In the era of Proof-of-Stake, securing the Ethereum network by staking is a fundamental activity. However, capital constraints (requiring 32 ETH) and locked liquidity become barriers for many. Lido and Rocket Pool emerge as dominant solutions to this problem. Both are built on the same technology: liquid staking, which allows users to receive liquid tokens as rewards for the ETH they deposit. However, behind this shared goal, there lies a philosophical divide that fundamentally distinguishes them.
The Same Goal: Liquefying ETH Staking
The core of both protocols is identical. Users can deposit an amount of ETH (even less than 32 ETH) into the platform. In return, they receive Liquid Staking Tokens (LST)—namely stETH from Lido and rETH from Rocket Pool. These tokens represent ownership of the staked ETH along with its rewards, and can be traded or used in various other DeFi applications, effectively 'liquefying' assets that are supposed to be locked.
Fundamental Difference: Who Becomes the Validator?
This is where the most crucial difference lies, namely in the approach to decentralization:
* Lido uses a curated and permissioned model. Lido DAO selects a group of professional and large-scale node operators who have been tested to run validators on behalf of users. User funds are pooled and delegated to these operators. This approach is highly efficient, reliable, and allows Lido to quickly dominate the market. However, it also becomes a point of centralization, as the security of the network relies on a small group of approved entities.
* Rocket Pool embraces an open and permissionless model. Anyone can become a node operator in the Rocket Pool network with significantly lower capital (for example, only 8 or 16 ETH), where the remaining capital is supplied from user fund pools. This drastically increases decentralization by allowing home stakers and small operators to participate. In return, operators are required to deposit RPL tokens as insurance collateral, a compromise to maintain security in a more open system.
Liquid Token Model: stETH vs. rETH
The way staking yields are provided to users also differs technically:
* Lido (stETH) is a rebasing token. This means that the amount of stETH balance in the user's wallet will increase daily to reflect the staking rewards earned. This model is easily understood by lay users, but sometimes causes compatibility issues with some DeFi protocols that are not designed for tokens with changing amounts.
* Rocket Pool (rETH) is a reward-bearing token. The balance of rETH in the user's wallet remains the same. Conversely, the exchange rate of rETH to ETH continuously increases over time as it accumulates rewards. This model is generally easier to integrate and more compatible with various DeFi protocols.
Conclusion
The choice between Lido and Rocket Pool ultimately is a philosophical choice about the future of Ethereum. Lido is a pragmatic and market-oriented choice. It offers ease of use, deep liquidity, and capital efficiency, accepting compromises on validator decentralization. It is the dominant giant that is easily accessible.
Rocket Pool is the idealistic choice that adheres to the ethos of Ethereum. It advocates for decentralization and permissionless access, empowering smaller players to participate in securing the network. Choosing Rocket Pool is often seen as an act of supporting a more distributed and resilient Ethereum network. Both are important pillars, but serve two different visions of how staking should operate.