What is Liquid Staking?
Plus an update on the Fantasy Portfolio
Dear readers,
Happy belated new year!
I saw the feedback about content, stating that there is a preference for concept explainers, so I will look into that. At the same time, I also want to noodle into some crypto projects that I find interesting, which I will share with you. I’ve taken note of the preference for some level of consistency and will do my best in that area.
One thing I’ve been keen to try out is staking ETH in a DeFi protocol. The process is similar to what I did when I staked my SOL and got mSOL, which I then lent it on Solend. This issue is a bit of a refresher on Liquid Staking in case you’d forgotten about it.
On the Ethereum side, Lido Staking is the most well-known but there are other protocols around. One such protocol is Rocketpool. These were the pioneers of Liquid Staking before Solana had it in their ecosystem.
Rocketpool was first brought to my attention at the end of 2021. I didn’t know much about it and was too scared to do anything with the little precious ETH I had. Now that The Merge is over, and we’re settled into bear-market zone, the project is still around, so I thought it worth checking it out and maybe participate in it.
Aside from the project, I’m also going to do a quick guide on how to stake ETH on Rocketpool so please read on. :)
One other thing of note is the Fantasy Portfolio project, which has been put aside. I’d like to restart it again this year.
Here is a summary of what we have in the portfolio thus far:
Polkadot (DOT) with 133.6 units ($14.97)
Chainlink (LINK) with 112.8 units ($17.73)
Terrra (LUNA) with 24.77 units ($80.72)
The Sandbox (SAND) with 325.72 units ($3.07)
It’s obvious that we’ve pretty much lost all our money in LUNA while the rest are in prices way below what we’ve bought.
Still, the silver lining is that we still have left over from our initial capital to deploy and there’s no better time to buy than during a bear market! In the near future, I’m going to delve into more projects to look for good buying opportunities for the portfolio. :)
Liquid Staking and Rocketpool
When considering how to lay out the information for this topic, I decided to revert back to the previous “newsletter layout” format. Somehow, that just felt like a “proper” newsletter to me instead of the blog-style.
Here is the PDF version for your reading pleasure.
How to stake ETH on Rocketpool
Rocketpool runs on the Ethereum mainnet. The staking interface is quite straightforward:
Most of the fields are fairly self-explanatory, so I won’t go into much depth. Note that the current APR is around 4.33%, which is passable. The transaction cost shown is an estimate. Around $6.00, not too bad but could be better.
If we’re happy with the costs, then we can go ahead, press the Stake button, confirm the transaction in your Web3 wallet and away you go!
The problem I face here is that, even though I could technically stake 0.01ETH in the protocol, it’s not really going to get me much, so I’d like to stake a slightly higher amount. I have some ETH in KuCoin that I would like to move, but that would be an additional $6.00 to transfer that to my Web3 wallet. The total expenditure for this is $12.00
At 4.33% APR, assuming I’m staking 1ETH (approx. USD1700), I’ll be getting $1700 * 4.33% = $73.61 a year, which is roughly $6 a month. I’d need 2 months to recoup my gas fees and only start being in the black by the 3rd month. On the other hand, 1 ETH is a bit much to risk.
How to get rETH for ETH via Arbitrum
On the other hand, there is the Arbitrum network, a Layer 2 on top of the Ethereum mainnet. KuCoin is only charging $1.32 in gas fees for me to move my ETH there.
While I can’t stake ETH directly from Arbitrum with Rocketpool (currently not supported yet), I could still get some rETH from Uniswap using Arbitrum. It’s almost like staking because the rETH could only come from Rocketpool. As long as I have rETH, I can redeem it for ETH at a later time.
With that in mind, I went over to Uniswap and switched over to Arbitrum. The main thing to pay attention to is to ensure that if I want to do the swap, I need to be swapping to the right token. That’s the thing with Dexes. Anyone can add any token, and there have been numerous stories of scams of people swapping the wrong tokens.
Just to be clear, here is the rETH address on mainnet from Etherscan: https://etherscan.io/token/0xae78736Cd615f374D3085123A210448E74Fc6393
Here is the rETH address on Arbitrum from Arbiscan: https://arbiscan.io/address/0xec70dcb4a1efa46b8f2d97c310c9c4790ba5ffa8
Once you’ve checked that you’ve got the right token, that’s when you can go ahead to make the swap. Check out that huge discount in fees!
After I clicked “Confirm Swap”, I found out that I only paid $0.15 in gas fees, which is a huge difference if I’d done it via the main Ethereum network!
If I try to swap my rETH back to ETH, I noticed that the Swap button is greyed out but there is another button asking me to allow Uniswap to gain access to my rETH. I assume that I need to allow this function in order for the swap to happen.
However, this is a one-time thing and I’d hate to suddenly wake up and find that my rETH is gone because of some hack that happened on Uniswap that had access to my rETH. Therefore, I’ll refrain from pushing that button until I am sure I want to swap it back.
Conclusion
I’ve succeeded in “staking” some of my ETH and obtained rETH. With rETH, I can use it participate in other DeFi protocols, similar to what I did with mSOL. For now, I’m just going to let it sit in my wallet.
Rocketpool has been around the block and is the no. 2 DeFi staking pool after Lido. They seem to be more decentralised than Lido so if that’s an important aspect for you, they can be a viable option. It also depends on what you’d like to do with the rETH tokens. They’re not as widely-accept as stETH from Lido.
On the other hand, the more you maximize what you have, the greater the risk of a domino-style crash, so please take that into consideration.
Related Links to check out:
Explainer on how Rocketpool works in detail - https://medium.com/rocket-pool/rocket-pool-staking-protocol-part-1-8be4859e5fbd
https://github.com/rocket-pool/smartnode
https://docs.rocketpool.net/guides/node/responsibilities.html#rocket-pool-node-operators
MakerDAO accepts rETH as collateral: https://crypto.news/makerdao-heralds-deployment-of-rocket-pools-eth-reth-as-collateral/
Disclaimer: This is most definitely NOT financial advice or any kind of recommendation to use the protocol. It’s purely out of my own self-interest and curiosity. I’m sharing this process in case you’re wondering what it looks like.
As always, please feel free to share this with others who might have an interest in this topic.
Looking forward to your comments and ideas for future issues.