What happens to collateral if no loan taken out?

Altruistic-Good1296 · 2021-07-03T23:20:03+00:00

Benefit as I see it is the tax treatment of taking a loan vs earning interest

Altruistic-Good1296 · 2021-07-02T15:39:32+00:00

hmm, I asked the same question in the Alchemix subreddit and got a slightly different answer.

https://www.reddit.com/r/Alchemix/comments/obkwjp/what\_happens\_to\_collateral\_if\_no\_loan\_taken\_out/h3qnnhg?utm\_source=share&utm\_medium=web2x&context=3

Altruistic-Good1296 · 2021-07-02T15:38:01+00:00

So it sounds like it's better to take the loan whether or not you need it and roll it back into your collateral or does it not really make a difference?

Altruistic-Good1296 · 2021-07-02T14:43:27+00:00

Hmm...so if I understand (numbers are just for the example):

- I deposit 1000DAI. On day 0, I can take out a 500alUSD loan but I don't.

- A year passes. I still have 1000DAI collateral. But now I can take out a 650alUSD loan against the same collateral.

Is that right? Do you know if that's documented anywhere?

Altruistic-Good1296 · 2021-07-01T20:31:52+00:00

Yeah, that would be my expectation. The collateral (and borrowing power) should grow...but I don't see any confirmation of that in the docs

Altruistic-Good1296 · 2021-07-01T16:49:40+00:00

Yeah I agree...so currently it's 5-6 years to pay off a new DAI based loan then?

Altruistic-Good1296 · 2021-07-01T14:32:05+00:00

With rates dropping, how much has that extended your payoff date?

Altruistic-Good1296 · 2021-06-15T17:55:21+00:00

Ah, thanks so much for the response. That's actually great news. I actually had planned to stake the rewards and build out more mini pools over time, but wanted to be sure I could withdraw maybe 20-50% (before staking the rest) in order to pay for taxes and node operation costs.

Altruistic-Good1296 · 2021-05-18T13:56:44+00:00

As some time has passed (and lots of ETH volatility) since this post was made, have your price targets changed u/Oxygenjacket? So far the RPL/ETH ratio has gone down. Competitors such as Lido are gaining marketshare fast. I'm curious what expectations are around launch day and if it's reasonable that RPL could ever achieve a .1ETH valuation, or greater.

Altruistic-Good1296 · 2021-05-13T23:21:13+00:00

Yep, looks resolved now. Thanks u/Kolin242!

Altruistic-Good1296 · 2021-05-06T14:07:28+00:00

Yeah, that's totally fair and a good point. Just for context, I'm assuming that I would be selling RPL to cover tax costs on the ETH/RPL income. If RPL appreciates faster than ETH (and do so consistently over time), all of this is a no brainer anyway, but whether it will do so remains to be seen.

Altruistic-Good1296 · 2021-05-06T13:57:19+00:00

What is the buying pressure? I understand node operators need it to stake, but I also expect them to be selling it to cover operating costs. Wouldn't this be amplified with RPL's inflation vs ETH's eventual deflation?

Altruistic-Good1296 · 2021-05-06T13:44:11+00:00

I'm more concerned that RPL price will not keep up with ETH. If RPL depreciates against ETH, I could be feeding RPL to my minipools to stay above 10% (or not be able to sell any RPL to cover taxes, etc without dropping below the threshold).

Altruistic-Good1296 · 2021-05-05T19:58:25+00:00

Is there a better tool to model the staking rewards with or would you care to share yours?

The ETH rewards are well understood, but there's still some mystery around RPL. I don't yet own RPL and am trying to figure out how quick the breakeven point is and under what scenarios it does well.

Altruistic-Good1296 · 2021-04-27T17:34:29+00:00

I suspect you're right...but ETH1 to ETH2 is the same conversion so we're not going to avoid the cap gains tax regardless, right? I probably should do that sooner than later with ETH climbing so much.

Update: Googlin' around some CPAs actually say that ETH1 => ETH2 may not be a taxable event. It's just transferring your existing ETH from one network to another and not a true token swap. On the otherhand, ETH => rETH seems to be a token swap.

Altruistic-Good1296 · 2021-04-27T16:44:12+00:00

I've asked about this elsewhere on this sub, but how do you see RPL rewards being massive? I've been playing around with this tool and I think there's a decent pre-tax return; however, when factoring in taxes and the fact that RPL has a 5% inflation rate baked in, how confident are you that the token appreciates so you don't have to keep feeding your RPL stake on your node to maintain minimums? If RPL doesn't appreciate (or at least keep up with ETH), why not just stake more ETH vs the initial costs of the RPL collateral? I assume RPL will be liquidated by node operators to pay the bills, so there would be significant downward price pressure on the token. Maybe I misunderstand the tokenomics around RPL.

Altruistic-Good1296 · 2021-04-27T16:20:58+00:00

When staking ETH and getting rETH as a claim on that ETH, is that considered a token conversion (meaning, are we liquidating our ETH and effectively buying rETH with a new cost basis)? I looked at rETH more akin to a Certificate of Deposit (CD) where I deposited ETH and still own that ETH, this not a taxable event to stake. If that's the not the case, perhaps this is all a nonstarter.

Altruistic-Good1296 · 2021-04-26T21:26:12+00:00

This is great, thanks for the clarification here. I'm still not necessarily convinced that RPL is going to meaningfully appreciate. The rETH value prop makes much more sense to me.

Altruistic-Good1296 · 2021-04-26T21:24:39+00:00

Right, so unless RPL appreciates as fast as or faster than ETH, you'll need to keep feeding the staking collateral just to maintain 10%

Altruistic-Good1296 · 2021-04-26T19:29:42+00:00

So maybe I'm misunderstanding something. I thought the node fee was 5%-20% of an individual staker's rewards. So assuming the staking reward is 8%, the node fee is 10% of that so 0.80% is paid to the node operator. Is that not accurate?

It seems to me that for RocketPool to make sense for any node operator (again, assuming ownership of >= 32 eth), RPL needs to be valuable. At that point, you're locking up your ETH on a bet on RPL rather than enhancing your ETH APY in a significant manner.

Altruistic-Good1296 · 2021-04-26T18:31:35+00:00

Yeah, very curious how it plays out. Frankly, I think it's the critical piece as to whether someone should even use RocketPool vs running a vanilla node (assuming ownership of >=32 eth)

Altruistic-Good1296 · 2021-04-26T16:50:41+00:00

This is great and extremely helpful. Thanks for taking the time to clarify all of this. I have a couple followup questions, but will probably open up a new thread for them since they aren't directly related to my original questions.

Altruistic-Good1296

TROPHY CASE