Rocket Deposit Tokens

Once again, life doesn’t always go the way we plan and sometimes we just need to get some money quickly for unexpected expenses or a myriad of other reasons. When you can have Ether staking in Rocket Pool for up to a year, this situation is inevitable for some users, so we’ve planned ahead :)

Need to delay that trip to the moon for a moment to move to a new house? No problem!

When you have a deposit staking with Rocket Pool, you can now withdraw ERC20 tokens called Rocket Deposit Tokens (RPD) that back the Ether you have deposited. Users can then sell these tokens to other users on the free market, which can then be redeemed for Ether back at the Rocket Pool Deposit Token contract.

When a single RPD token is withdrawn, it represents 1 Ether. So why would people bother buying other peoples RPD tokens when they could just buy Ether I hear you ask? Great question! To answer that we’ve devised the following system:

Bob has 200 Ether locked up depositing and looking in the mirror on his 40th birthday he finally decides he can’t live without that hair piece he’s had his eye on since he noticed his hair line marching south at an unusually rapid rate. He decides to withdraw 50% of his deposit as RPD tokens, this leaves his available balance staking at 100 Ether. When withdrawing these tokens, Bob is charged a 5% withdrawal fee, so he ends up with 95 RPD tokens which he can then sell on the free market or if there is available funds in the Rocket Deposit Token contract, he can trade them in there for Ether immediately.

Now as you’re sharpening your pitchfork over the 5% withdrawal fee, let me just say quickly, that doesn’t go to us! That fee serves a dual purpose which I’ll explain shortly. But first let me quickly explain how the Rocket Deposit Token contract where tokens are traded in for Ether is funded. If you’re familiar with Rocket Pool, you’ll know we use a system for staking called Minipools, these are small groups of users pooling their Ether together which are spread out over the Rocket Pool network in a decentralised and load balanced method. They can be staking for various time lengths, from two months up to a year. When a Minipool returns to Rocket Pool from staking with Casper and users within that pool have withdrawn RPD tokens, the Ether backing those tokens are sent to the Rocket Deposit Token contract, this means the contract will have a variable rate of Ether available for users to trade tokens in for at any given time, depending of course on how often Minipools return with these token debts.

Now about that fee! The first reason for that is it prevents Bob cheating the system when his deposit first begins staking, he can’t simply withdraw his tokens and trade them into the Rocket Deposit Token contract for Ether immediately, then do the same again and again and again. He could essentially keep this contract drained of Ether without the fee and other token holders wouldn’t be able to trade their tokens for Ether. Bad Bob!

Secondly that fee is then used as an incentive for buyers to help RPD token sellers like Bob out. If 1 RPD token equalled 1 Ether when buying, why would buyers not just buy Ether instead? That 5% fee is given as a bonus to users who trade tokens in to the Rocket Deposit Token contract for Ether. So essentially users get an extra 5% Ether when trading tokens which would help any seller out who needed funds quickly. These tokens are also fully enabled on the free market, so if the Rocket Deposit Token contract does not have enough Ether in it for you to trade in your tokens, you can always price them at a discount and sell them quickly on the free market. Patient buyers of these tokens who don’t mind waiting for the Rocket Deposit Token contract to fill up with Ether again, are rewarded with a 5% bonus when trading in their bought tokens in for Ether when the time comes.