstrap growth and just like ingest and like give them a big like bear hug and, and welcome them into the Rocketpool family. I think it's a, it's a really cool thing that we can do that is very, very unique to the circumstances around them, around withdrawals and also Rocketpool as a technology layer.

• 58:57David Hoffman?

  Right. And, and the, the reason why I wanted to take the time and talk about the, the staking as a service and also ingesting the solo operators. Well, first off, those are two like barbells, right? Like one is going after the big people that are like funnels for like the rest of the world into Rocketpool. But then also it's like the remaining single node operators are given like a very low barrier into like joining Rocketpool. So it's like, Rocketpool as a system is like going after both ends of the spectrum, like the big boy institutions, but also like the remaining solo stakers that that exists on Ethereum. And like the idea here, like the bull case for Rocketpool in my mind is synonymous with how many independent validators there are, which I think also brings us to the conversation of RPL,

• 59:41David Hoffman?

  because there's like a one-to-one relationship of how many independent staking validators there are in Rocketpool and the RPL token. So who wants to, let's start at the very beginning. Who wants to lead us into the conversations around why the RPL token exists and what it does?

• 59:56Speaker 02

  Yeah, I guess I guess I could start with it. The one thing I may, if I if I could, that we we touched on, but we didn't cover in depth, and it would be a shame for not mentioning it, is the smoothing pool. And and I think this is one thing that I don't think people have figured out. It was just just launched this week as part of the Redstone upgrade to Rocketpool. And and what it does, real briefly, is that, you know, post-merge here, right? We think that the returns that a validator gets are going to be made up about 50% from the beacon rewards. We think about 40%, now this is on average, about 40% of it is going to be the inclusion tips. And that doesn't change with gas prices. Everybody's still paying about 1 to 2 Gwei to move their transaction through MetaMask or whatever their wallet or their choice is.

• 1:00:37Speaker 02

  And then, you know, most most models show that about 10% of the returns are going to be in this MEV, right? Something I call proposer payment values, the amount of of of MEV that's actually paid to the block proposer, right? Now, what's misleading about that is that's an average, right? MEV is actually a very rare thing, right? These large arbitrage opportunities that occur where somebody can make 10 ETH, 50 ETH, 100 ETH, 200 ETH from, you know, placing a Flashbots transaction in there are actually pretty rare. And so what happens is, sure, on average, you get that. But for most validators, they're not going to see any MEV. Or if they do, it's just going to be a very small amount, you know, much less than even a fraction of what the inclusion tips are at 1 Gwei or 2 Gwei, right?

• 1:01:21Speaker 02

  So what the smoothing pool does is it's it's kind of a play off the old mining community that says all of the validators that are in Rocketpool can opt in. It's an opt-in choice, but already I think we've got about 30% of our node operators. have opted into it already and almost almost as many of our mini pools that have opted in. But what it does is it smooth them. So it basically says that, okay, what we'll do is we'll share those rewards in a in a 28 day reward period. We'll collect all of that MEV, all of that PPP PPV proposer payment value that's made to the proposers and we'll distribute it equally based upon the contributions of everybody in the pool.

• 1:01:58Speaker 02

  And so what that does is it is it reduces the variance, right? If you are a solo operator and you're thinking, hey, I might, I might win this lottery, right? At this large MEV. It's going to be a lottery and that lottery isn't one that you can play forever. There's a lot of push. Push and a lot of thought among the core developers in the Ethereum community about is MEV good? Is proposer builder separation needed? Do we have to worry about OFAC sanctions and so forth? And and they keep looking at perhaps removing the ability to order the transactions by the proposer. So there's only, in my opinion, a narrow window that we can actually chase this game. And so if you join the smoothing pool, you're much more assured. You've got a much more probable outcome of getting some share of that MEV versus if you don't join a smoothing pool

• 1:02:42Speaker 02

  that, you know, you're just, you're playing the odds and the odds are unfortunately that most people will not win any substantial MEV. And this is one thing I think that really attracts Rocket Pull. In fact, the smoothing pull is so, I think, unique among it that we'll start to see other other protocols that allow node operators will also be contributing and creating smoothing pulls of their own.

