How does Rocket Pool's rETH work?

Rocket Pool's rETH allows users to stake ETH and earn rewards while maintaining liquidity through a tokenized, appreciating asset.

Aug 02, 2025 at 11:07 pm

Understanding rETH: Rocket Pool's Staked ETH Derivative

Rocket Pool's rETH is a liquid staking token that represents staked Ethereum (ETH) within the Rocket Pool network. Unlike traditional staking, which locks up ETH until Ethereum's full transition to a proof-of-stake model, rETH allows users to retain liquidity by offering a tokenized version of their staked ETH. This means users can stake ETH without waiting for network upgrades to unlock their funds.

When users deposit ETH into Rocket Pool, they receive rETH tokens in return. These tokens track the value of the underlying staked ETH and any accrued staking rewards. As the network earns yield, the exchange rate between rETH and ETH increases, allowing rETH holders to redeem more ETH over time.

Note: rETH is not a stablecoin. Its value appreciates relative to ETH as staking rewards are earned.

How rETH is Minted and Redeemed

The minting and redemption process of rETH is crucial to its functionality and value proposition. When a user deposits 32 ETH, they can run their own node and mint rETH. However, most users deposit smaller amounts (as little as 0.01 ETH) through Rocket Pool's smart contracts and receive rETH in return.

• Users deposit ETH into Rocket Pool's deposit contract
• The system mints rETH tokens at a 1:1 ratio initially
• As rewards are earned, the rETH/ETH exchange rate increases
• Users can redeem rETH for ETH once withdrawals are enabled on Ethereum

The exchange rate is updated periodically, reflecting the total staking rewards earned across the Rocket Pool network. This ensures that all rETH holders benefit proportionally from the yield generated by staked ETH.

Smart Contract Mechanics Behind rETH

The rETH token operates on Ethereum using a combination of smart contracts that manage minting, burning, and exchange rate tracking. The core contract responsible for rETH is the rETH contract, which is upgradable through a decentralized governance process.

Key components include:

• Deposit Pool: Holds user-deposited ETH before it is assigned to a validator
• Exchange Rate Oracle: Tracks the amount of ETH earned per rETH
• Burning Mechanism: Allows rETH to be redeemed for ETH when the network supports withdrawals

These contracts are designed to ensure transparency and fairness. All ETH deposited is eventually used to create validators on the Ethereum network, with node operators and users both receiving rewards based on their contribution.

Node Operators and rETH Rewards

Rocket Pool's decentralized architecture allows node operators to participate in Ethereum staking with as little as 16 ETH, instead of the standard 32 ETH requirement. The remaining 16 ETH is covered by rETH stakers, who provide the balance through Rocket Pool's deposit pool.

• Node operators deposit 16 ETH and receive 16 ETH worth of rETH from the pool
• They then create a validator with 32 ETH (16 own + 16 borrowed)
• Rewards are split between node operator and rETH stakers

This structure incentivizes decentralization by reducing the barrier to entry for node operators. It also ensures that rETH stakers earn a portion of the staking yield, making it a competitive alternative to centralized staking services.

rETH vs. Other Staking Derivatives

While several liquid staking solutions exist, such as Lido's stETH, Rocket Pool's rETH distinguishes itself through its decentralized node operator model and lower entry requirements.

• rETH does not rely on a central entity to run validators
• Users are not exposed to centralization risks associated with large staking providers
• The collateralization model ensures that node operators have skin in the game

Additionally, Rocket Pool's smart contract architecture is designed to minimize trust assumptions, making it one of the more secure options for staking ETH in a decentralized manner.

Redeeming rETH for ETH

Currently, Ethereum's execution layer does not support withdrawals for staked ETH. However, once Ethereum's Casper-FFG upgrades are fully implemented, users will be able to redeem their rETH for ETH directly through Rocket Pool's smart contracts.

When withdrawals are enabled:

• Users can burn rETH to receive ETH
• The amount of ETH received increases over time due to staking rewards
• The process is permissionless and trustless

Until then, users can trade rETH on decentralized exchanges like Curve Finance to obtain liquidity without waiting for full Ethereum withdrawals.

Frequently Asked Questions (FAQ)

Q: Is rETH pegged to ETH?

No, rETH is not a stablecoin. Its value appreciates relative to ETH as staking rewards are accrued.

Q: Can I lose money with rETH?

Yes, if Ethereum suffers slashing events or if the exchange rate drops due to market conditions, rETH holders may experience losses.

Q: How often is the rETH exchange rate updated?

The exchange rate updates periodically based on the amount of ETH earned by the Rocket Pool network.

Q: Can I stake rETH elsewhere for additional yield?

Yes, rETH can be used in DeFi protocols such as Curve Finance or Balancer to earn additional yield.