GM Intels, this is your Daily Bolt briefing.
In today’s briefing, we provide notes on the NASDAQ’s recent forray into crypto, from their Global Head of Research himself, Matt Savarese. As of now: we’ve now produced over 1k notes!
Today we bring a slight deviation in programming: instead of your rounds of research, we have provided a preview of our most recent project breakdown: Rocket Pool.
While most breakdowns are for paying members, we continue to release breakdowns for free users with the goal being to provide you with all available information about a project, in an organized report complete with graphics, links, and live data feeds from dune, tokenterminal, and more.
Over and out.
Breaking Down Rocket Pool
Brief Overview: Rocket Pool is an Ethereum staking protocol that aims to lower both the capital and hardware requirements for staking on the Ethereum Proof of Stake (PoS) chain.
Here are some key takeaways from our report:
How Rocket Pool Nodes Work
In the Ethereum Proof of Stake network, the Beacon Chain, every validator node is required to deposit 32 ETH in order to create a new validator.
In Rocket Pool, however, each node operator is only required to deposit 16 ETH.
These 16 ETH will then be paired with another 16 ETH that come from stakers who are not interested in running their own node and who just want to earn rewards from participating in the PoS network.
Economics
Fees Breakdown
Node operators can earn commissions from the rewards generated by the 16 ETH that have been pooled from non-operator stakers.
The minimum commission that can be earned is 5% of the rewards generated from the 16 ETH that have been pooled from non-operator stakers.
The maximum commission that can be earned is 20% of the rewards generated from the 16 ETH that have been pooled from non-operator stakers.
Currently, Minipools are activated at a set 15% commission rate. In the past, the node commission ranged from 5% to 20% with the ideal being 10%, and each minipool’s commission was locked for the lifetime of the Minipool.
Risks
When it comes to Liquid Staking Derivatives, it is worth noting that this is not a native feature of a PoS blockchain and that smart contracts are required in order to allow for this functionality.
Rocket Pool will prefer self-damage itself before endangering the stability of Ethereum.
Rocket Pool’s growth should improve the decentralization of Ethereum and will self-limit its growth if it detracts from it.
Hard limit – Rocket Pool will turn off the ability to stake more (prevent rETH minting)
Soft limit – Rocket Pool will discourage taking on more stake and/or encourage to stake elsewhere
Sector Outlook
Following the Ethereum Merge, Rocket Pool has consolidated itself as the most decentralized alternative for participating in the PoS chain.
Even though Rocket Pool remains behind competitors such as Lido and Coinbase, it is still favored by a strong narrative that promotes ethics over operational efficiency.
Nonetheless, Rocket Pool’s future growth strategy will likely be driven by rETH’s utility in DeFI, especially as liquidity staking derivatives continue to expand to layer 2s, starting with Arbitrum and Optimism.
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Note of the Day
The Scoop - NASDAQ's digital asset strategy revealed
In this episode of The Scoop, Frank Chaparro is joined by Matt Savarese, VP, Global Head of Strategy at Nasdaq to discuss Nasdaq's plan for entering the digital asset space, Nasdaq’s plan to offer crypto custody solutions, and more!
Read our notes below to learn more.
Nasdaq's Digital Asset Initiatives
Nasdaq (a venture capital fund) is focused on digital assets and has ventured into various areas, including investments, technology sales, and digital asset indexes.
Nasdaq has announced the development of a custody solution for digital assets, aiming to bring institutional-level technology and trust to the market.
The company decided to create a unified group for all its digital asset initiatives to drive innovation and offer end-to-end solutions for clients.
Nasdaq's client profile is a mix of those interested in holding Bitcoin and Ethereum and those anticipating the proliferation of other digitized assets.
The custody solution launch coincided with market turmoil, but Nasdaq remained confident in its thesis and the need for a trusted player in the space.
The market has seen a shift back towards major crypto like Bitcoin and Ethereum, which aligns with Nasdaq's focus on these assets.
Tokenization and Nasdaq's Expansion into Digital Assets
Savarese has been involved with Nasdaq since 2015 and focused on expanding the business into digital assets.
Nasdaq has expertise in building infrastructure for the financial ecosystem and explored the best opportunities to provide value to clients.
The company decided to focus on the custody business and is currently working on launching a custody solution.
The launch of the custody solution is subject to regulatory approval from the New York Department of Financial Services (NYDFS).
Institutions are looking to tokenize traditional asset classes, with the tokenization trend coming back into vogue.
Technology and security around blockchain and custody have improved, making tokenization more efficient and viable.
Smart contracts are now more detailed and audited, allowing for more efficient trading of asset classes.
Savarese predicts that a tokenized carbon removal credit will be available for trading within 2023.
Tokenization adds benefits to less efficient markets, such as carbon or fixed income, by enabling better tracking and utilization of assets.
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Future of Digital Assets and Nasdaq's Strategy
It is important to look at asset classes like carbon and fixed income for tokenization due to their unique characteristics.
The focus is on starting with custody as the foundation for holding assets, then moving on to execution and liquidity services.
Nasdaq aims to bring proper market structure and expertise to the crypto space, rather than simply launching another copycat exchange.
In the next 6-12 months, excitement revolves around the launch of new products, potential regulation, and innovation in the regulatory environment.
Customers are still interested in the digital asset space, and more are expected to enter as they focus on their own products and infrastructure.
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