• 1:03:02David Hoffman?

  So the question I have, the critique I have that I'm hoping you can cover is, is doesn't this just take money from the people that are very good at extracting MEV and giving it to the people that aren't as good at extracting MEV?

• 1:03:16Speaker 02

  Yeah. So the the people that are good at extracting MEV, those are going to be the searchers and the builders, right? The searchers are going to look for the unique arbitrage, run the very fast computers. Find, find the best way to do it, but eventually they'll know who the next proposer is, right? Let's say, for instance, it's Marceau's node, right? They have to decide if I'm the searcher and I found, let's say, a hundred ETH block, I got to decide how much I'm willing to bid in one of these relays, like flashpots or other relays that are coming up. And perhaps maybe I decide to pay him 70% of it. So I put a 70 ETH bounty on that. And if I win that auction through the relay, Marceau will propose that block. I'll take 30 ETH and I'll give him 70 ETH. So really, it's just the proposer that lines up. And so the way as a node operator, you, you get

• 1:04:01Speaker 02

  your share is you want to have as many block proposers as needed. So the only way to do that is either be very rich and run a lot of nodes yourself, or join a smoothing pool. Because if I'm in the smoothing pool and Marceau's in the smoothing pool, and he gets that 70 ETH, we'll share it among some fair sharing method. And usually that sharing method that we're looking at is the number of added stations. So if we both had two nodes operating for 28 days, they both did equal work, we'll share that reward 50/50.

• 1:04:30David Hoffman?

  I'm getting the gist of like, there's this pattern that I always find in crypto that like, it's like a peloton, a bicycle peloton, where like, the more people that are in the peloton, the more efficient it is. Is that also the same way that the smoothing pool works? Is that like, actually, when the smoothing pool has more buy-in by more and more node operators, it actually becomes a more competitive product?

• 1:04:49Speaker 02

  It gets much more certain on your returns, right? The variance, like, so like, right now, like, if I'm by myself, maybe I'll win that 100 ETH block. I probably will never win it, even over five years. And in five years, they've removed MEV, they've, the, the protocol has changed, we've got proposer builder separation, there's now a fixed ordering, I can't change anything, I can't extract that anymore. But if I join a pool and there's a lot of people in it, we'll have that many more proposal opportunities. And perhaps one of those is one of these lottery blocks. And if we win, then we all share the proceeds. Will I ever see 100 ETH in one? Probably not, but I'll receive 1/100 or 1/1000 of that return. And I'll do that month after month after month. So in that five or three-year period, whenever they, they invoke DBS, I'll actually

• 1:05:34Speaker 02

  have some returns in my wallet to, to, to benefit from it.

• 1:05:39David Hoffman?

  Cool. Cool, cool, cool. All right. Now, so that's another incentive to spin up a Rocketpool node and join the Rocketpool system. Like, it's another perk, you know, see if perks of being a Rocketpool node operator. And again, like I was like, we were about to go into before we went down the smoothing pool rabbit hole. Every single node comes with an RPL sidecar. Who wants to take us down the RPL rabbit hole? Like, what the token is and what does it do? And overall, we'll eventually end up at the bull case for that. Who wants to lead us here?

• 1:06:10Speaker 02

  Maybe I'll start and Marcel can finish, right?

• 1:06:14David Hoffman?

  Yeah, please.

• 1:06:14Speaker 02

  So what is RPL? RPL is the native token of Rocketpool. Why do we have it? Well, we first have it because it was initially the ICO offering in 2017 when the ideal first came, right? It was offered to investors. Investors could push, could purchase it, right? There was no, there was no lockup period, right? It gets so old of a token now. Everybody has it. It's very well distributed among the larger shareholders of it. And it funded the dev team for that period of 2017 to 2021, when the protocol finally launched and staking was available on the Ethereum network. What does it do? It's actually provides, I would

