Coinbase Teams Up With Liquid Staking Rocket Pool

Rocket Pool Liquid Staking

It was revealed on the 12th that Coinbase Ventures will participate in the DAO (Decentralized Autonomous Organization) involved in the operation of the liquid staking protocol Rocket Pool (RPL).

The overconcentration of Lido Finance, a top provider in the Ethereum (ETH) liquid staking market, may be eased.

Coinbase Ventures describes the decentralization of the ETH staking environment as follows:

ETH finally breaks resistance right as @Rocket_Pool announces the new oDAO member being proposed.

None other than @coinbase through their venture arm

The oDAO is a trusted group that allows @Rocket_Pool to remain a permissionless system. https://t.co/BnpdLBApri pic.twitter.com/zxlPnQmn5h

— jasperthefriendlyghost.eth | jasper.lens (@Jasper_ETH) January 11, 2023

Coinbase Ventures is the investment division of Coinbase, a major US cryptocurrency exchange. According to an announcement on Rocket Pool’s discord channel, Coinbase will join Rocket Pool’s OracleDAO (oDAO).

The oDAO will be responsible for running Rocket Pool’s ETH staking nodes and voting on upgrades to Rocket Pool’s smart contracts. oDAO members will receive Rocket Pool’s unique token RPL as a reward.

Liquid staking is a DeFi (decentralized finance) mechanism that allows you to operate alternative assets (staking proof tokens) while receiving cryptocurrency staking interest. If you stake Ethereum (ETH) with Lido and Rocket Pool, you will receive “stETH, rETH”, which can be used as collateral for lending or operated on DEX (distributed exchange).

Liquid staking, which has excellent usability such as eliminating the need to set up a node on your own and avoiding the minimum stake requirement of 32 ETH, will become even more important after the Ethereum update “shanghai” scheduled to be implemented in March this year. It has been seen.

Since the beacon chain (consensus layer) went live in November 2020, Ethereum deposited in staking contracts has reached 16 million ETH (equivalent to approximately 3.18 trillion yen) at the time of writing. A total of 1 million ETH has been generated as a staking reward, but neither the principal nor the reward can be withdrawn to Shanghai.

Relation:Ethereum Foundation warns of risks liquidity staking poses to ETH

Decentralization of Ethereum Staking

According to data site DUNE, liquid staking accounts for 42.54% of the total staking volume on Ethereum (consensus layer).

Notably, Lido Finance is not only the top ETH liquid staking market share (65.8%), but also the top overall Ethereum staking share (28.9%). Several analysts, including Ethereum developers, have sounded the alarm about the oligopoly of the staking ecosystem.

It is argued that if a particular protocol were to stake a large portion of the ETH in circulation, it would encourage a cartelization of validators and ultimately pose a threat to the Ethereum protocol.

Relation:Ethereum Foundation warns of risks liquidity staking poses to ETH

Meanwhile, Coinbase is the second largest liquid staking market (14.8%) and Rocket Pool is the third largest service provider in the market (3.0%). Coinbase Ventures’ participation in the oDAO suggests some sort of collaboration between the second and third largest liquid staking markets, and is expected to eventually ease the gap with Lido.

Still, some in the Rocket Pool community fear that the participation of US-regulated entities could have negative censorship implications for the oDAO’s decentralized governance system. But Rocket Pool community backer Jasper is bullish that Coinbase’s backing will boost the entire ecosystem.

Oh no Coinbase is now helping secure @rocket_pool oracles, this means they will soon take over and dominate the protocol with nearly 2,000 individual node operators, >50x as many as Lido

BTW, how did your DAO vote regarding control of the network again? Some ‘professionals’. https://t.co/X4QpoJA3T2

— jasperthefriendlyghost.eth | jasper.lens (@Jasper_ETH) January 16, 2023

The feature of Rocket Pool compared to Lido as a decentralized protocol is that anyone can operate a validator with a deposit of 16 ETH + RPL (equivalent to 16 ETH). Maintained by 2000 validators, 50x LIDO, each validator receives commission revenue and rewards in RPL as well as ETH staking rewards.

Relation:What impact will the Shanghai upgrade scheduled for March have on the Ethereum market?

According to DeFi Llama, Lido’s yield is 5.0% and Rocket Pool’s is 4.43%, but it is expected that the yield situation will change if the RPL price rises in the future.

On the 13th, cryptocurrency self-managed wallet “MetaMask” started supporting ETH liquid staking via Lido and Rocket Pool. Lido and Rocket Pool’s proprietary tokens LDO and RPL are up 120% and 64% respectively in January 2023.

Source: Tradingview

Another decentralized protocol that offers ETH liquid staking, Stakewise (SWISE), has also seen its token price double in the past month.

Relation:Cryptocurrency wallet MetaMask implements Ethereum staking function

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