[RFC] Collateral Basket Change Proposal: Adding Rocket Pool ETH (rETH) to the Based ETH Collateral Basket

Based ETH (bsdETH)
1

Summary

This proposal seeks to add Rocket Pool ETH (rETH) to the bsdETH collateral basket, enhancing basket decentralization while creating mutual incentives for bsdETH adoption.

Abstract

Rocket Pool ETH (rETH) was the first Ethereum LST protocol to implement permissionless nodes and remains the most decentralized LST. From day one, its goal has been to be fully permissionless and trustless.

rETH is already included in ETH+, making it a logical addition to bsdETH as well. rETH has established deep liquidity on Base and is integrated with major DeFi protocols. Additionally, its interoperability and the upcoming Saturn upgrade will further enhance rETH’s performance on Base.

Problem

The current bsdETH basket of ETH LSTs faces a centralization challenge in its implementation. cbETH, being an LST from centralized exchanges, relies on self-operated node operators. While wstETH and wsuperOETHb use Distributed Validator Technology (DVT), they still have limited node operator numbers and diversity. For Ethereum, greater decentralization directly enhances network security—a core principle that LSTs should follow.

Rationale

rETH achieves 100% permissionless node implementation, featuring numerous solo validators, making it the most decentralized LST in the ecosystem.

Node Decentralization Comparison

  • wstETH: ~5% permissionless nodes through Community Staking Module
  • wsuperOETHb: 100% permissioned nodes, based on SSV DVT
  • cbETH: 100% permissioned nodes, centralized LST
  • rETH: 100% permissionless nodes

rETH is steadily growing on Base with increasing liquidity and depth. Currently, its largest liquidity pool is on Balancer with 7.8M, second only to wsuperOETHb.

Liquidity Comparison

Adding rETH to bsdETH would enhance diversity and decentralization of the basket while further improving depth.

Furthermore, the Rocket Pool GMC has approved the Star project, providing incentives to DAOs that mint and adopt rETH. The current incentive rate is 0.05% for the first 10,000 rETH, and 0.025% thereafter. These incentives could be utilized through DeFi protocols to boost bsdETH adoption and growth.

Proposed Allocations

Option 1:

  • cbETH: 25%
  • wsuperOETHb: 25%
  • wstETH: 25%
  • rETH: 25%

Option 2:

  • wsuperOETHb: 30%
  • wstETH: 25%
  • rETH: 25%
  • cbETH: 20%

This reallocation would convert approximately 1,000 ETH to rETH, generating around $1,000 - $1,500 RPL incentives that could be used to drive bsdETH growth.

Conclusion

We welcome questions and feedback from the Reserve community regarding rETH. Adding rETH to bsdETH would benefit both the Rocket Pool and Reserve communities while contributing to Ethereum’s decentralization efforts.

  • I am in favor of adding rETH to bsdETH collateral
  • I am not in favor of addingrETH to bsdETH collateral
0 voters
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2

Thanks for taking the time to dive into the Reserve Protocol and write this proposal @signal.

I’m encouraged by this proposal for a number of reasons:

  • The improvements to basket decentralisation and liquidity depth while maintaining a similar yield profile to the previous incumbents cbETH and wstETH
  • The view or llama risk that rETH is a well-rounded LST product
  • The fact it’s already included in the ETH+ collateral basket

I do however have two concerns:

  1. While we have the rETH plugin live on mainnet, this isn’t live on Base. For the past year, given the volume of integration request and the limited bandwidth, asset issuers that want to benefit from inclusion in RToken baskets have developed their own collateral plugins themselves. I will link the relevant docs below. The core team will support through the audit process and finally complete back-testing in house prior to whitelisting.

Would the Rocket Pool team be happy to develop this plug for rETH to be included in the bsdETH collateral basket?

  1. I appreciate the additional incentives you have proposed via the Star Project however feel that 0.05% is rather low and won’t sweet the deal enough to move this through governance at pace. Please see the ETHx proposal from Stader where they supplemented the yield from 3% to 5% for the first 90 days. I feel something along these lines would more favourable to RSR stakers.

With regard to basket allocations i’m hesitant to reduce wsuperOETHb given it’s yield profile and liquidity depth so i’m more in line with option 2, dependent of course on any additional incentives you can offer.

Relevant docs for collateral plugins:

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3

Hi @ham , thanks for the feedback!