• 1:06:58Speaker 02

  say, three functions to it, right? The first thing they throw out is they say, well, it's the governance token of Rocketpool, right? But we've heard that everybody's got a governance token and we're not really certain what value a governance token has on a protocol, right? So let's pass over that one pretty quickly. The main reason that RPL exists right now is it does two things. One, it provides insurance. It provides a second tranche of insurance, right? So we mentioned that, you know, as we go down to low ETH bonded mini-pulls, right? If we go down to 8 ETH and so forth, there are some, some possible outcomes of events that happen that, you know, perhaps that 8 ETH is consumed up by a node operator, especially the node operator that abandons their nodes. Maybe they pass away or something

• 1:07:42Speaker 02

  happens to them. They get hit by a bus, have amnesia, forget they have a node, and that node begins to leak ETH very slowly until it reaches some, some critical level and it's kicked off the Ethereum network. So that RPL bonding provides a second level of insurance. If there is not enough asset when that node is removed from the network to cover the investment, the principal of the RE holders, the RPL token is auctioned. So it provides this kind of second level of insurance. But more importantly, as we talked about, it actually provides access to leverage, right? So I think of RPL as a token that that provides the leverage, right? So when you, you know, if you want to get this low Eave mini pool, you have to put more

• 1:08:23Speaker 02

  RPL token. There's kind of a more buy-in in order to get that leverage. And that's what adds value to it, right? The token itself does inflate right now at 5%. 70% of it is paid to node operators, right? So you earn a stake yield on it. The other 30% is given to the the DAOs. It's a two-party DAO system in Rocketpool, one called a P-DAO, one called a No-DAO, different functions. But the majority of the inflation is paid to node operators.

• 1:08:52David Hoffman?

  Okay, so, Marso, do you want to say anything? Because I have a few, like, devil's advocate takes on RPL I want to bring. So I want to give you the chance before I go into that.

• 1:09:01Speaker 01

  Yeah, for sure. I mean, I could talk about this for a long time. The one thing that I just wanted to like, so Ken's explanation was brilliant. The one thing that I want to maybe illustrate in plus one is to a node operator, RPL is the price they pay to unlock commission. So it very much has a natural kind of leverage property to it, where if you put an X amount of RPL, you get Y amount of sort of leveraged yield in return. So there's a direct connection between RPL and the yield that unlocks. And this is why some people feel like RPL is sort of leveraged Ether. Because we've actually done the calculations and looked at the sort of difference between them. And if you believe that Ether has value because the yield that it generates, RPL has about three times more value because it unlocks that much more yield in the form of commission. So I'm a big believer personally

• 1:09:45Speaker 01

  in this theory that once we are post-merge, we will kind of attribute value and sort of monetize Ethereum in terms of like a DCF model, looking at the yield that it generates. And if you follow that same logical argument to RPL, it has even greater value because it effectively acts like a leveraged form of Ether. So it's really appealing to a node operator, in addition to the things that Ken mentioned as a utility token in the ecosystem. But just the economics of it, I think, are very well designed for node operators to find it appealing. But go ahead with your, I know you've got some questions, some questions to ask.

• 1:10:16David Hoffman?

  Yeah, so I've always, this is a question about the RPL token has always sat in my brain because I haven't figured out how to answer it. Like, it seems like, there are some tokens out there, some protocols out there, that if the token wasn't there, it would fall apart. Like MKR, Maker Dow does not work with MKR. Like, you need the MKR token or else that thing breaks down. Like, it completes the loop. For Rocketpool, I haven't seen that association. So, when Ken was talking about the role of Rocketpool, it's like the additional bond. But like, the bond is already Ether. Like, that is the bond. That's why we put up a bond in the first place. And then we're adding this RPL token on top of that. And so it's kind of like, there's this product.

• 1:10:57David Hoffman?

  It's this RPL protocol, it's this RPL network with all the incentives to join it that we've talked about throughout this podcast. But then there's like this gate, and it's this gate that is RPL. In order to pass through the gate, you must own a sufficient level of RPL to get through the gate. But the gate doesn't actually need to be there. It could actually just be Ether and Ether alone. And you could, in theory, just have a higher bond requirement in order to like match what was otherwise the RPL. But the RPL is like retrofitted onto the system in a way that I think is less like organic like Maker Dow and more like kind of...

