MakerDAO Brings Aboard Rocket Pool’s LSD Token

Deal Challenges Liquidity Staking Giant Lido

In a deal that may ratchet up competition for staking giant Lido, MakerDAO, the No. 1 DeFi protocol, has embraced Rocket Pool’s liquid staking derivative (LSD) token.

Users can now use that token, rETH, as collateral for minting Maker’s DAI stablecoin. Oasis.app, a popular portal for MakerDAO, also launched support for rETH. Users can access leveraged exposed to rETH using Oasis’ “Multiply” feature. 

While critics have taken aim at the dominance of Lido’s stETH token, no other liquid staking tokens boast as much support from top DeFi protocols. 

Promoting Decentralization

By supporting rETH, Maker, which has $6.5B in TVL, provides DeFi users with the option to use a liquid staking derivative that promotes decentralization.

“It’s great to be supporting another liquid staking derivative, this time in the form of rETH — especially with the recent concerns around dominance of other derivatives in the sector,” said Chris Bradbury, the CEO of Oasis.app.

MakerDAO users minting DAI against rETH will face liquidation if their collateral is worth less than 170% of their outstanding DAI.

Locking Up Liquidity

Liquid staking derivatives are yield-bearing tokens that represent staked Ethereum. Staked Ethereum cannot be withdrawn from the Ethereum Beacon chain until the network’s next major upgrade, with LSDs rising in popularity as a way to become exposed to Ether’s staking rewards without locking up liquidity.

Lido is the dominant LSD provider, with its stETH token boasting a 78% market share, according to Dune Analytics. Coinbase ranks second with 16%, followed by Rocket Pool with 4%.

But critics say Lido’s size exerts a centralizing force on the network. While Lido spans 29 unique validators, the protocol represents more than 30% of all staked Ethereum, according to Rated Network. Alongside the centralized exchanges Coinbase and Kraken, the trio have amassed half of Ethereum’s staked supply.

In contrast to other staking protocols, Rocket Pool provides infrastructure allowing users to operate independent Ethereum nodes, attracting support from decentralization devotees. 

Staked Ether

Darren Langley, the general manager of Rocket Pool, told The Defiant that while the protocol controls only 2% of staked Ether, it encompasses more than 1,700 nodes or 15% of Ethereum’s validators. 

“Our community has helped to onboard hundreds of new node operators,” he said. “Rocket Pool is addressing centralization risk, one node operator at a time.”

He added that the collateral requirements for becoming a Rocket Pool node operator will be reduced from 16 ETH to 8 ETH with the protocol’s Atlas upgrade next quarter, further lowering the barriers to becoming a validator.

Integrations

Rocket Pool is hoping the Maker integration will be the first of many high-profile DeFi integrations for its rETH token. The protocol has been waiting for Chainlink to launch an oracle providing rETH data, making it simple for developers to track the token’s price. 

Langley told The Defiant that the oracle will launch “any day” now. “They have finished the development work and are almost ready to deploy,” he said.

The community for Aave, the top DeFi money market, voted to onboard rETH in June, meaning Aave launch support for rETH could happen soon after the oracle is live.