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Announcement

The forthcoming Houston Protocol Upgrade to the RocketPool protocol represents a pivotal leap in governance, introducing a fully on-chain Decentralized Autonomous Organization (DAO) for protocol governance — termed the Protocol DAO, or pDAO. This cutting-edge DAO operates entirely on-chain, eschewing the need for third-party snapshot voting or tools, setting a new standard for self-governance in the blockchain sphere.

Current Rocket Pool Governance

Rocket Pool has an implemented governance structure that works to create collaboration between different groups of stakeholders. Overall, decisions on the direction of the protocol are primarily driven by the oDAO, which is controlled by RPL holders. However, there is a two-party system that will be discussed in depth below. Any changes implemented by the oDAO are then added to the protocol by a team of core developers.

So far, Rocket Pool has worked to align itself closely with the ethos of the broader Ethereum ecosystem by choosing to value decentralization and user desires over other potential paths to development. The oDAO is a fundamental piece of helping Rocket Pool to achieve a higher degree of decentralization than competitors. 

Individuals gain power within the oDAO by participating in the network via staking the RPL token (a requirement for node operators) rather than just holding RPL tokens themselves. Lido, for instance, only requires that a party hold LDO tokens. This allows large holders to control significant portions of the voting power on Lido even if they have no intentions of supporting the network’s functionality. Thus, Rocket Pool is far less susceptible to manipulation by a small group of powerful holders within the ecosystem compared to Lido’s governance structure.

Governing Bodies: oDAO and pDAO

The Rocket Pool Protocol has two governing bodies, the Oracle DAO (oDAO) and the Protocol DAO (pDAO). 

The oDAO, made up of node operators, ensures the proper functioning of Rocket Pool contracts and performs tasks for the protocol. The members of the oDAO are invite-only, high-profile members of the Ethereum and Rocket Pool community and must post a bond and run a node. As compensation for performing these responsibilities, the Oracle DAO receives 15% of the total RPL inflation produced during each rewards period, which is distributed equally among its members.

The Oracle DAO (oDAO) in the Rocket Pool protocol plays a crucial role in maintaining the integrity and functionality of the system. The oracle nodes under its purview monitor several key elements that are vital to the operation of the protocol. One of these elements is the performance of each validator, also known as a Minipool. The protocol needs to track the performance of each Minipool to accurately calculate the overall network performance and set the correct exchange rate for rETH to ETH conversions.

Another critical element is the RPL:ETH ratio. This ratio is required when node operators deposit ETH, as they must also provide at least 10% of the ETH value in RPL as insurance to the protocol. To ensure fairness, more than 50% of oDAO members must agree on the RPL:ETH ratio.

Validator credentials are also monitored to ensure that validator public keys aren't already in use and have the proper withdrawal credentials. This monitoring allows the protocol to safely fund them. The oDAO also oversees validator processes, including onboarding and offboarding minipools. This includes processing transition requests between 16-ETH minipools and 8-ETH minipools.

Epoch rewards are another key element under the oDAO's purview. The oDAO is responsible for constructing the rewards Merkle tree at the end of each rewards period and uploading it to IPFS for other node operators to access.

Lastly, the oDAO votes on contract upgrades. For instance, vote ID 13 executed the Atlas upgrade to handle ETH staking withdrawals based on on-chain approvals from 10 of its 18 members. This democratic process ensures that the protocol continues to evolve and adapt to the changing needs of its users and the broader cryptocurrency ecosystem.

Examples of the groups associated with the oDAO for Rocket Pool are represented below:

14 of the 16 oDAO members. Source

For everyday users, the exclusivity of the oDAO isn’t perfect. However, there is a second portion of governance in pDAO. The pDAO, governed by node operators with voting power proportional to their RPL stake, manages the Rocket Pool treasury and signals the future of the protocol, including parameters such as rewards, fees, and deposit parameters. The pDAO is funded by the Rocket Pool pDAO Treasury, partially through RPL inflation. Because of this, node operators have a significant influence on the future value of the protocol as a whole.

The most important takeaway is the indirect governance that this gives users of the protocol. Due to the dual-group governance model of Rocket Pool, users have significant influence over the protocol as a whole because they essentially “vote” for node operators by choosing to stake with them to create Mini-pools.  

Houston Upgrade Specifics

Central to the Houston upgrade are enhancements designed to foster new integrations and bolster platform development atop the protocol. A notable feature is the expanded capability for users to stake Ether (ETH) on behalf of a node, which diverges from the traditional model where only the node itself could perform staking. Additionally, the upgrade introduces an RPL withdrawal address feature, enabling node operators to supply ETH for staking while permitting another party to contribute RPL for the insurance bond in a trustless fashion.

The pDAO, underpinned by RPL governance, is charged with steering the protocol's direction, with its membership comprising node operators who actively participate in the protocol. Unlike conventional DAO governance, which relies on token weight for voting power, the pDAO mandates active protocol participation for governance eligibility, ensuring a democratized and engaged governance process.

At present, the pDAO presides over various protocol settings and the treasury funds, fueled by a 5% inflation of the RPL token. These funds can be allocated for a range of purposes, including direct protocol development and third-party project support. With the Houston upgrade, the pDAO will gain the enhanced ability to distribute treasury funds progressively, aligning expenditures with the achievement of development milestones.

A new security council accompanies the upgrade, serving as a rapid response team to potential protocol issues. This council, elected by the pDAO, has the authority to propose and execute timely measures, including pausing the protocol to address and mitigate any emergent risks, ensuring the robustness and resilience of the network.

For the governance framework to operate effectively, a robust proposal and voting system is paramount. The Houston upgrade ushers in RPIP-30, which introduces an optimistic fraud-proof system for governance. This system allows node operators to raise, vote on, or challenge proposals directly on-chain, eliminating reliance on external tools.

The proposal process is as follows: nodes can raise a proposal by locking in an RPL bond, and should a proposal contain inaccuracies, it can be challenged, with challengers also required to post a bond. Voting then occurs, with options ranging from abstention to full support, opposition, or veto — the latter being reserved for proposals considered spam or malicious. If a proposal withstands challenges and vetoes, it proceeds to execution, thus amending the Rocket Pool protocol.

This comprehensive governance overhaul, epitomized by the Houston upgrade, marks a significant stride in the decentralization and self-sustenance of blockchain protocols. It establishes a governance model that insists on active engagement and offers a layered approach to decision-making, enhancing both the security and efficacy of the network. For investors and users of cryptocurrency, such developments signal a maturation of the space, promising greater autonomy and resilience for the decentralized platforms of the future.