• 1:11:37David Hoffman?

  It's like, it's just like, it's like given this role rather than like actually needing to be a part of the protocol. So that's my critique to that. Like, what would you guys say to that argument?

• 1:11:46Speaker 01

  Ken, you want to take it or do you want me to?

• 1:11:48Speaker 02

  Why don't you take first stab at it?

• 1:11:50Speaker 01

  Sure. Yeah, I mean, first of all, I think that's a semi-fair technique. I think you can defend the position of RPL in the ecosystem in a few different ways. One is that it has kind of an important function of just aligning incentives between the team and their sort of O-Dow that runs the Oracle. And also between node operators, it's an incentive mechanism for them. And then it also acts as a secondary form of collateral for RE. At a minimum of 10% collateral for that. It's also the mechanism that allows us to do things like the lower ETH-founded mini pools because right now it's sort of a secondary form of collateral and it's sort of treated second after Ether. But once we flip to lower ETH-founded mini pools, it's actually the primary form of collateral. Arguably, it's the primary form of collateral. So we're sort of swapping out...

• 1:12:35Speaker 01

  The role of Ether with the role of RPL and RPL is really being positioned as sort of like the collateral layer and Ether is just really, you know, the pure monetary.

• 1:12:44David Hoffman?

  Yeah.

• 1:12:44Speaker 01

  Yeah, the Ether layer.

• 1:12:45David Hoffman?

  Yeah.

• 1:12:46Speaker 01

  So it is changing a little bit. I mean, I think you could ultimately design a protocol that looks like Rocketpool without a native token, or at least for collateral, you'd still need to have governance and things like that. But it does really help to make the tech come together beautifully and like sort of governance and incentives come together beautifully that I think would be a worse product without a token like Rocketpool in the center of all of it.

• 1:13:07David Hoffman?

  Right. I do like the idea of like rock, the RPL token being like this fractal microcosm off of Ether where like Ether is the collateral for Ethereum, but then Rocketpool is the collateral for Rocketpool and what does Rocketpool, but it does, it validates Ethereum. And I also like that inverse relationship where like on a normal Rocketpool mini pool with 16 Ether, you have like a relatively low RPL requirement in the total capital size proportion. But then as you go down to like the lower bond requirement pools, it actually inverts. And so like there's an inverted relationship there between like as you get more leverage on your yield, you have to pay more collateral to protect against that leverage. So I do,

• 1:13:50David Hoffman?

  I do think that makes sense. And I, and overall, I just like the imagery of like RPL being a little sidecar to the Ethereum motorcycle. That's kind of how I think about it.

• 1:13:59Speaker 02

  Yeah. The, the other thing I would probably add is that I think it aligns incentives, right? I mean, you need some way to fund a dev team, right? You, you need some way to fund the team that is marketing and integrations, right? That is the educational outreach and the support outreach for the node operators when they have, they have difficulties, right? And you either do that by either becoming rent syncing, right? You take some part of the Ethereum commission from this, from the staking operation, but that cuts into the, that cuts into the profits of everyone, right? The profits of the RE holder, the node operators. So instead what you do is you create a, you know, a tokenomics around it that says, okay, Rocketpool will will pay its bills and keep its lights on by selling the RPL token

• 1:14:42Speaker 02

  that the dev team earns from their participation in the O-DAL. And the only way that that token continues to have value is if they keep producing products and services that people want to want to use. To become a node operator, you need to have RPL, you need to buy it and produce it. So it aligns the incentives for the the team to perform, for the node operators that invested in it to be committed to the protocol, and then for others to have a requirement to purchase in. And because it has value, then you can return that as a reinsurance value, right? Most operations of any significant size that that staking is becoming here not only have a primary means of insurance, but they go to the reinsurance market and make certain that they have layers of protection.

• 1:15:23Speaker 02

  And so I think it's actually very essential that protocols start to consider these these layers of protection.

