Onboard rETH as collateral

# Onboard rETH as collateral ## Context The Rocket Pool (RP) protocol is a decentralized Ethereum 2.0 Proof of Stake infrastructure service. Without a stake pool service, only wealthy network participants who meet the 32ETH threshold are rewarded for validating transactions. Rocket Pool democratizes participation in network validation by providing a service that lowers the wealth threshold. Abstracting staked ETH as rETH, participants can retain commodity properties of their stake (transfer of ownership). There are 2 primary users in RocketPool: 1. rETH stakers Stakers can show up with as little as 0.01 ETH to be deposited in exchange for rETH. rETH is a redemption token representing staked ETH. rETH can be burnt at the Rocket Pool contract or website in exchange for ETH and accumulated staking reward. They do not need to run a machine. The returns are subject to a commission to node operators, which is a % of the staking rewards earned. 2. Node Operators Node Operators can show up with 16 ETH, along with 1.6 ETH worth of RPL tokens as collateral to stake on behalf of the pool. This is permissionless, so anyone can do this as long as they have the infrastructure and collateral. They will receive RPL inflation rewards, as well as ETH commission from the pool, along with staking rewards on their own 16 ETH. Unlike beacon chain ETH, rETH can be freely transferred and traded as it implements the ERC-20 interface. Onboarding rETH to Abracadabra would allow users to borrow against rETH. ## Motivation Abracadabra is a fast-growing multichain protocol that would make a strong partner with RP and its community. Right now, RP is bridging its rETH token across chains to make liquid staking more accessible for the masses - it is currently available in both Optimism and Arbitrum. Abracadabra currently offers other ETH staking vaults, such as Yearn stETH. rETH is important to hedge against the risks of other ETH staking services (particularly because of its decentralized nature) and will be an important addition to the DeFi space in general. As a protocol that aspires to keep in line with Ethereum's ethos, the protocol aims to be fair and is actively engaged in research to share all MEV and proposal rewards with rETH stakers, increasing the chance that the protocol will outperform other staking services, or at the very least, provide the fairest reward possible. ## Proposal Allow rETH as collateral with the same pool specifications as yvcrvSTETH (Maximum collateral ratio 75%, liquidation fee 12.5%, borrow fee .5%, interest .5%) ### Benefits 1. Diversified risks and potentially higher return on ETH staking for Abracadabra depositors. 2. Creates a non-LP liquid staking position that does not depend on the continuation of any liquidity mining incentives. ### Considerations/Risks Rocketpool is very new on mainnet - since November 9, 2021. However, the risk can be considered to be mitigated to a great extent because of: 1. Staged rollout in the initial stages has been successful 2. The protocol has undergone 3 betas 3. The protocol has undergone audits by 3 separate auditors 4. The protocol has an active bug bounty program with [immune.fi](https://immunefi.com/) 5. The code is open-source 6. TVL is over 70 million USD as of writing rETH stakers are exposed to smart contract risks, primarily. Even if node operators get slashed, the rETH staker's ETH is still safe, as the node will be booted from the beacon chain when the validator balance reaches 16 ETH - the entirety of the slashed balance will be subtracted only from the node operator's balance. As of now, rETH price can only be derived from uniswap's liquidity pool. The dev team is looking to add a chainlink oracle soon. As with anything to do with ETH staking, the usual risks apply - protocol risk and implementation risk of ETH staking, withdrawal methods, and RP's implementation of withdrawals. ## Links and resources ### Resources * Detailed explanation of Rocketpool: https://medium.com/rocket-pool/rocket-pool-staking-protocol-part-1-8be4859e5fbd * rETH staking website: https://stake.rocketpool.net ### rETH contract address Ethereum mainnet: 0xae78736Cd615f374D3085123A210448E74Fc6393 Polygon: TBC Arbitrum: 0xec70dcb4a1efa46b8f2d97c310c9c4790ba5ffa8 Optimism: 0x9bcef72be871e61ed4fbbc7630889bee758eb81d zkSync: TBC