First of all, I really appreciate the recognition and support for Rocket Pool’s rETH. Regarding the development side, I’ve already completed a first version and am currently waiting for review from the team or the community. There are a few questions I’d like to clarify on the development front:

  • Which branch should be used for development? At the moment, I’ve been working on the main branch.
  • Since rETH does not use Chainlink for syncing the rate, we’ve deployed our own rate provider.
  • Will the bsdETH allocation of rETH be handled via minting or swapping?

As for the incentive part — the RPL incentive is a one-time allocation, not distributed gradually over the year. The incentive will go directly to Reserve DAO, which can decide whether to use it for DeFi incentives related to bsdETH or for other growth strategies. From my perspective, the amount is quite significant.

It’s also worth noting that RPL tokens are distributed in a decentralized manner — unlike VC-backed projects, the Rocket Pool community does not hold a large reserve. So, from the Rocket Pool side, significantly increasing the incentive pool doesn’t seem likely at this time.

1 Like
4

Not including incentives, Option 1 would bring the blended APY down to 3.54481031%

Option 2 would bring the blended APY down to 3.65677237% (Current UI is incorrect and should be showing 3.829%)

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5

Hey, thanks for your calculations! The reason for considering option 2 is primarily due to the outstanding performance of wsuperOETHb in terms of interest rate and peg stability, which is why it currently receives the highest allocation.

Regarding cbETH, it comes with a 25% commission fee, while rETH’s is only 14%, so replacing a portion with rETH could improve the overall APR — even without factoring in the priority fee. That said, as I noted in the proposal, the primary motivation for increasing the rETH allocation is the decentralization of node operators, which we believe is crucial.

As for additional incentives, I think that the goal is to drive bsdETH growth. If the current incentive level proves insufficient, I can apply to the Rocket Pool community for an increase.

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6

Thanks for your comments here Signal, it’s clear you’re already deep in the weeds with plug-in development. The team best placed to review the plug-in and answer these questions is Reserves ABC labs. Previously a group have been set up between each teams devs, please let me know if that is required and I can connect you.

Once the plug-in is completed it will need to be audited. Reserve will be happy to send it to Trust security who they have on retainer, a rough timeline is 1-3 weeks + mitigations (if any) then ABC labs will backtest and whitelist it on the UI. You can also opt to choose your own auditor if you prefer.

I noticed you mentioned comission fees but instead prefer to look at on-chain yields. I’ve attached the defillama 30d APYs below, as you can see rETH has the lowest 30d average.

  • cbETH, 3.10%
  • rETH, 2.58%
  • stETH, 2.81%
  • superOETH, 4.18%

Current Basket

Collateral Asset Allocation (%) Allocation ($) APY
superOETH 33.3% 4.2m 4.18%
cbETH 33.3% 4.2m 3.10%
stETH 33.3% 4.2m 2.81%

Blended APY - 3.36%
Diversification Ratio - 0.67

Proposed Basket

Collateral Asset Allocation (%) Allocation ($) APY
superOETH 40% 5.2m 4.18%
rETH 20% 2.6m 2.58%
cbETH 20% 2.6m 3.10%
stETH 20% 2.6m 2.81%

Blended APY - 3.37%
Diversification Ratio - 0.74

Rationale

I’m grateful for your prev rationale in the original RFC and think rETH would be a great addition to the collateral basket for the same reasons - 100% permissionless nodes making it the most decentralised LST, the fact that it has deeper liquidity than two of the incumbents; cbETH and wstETH and it’s inclusion will also diversify the collateral basket. It’s also worth highlighting here that Rocket Pool already have a deep alignment with another Yield RToken, ETHplus where it is allocated 21% of the basket (~$50m).

The basket I’ve proposed takes into mind the rational behind adding rETH while also increasing superOETHb to 40% given it’s superior on-chain liquidity from both Aero and Curve pools and it’s superior yield profile at over 1% higher than the rest of the collateral basket assets. The proposed basket also helps us tackle a potential issue we may see in the future with sustained growth of bsdETH since the Coinbase team have deprioritised growing the DEX liquidity of cbETH these last few quarters.

Incentives

I agree that any incentives should be used to prioritise bsdETH growth and as such think that any additional incentives should be added to the bsdETH furnace contract, increasing the yield profile of bsdETH. Using the incentives in this way is two-fold for Rocket Pool since it will help you secure the $2.6m allocation to rETH and will also help grow bsdETH further adding to your TVL and any additional incentives above and beyond the STAR project would always be welcome. Of course i’m open to alternatives here.

More info on how the furnace operates can be found here.

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