• 1:15:29Speaker 01

  Yeah, I think that's a I think that's a perfect way of putting it better than how I put it. But I would sort of summarize that as I think RPL is what lets Rocketpool be non-rent seeking and to act as a public good. Like, in the absence of RPL, they would be forced to collect, you know, to skim off the commission and to fund a treasury and to pay for things like marketing and growth. So having it there is a kind of a creative way of bypassing a lot of those behaviors that we don't want to have because we want Rocketpool to be a public good.

• 1:15:56David Hoffman?

  Cool. Okay. All right. Now, we've really just teased this whole Rocketpool community, just like really itching to to get into the bull case. So who wants to just give me the most bullish case for for the RPL token?

• 1:16:08Speaker 01

  I could take a stab at it. So I've spent a lot of time thinking about RPL as a token and the ecosystem and its role as collateral and where we're likely to go with technology efficiencies that like the Lower East Front and mini pools. And it's really fun to project this forward. And one thing I really like about the RPL token is that it's very modelable. If you take certain assumptions and work backwards from there, you can derive a price and assign it probability likelihood of occurring and things like that. So I have my own set of assumptions about where. Staking participation is likely to go and where Rocketpool is likely to kind of fit into the ecosystem.

• 1:16:46Speaker 01

  I'll share that in just a second, but if you take some reasonable assumptions, you can like kind of directly calculate a price because of its role as a utility token and collateral in the ecosystem is a very direct connection. It is not at all driven by like speculation. It is just pure fundamentally like goodness driven. So anyways, like I, I think we are heading towards a world where staking participation is really high. You, you said 30 million. I think we're probably closer to 60 million, honestly, when, and this is probably like a two year timeframe.

• 1:17:13David Hoffman?

  Two, 60 million in two years? I could see 60 million in like 10 years. I'd, I've never heard anyone say 60 million in two years.

• 1:17:20Speaker 01

  I, I think it's our saturation level. I, I think we get there sooner than folks realize.

• 1:17:25David Hoffman?

  Okay.

• 1:17:25Speaker 01

  Like immediately post merge ether is just purely yield generating. It's an internet bond, like you like to say. I, I think the value for a staking is super clear post merge. And even more importantly, post withdrawals, because then the entire cycle is complete. So let's say six months to withdrawals and then 18 months to kind of hit saturation is kind of how I'm thinking about it. And I'm targeting roughly, you know, it's more like 50 to 60 million in fairness, but I'm, I'm looking at about half the supply being staked. And when you look at Rocketpool, we have currently earned about a 5% market share since we've launched. It's 1.6% in total, but since launch has been 5%. Given all the excitement around the technology improvements, given all the excitement around liquidity incentives, integrations that are coming, given the renewed focus on decentralization.

• 1:18:10Speaker 01

  I think getting to eight to 10% market share is pretty justifiable. And then the last kind of variable that I look at pretty closely is to what degree are node operators collateralizing their mini pools with RPL? And the answer there is a little bit technical. It's a little bit speculative in nature, but for reasons I can get into if it's, if it's interesting, I think the, the collateral rate is likely to stay pretty high. It's currently at 80%. I think we trend down to maybe 60% over time, but still quite high. The minimum is 10%. So if you put those in a calculator and you project it forward with those numbers, you arrive at like, to be honest, what is kind of moon boy math, like not intentionally, but that's just like what it looks like because the value prop for RPL is so good.

• 1:18:51Speaker 01

  Like when I look at the likelihood of events, the probability of them occurring with those numbers, I'm personally targeting a point one eight number on the ratio, which is about a 12 X performance against ether in its current form. So that's pretty significant gain against Ethereum, which is, it's really hard to out compete Ethereum. And you know, it's a little bit speculative, obviously, but I feel really good about the sort of inputs and being able to justify where I think we can go with the information we have about what's coming. So in any case, it's modelable and it's it's kind of fun to play around with the numbers and see what see what you get.

• 1:19:24David Hoffman?

