Ethereum is the new land rush
Here’s a guide on how to earn rent by staking ETH with Rocket Pool. If you find this article valuable, please consider subscribing for valuable insights about Ethereum yield farming and opportunities
The Ethereum ICO will be compared to the Manhattan Purchase by future generations. In 1625, Manhattan was purchased by Dutch traders for ~$1,143, and is now the richest plot of land in the world. In 2014, Vitalik Buterin described Ethereum's Initial Coin Offering (ICO). 2,000 ETH could be bought with 1 BTC, or $0.31 at the time. Those initial investors' ETH are now ~$1,800 each, a mind blowing ROI >580,000%.
I use real estate as an analogy for how to understand the value of different blockchains. The most valuable land exists in big cities where there's bustling businesses, millions of residents and workers, safety and security, and continuous growth. The most valuable blockchains have very full blocks, perform trillions of dollars in transactions, have millions of fees distributed, and are secure against potential bad actors.
Source Reddit.com
Investors in Manhattan real estate created multi-generational wealth through acquiring properties that support residences, office space, and municipal activities. Investors in the Ethereum blockchain, or its native asset ETH, are akin to those real estate moguls because they own a piece of the most widely used blockchain in terms of transactions, fees, and decentralized applications (DApps).
Fees generated by top blockchains and DApps. Pink shading indicates DApp running on Ethereum blockchain. Source https://cryptofees.info/
Real estate owners generate wealth via two primary functions; land value appreciation and rent. ETH is very similar because it is become an increasingly scarce asset after the inclusion of EIP-1559, is in high demand for DeFi and staking, and "pays rent" to owners with additional ETH as interest or rewards. This article will focus on how to generate additional ETH rewards (rent) by staking it through Rocket Pool.
Rocket Pool
Rocket Pool is the most highly anticipated DApp in Ethereum, in my humble opinion, because it secures the Ethereum network through simplicity, provides liquidity for ETH stakers, and will provide composability across Ethereum's vibrant DeFi ecosystem. Rocket Pool simplifies and democratizes ETH staking as Ethereum makes its transition from Proof of Work to Proof of Stake (PoS).
As a short background, Proof of Stake is the mechanism for validating transactions on the Ethereum blockchain with decentralized computers. This entails, for example, running some basic code on your laptop and depositing ETH into a smart contract. As a reward for validating transactions on the Ethereum blockchain, you get ETH, on the order of 5-15% APY depending on how much ETH is staked across the blockchain. An ever increasing problem with ETH staking is how expensive it has become. 32 ETH (~$57,000) is required to run an Ethereum validator!
Rocket Pool foresaw this problem in 2017, and envisioned staking pools as a potential solution. Rocket Pool allows ETH depositors of as small as 0.01 ETH participate in PoS and earn ETH rewards. This democratizes wealth generation and makes Ethereum staking far more accessible for the masses. Rocket Pool is currently running a final Beta and you can test the website and wallet integration at https://beta.rocketpool.net today. In addition, you can do some really cool (and potentially lucrative) stuff after you deposit your ETH because stakers are issued rETH, a tokenized deposit. Rocket Pool tokenized staking deposits enable liquidity before ETH2 transfers are available, and increase capital efficiency through composability in DeFi.
Running Validators with Rocket Pool as a Node Operator
A 32 ETH stake is required to run a solo validator, again, a sizeable investment for most! Rocket Pool created the idea of a 'minipool,' which is a combination of 16 ETH from a node operator, and 16 ETH from several small stakers' deposits. 16 ETH is half the investment of running a solo validator, which is another great innovation for wealth democratization and decentralization of the Ethereum network.
Node operators must deposit 16 ETH, a minimum of 10% RPL tokens as insurance against slashing events, and run the Rocket Pool software on either a local computer or a cloud based server. For their investment and effort in supporting the Ethereum blockchain/Rocket Pool protocol, node operators earn ETH2 rewards, a commission from small stakers (5-20%), and RPL tokens.
Initially, running validators on Rocket Pool will be 8-10% more profitable than solo staking after you make some basic assumptions about total ETH staked, additional commissions paid to Rocket Pool node operators, and % RPL staked on each minipool.
Becoming a Node Operator on AWS
I have a busy life these days. Two kids under 2.5, dealing with living in multiple states at any given moment, working multiple jobs and running a business. The hassle of procuring the right computer hardware, configuring the operating system, ensuring backup power, and monitoring it to make sure reliability is high enough takes a decent amount of effort. I prefer to rent my compute storage from Amazon, and followed the extremely detailed Node Operator instructions for setting up Rocket Pool on AWS. It's slightly more expensive (~$100/month), but it gives me piece of mind around keeping my nodes online and earning.
I have a new Macbook Air and am running the Big Sur OS.
For the most part, I ran into zero issues following the instructions. Keep in mind I have both experience with a command line interface (CLI), editing shell scripts in Linux, and have run software on cloud servers before, but this was my first experience using AWS.
My validator can be seen here: https://pyrmont.beaconcha.in/validator/121582
Here are a few tips for other MacOS node operators interested in getting started with AWS.
1) I selected the t5a.large AWS instance because the CPU processor/RAM is more performant than the suggested t2.large.
2) I upped the storage to 1TB (1000 GiB) because future Proof of Stake iterations will require a lot of Ethereum blockchain data
3) Save your withdrawal key pairs in the same way you protect your Ledger or other wallet seed phrase. This means offline!
4) When navigating to my Mac Terminal window, the default shell script is z-shell. I prefer bash so I had to make a change:
% chsh -s /bin/bash
Then restart your terminal.
5) Once you add the rpl alias in your bash_profile, you'll need to run:
% touch ~/.bash_profile
6) When you move to the Node Operator's guide, replace 'rocketpool' with 'rpl' for all of the commands
Useful Links and Support
Join the Rocket Pool Discord server if you want to meet the amazing community, ask additional technical questions, or get sneak previews about where token and protocol governance is heading.
I am also happy to provide support for anyone interested in learning about Rocket Pool, the RPL token, or setting up a node!
Interested in talking to me about Rocket Pool? Drop me a line