  Right. So just to run through some of the assumptions, you're assuming 60 million Ether staked, which I I think is very, very high. I think we are going to be, if we get above 30 million staked by end of 2024, I think I'll be surprised. I I could see it like I could see myself getting surprised. I'll I'll give myself like a 20% chance that we break 30 million Ether staked by the end of 2024. But these are just my personal shooting from the hip numbers. I haven't put too much thought into this. And I think the other assumption in there is that there's also a variable in how much RPL node operators can stake. And so we haven't talked about that yet, but the minimum is 10%. And you're saying like the average right now is like 80 or 90%, as in like people are staking 32 Ether, but they're staking like 28 ethers worth of RPL on average.

• 1:20:08David Hoffman?

  And probably that's going to come down, but you're not saying it's going to come down too much. And so when you multiply, and then also you're saying that Rocket Pool is going to eat into the market share of staking as a service token. So Rocket Pool like penetration will like 5X Rocket Pool, like therefore like Rocket Pool nodes will spin up. So more Rocket Pool will be collateralized. And then you're also saying just like more total nodes staking validator staking Ether will also come onto the market. I definitely agree with that in like a 2X at least by the by a year from now or so. And so like you're throwing all these numbers together and then you're saying, well, this much RPL will be staked. And it was, and if that's true, then there's probably going to be something like a 12X appreciation versus Ether. Is that like the accurate like summary of this?

• 1:20:53Speaker 01

  Yeah, totally fair summary. And maybe what I'll do is to put a spreadsheet up on Twitter just so people can kind of put input their own numbers, but it's very directly modelable. And so you mentioned 30 million Ether. I think we'd probably disagree on that, but that's fine. Like that would just be a 2X discount on my numbers then. So if I'm projecting a 12X increase, if you put in the same numbers and believe my other assumptions, you'd be projecting a 6X increase.

• 1:21:13David Hoffman?

  Versus Ether, the the important one. Yeah.

• 1:21:15Speaker 01

  Versus Ether. Yeah. USD doesn't matter in this equation because it's just strictly valued in terms of collateral against the Ether pair.

• 1:21:22David Hoffman?

  Right.

• 1:21:22Speaker 01

  So it's, yeah, I don't even think about dollars necessarily. But yeah, you mentioned the collateralization rate. I mean, we can definitely get into that if it's valuable. On the one hand, you have new entrants coming in who are likely to come in with low collateral, because they are more likely ETH maxies, right? Like, if they were RPL maxies, they would have already been in the ecosystem. So new entrants are likely to kind of push the average down. But the sort of like counterintuitive thing is that to enter the ecosystem, they have to buy RPL to collateralize their node. And doing that naturally pushes the price up, which then naturally increases the collateralization of everyone else in the marketplace. So you have kind of this push and pull effect where the average will trend down over time. But by the act of new people coming online,

• 1:22:04Speaker 01

  it's going to necessarily increase the price, which will also increase the average collateralization. So you have to kind of like speculate as to which of those two forces has a greater pressure. And I've been looking at this really closely for the past couple of months, because we've kind of gotten to that spot where everyone new is coming in at minimum collateral. And I think there's a reason why our staking percentage, or sorry, our collateral percentage has stayed so high. And it's because the price of the RPL token is just so justifiable in terms of like, when new people come online, it has to go up. And RPL number go up has been very consistent for the past six months, despite being in this kind of like terrible bear market. So it's interesting dynamics. We'll see how it plays out. But I'm overall more bullish on the collateral rate than I think some other people are.

• 1:22:48Speaker 01

  But still, you can put in your own numbers and assume whatever you want. And it's still very modelable and still even in a very conservative, like kind of almost like failure scenario type of situation. It's still, I think, holds its value really well. And it's kind of worth modeling every different type of possibility.

• 1:23:05Speaker 02

  Ken, what are you thinking about right now?

• 1:23:08Speaker 02

  No, I mean, it's hard to beat Marceau on the inputs that you use to do it, right? Now, what you want to value and what you want to kind of predict as what will happen to each of those five input variables in a spreadsheet? I mean, I'll leave that up to the viewer here to do. But the one thing I will say. David, do your thought about how much Ethereum is going to be staked? I think that's going to be very interesting. If you look at Ethereum versus some of the other ETH killers out there like Avalanche, like Cardano, right? They're at like 50, 70% of their collateral stake, right? And Ethereum is only at 11%. So, you know, I think it's got a ways to go. I think a lot of people are waiting for this merge. I've got complete confidence in it, right? But I think a lot of people are on the sidelines and just saying, let's see the merge go.

• 1:23:51Speaker 02

  And then, and then we'll decide to get into Ethereum staking afterwards. I think two things will really drive that. I think one that the, you know, as you've said many times, the price, the merge is not priced in. And the reason for that is my, my opinion is pricing is all supply and demand. And not until the merge happens, does the supply start to dwindle, right? And the, the, the demand can just hold where it is. And once that supply starts to dwindle, we'll see price action. And then I think they'll also see the return of tips and inclusion fees. And all of a sudden, no matter how you're staking, you're earning by most models about twice the amount of APR. Those things are going to combine in. And I think a lot of people are really going to want to get into the staking, staking aspect. And once they do that, they'll, they'll find Rocketpool, they'll realize the advantage.

• 1:24:36Speaker 02

  And just the way the tokenomics are designed, the RPL token will easily go up.

• 1:24:43David Hoffman?

  Well, guys, you didn't, didn't, never had to actually convince me in the first place, but I appreciate you guys coming on and giving, I think, a very comprehensive of not just like the bull case for RPL, but just like an overview of the Rocketpool landscape. Is there any conversation point that we haven't touched on yet?

• 1:25:00David Hoffman?

  You guys want to bring up?

• 1:25:02Speaker 01

  I don't think so. I think we covered it.

• 1:25:04Speaker 02

  I think, I think, I think, I think one of the things, I mean, certainly we mentioned in the beginning that we're just community members. And I will say that maybe the hidden gem of Rocketpool is really the community that it has. There's a channel in the Discord called Trading. Don't let that name throw you. It's really our community channel, right? We not only talk about Rocketpool, explain, explain all these different very aspects to new people. But more importantly, we're just a whole bunch of people that are very excited about Ethereum. And so, most of the topics in there are just about the Ethereum community in whole. So if, if you've stayed with us this long in the episode, I certainly invite you all to drop by the Rocketpool Discord, especially the Training Channel, Channel and say hi.

• 1:25:43David Hoffman?

  Yeah, I definitely agree. Even in the Rocket Pool commercial, I mentioned like, oh, I'm in the Rocket Pool Discord, so come say hi there. That's sometimes like towards the end of the day, usually after I like crack a beer, I pull up, I like close down the Bankless HQ Discord and I pull up, open the Rocket Pool Trading Discord and to see what all the, what all the people are doing in there. But overall, like also, it just feels like a very, I use this analogy before we started live streaming, but just like Athenian group of like hodgepodge hobbyists of ETH stakers. I was like, oh, I'm staking over here doing this. I'm also trading and I'm also doing this and I'm also doing that. So it's much more just than a Discord channel of like people that focus on like one thing. It's actually just like a

• 1:26:23David Hoffman?

  community that people talk about all their stuff, including their life, their life events. So it's just a kind of a cool community like fireplace there. So Ken, Marcel, thank you for taking a break from trading and coming onto Bankless to talk about Rocket Pool. I appreciate it.

• 1:26:38Speaker 02

  Our pleasure. Thank you. Yeah, thank you so much. It was fun.

• 1:26:41David Hoffman?

  So I know you guys, we have a document that we're looking at. There's the, the sign off at the, the risk and disclaimer is at the end of the document. If you guys want to scroll down, either of you two want to read that?

• 1:26:52Speaker 02

  It's all yours, Ken. Oh yeah, hang on. I don't, I wasn't following the document here, but hang on, let me get down there right now. I'd love, love, love to do that. Ethereum is risky. Crypto is risky. DeFi is risky. You could lose what you put in, but we're headed west on the frontier. But we're glad, but we're glad you're with us on this Bankless journey.

• 1:27:14David Hoffman?

  Oh yeah, sorry. It is the shorthand that we have in there. I need to write it out fully. Awesome. Ken, Marcel, thank you so much for joining me here on Bankless. Cheers, guys.

• 1:27:23Speaker 02

  Cheers.