Puffer has consistently adhered to principles aligned with Ethereum in its design and product evolution, demonstrating support for Ethereum's long-term vision.
Written by: LINDABELL
According to Puffer Finance's latest strategic roadmap, the platform has expanded from a native liquidity restaking protocol to a decentralized infrastructure provider for Ethereum. Its product architecture has also been adjusted, adding Based Rollup Puffer UniFi and pre-confirmation solution UniFi AVS in addition to Puffer LRT. Regarding these adjustments, Puffer stated, 'Puffer's strategic roadmap represents the team's commitment to building the infrastructure necessary to support Ethereum's growth and resilience. From UniFi AVS to PUFI TGE, everything has been meticulously designed to align with Ethereum's core principles.'
The Birth of Puffer
On November 29, 2023, Puffer co-founder Jason Vranek demonstrated the Puffer Demo at the 'Restaking Summit: Istanbul Devconnect' hosted by EigenLayer. Puffer is a native liquidity restaking protocol aimed at designing a permissionless liquidity restaking solution that reduces slash risks and alleviates the current issues of centralization and high entry barriers in the staking market.
The original goal of the Puffer founding team was to use verifiable technology to reduce potential slash risks in liquidity staking protocols. Inspired by Ethereum Foundation researcher Justin Drake's proposal in his 2022 paper 'Liquid solo validating' to reduce the slash risk for individual validators through hardware technology, the Puffer team developed the Secure Signer security signing technology at the end of 2022. This technology utilizes Intel SGX to store validator private keys in an enclave, preventing the slash risks that can arise from key leakage or operational errors. The development of Secure Signer also received funding from the Ethereum Foundation in the fourth quarter of 2022.
Of course, Puffer has also garnered significant attention from many investment institutions and angel investors. To date, Puffer Finance has completed four rounds of financing, with a total funding amount reaching $24.15 million. In June 2022, Puffer Finance completed a $650,000 Pre-Seed round led by Jump Crypto. Subsequently, in August 2023, Puffer Finance completed a $5.5 million seed round led by Lemniscap and Lightspeed Faction, with participation from Brevan Howard Digital, Bankless Ventures, and others. This round of funding was used for further development of Secure-Signer. In April of this year, Puffer Finance completed another $18 million Series A funding round, led by Brevan Howard Digital and Electric Capital, with participation from Coinbase Ventures, Kraken Ventures, Consensys, Animoca, and GSR. This round of funding was primarily used to advance the mainnet release.
Puffer LRT Protocol: Native Liquidity Staking Protocol
Liquidity Restaking Tokens (LRT) are a category of assets developed around the EigenLayer ecosystem, aimed at further enhancing the capital utilization efficiency of Ethereum staking assets through a restaking mechanism. Its operating principle is to restake ETH or liquid staking tokens (LST) already staked in the Ethereum PoS network through EigenLayer to obtain additional revenue beyond Ethereum's mainnet staking rewards.
Since Ethereum transitioned to a PoS mechanism, an increasing number of staking products have emerged, driving the development of the staking market. However, some platforms like Lido hold a significant share in the staking market, raising concerns about the risk of network centralization. Reviewing September 2023, Lido's market share in the liquid staking sector once reached 33%. However, with the rise of liquidity restaking protocols, Lido's market share has gradually declined to around 28%. Ethereum contributor Anthony Sasson noted that the vampire attack initiated by Puffer has significantly impacted Lido, involving over $1 billion in capital movement.
As an open, decentralized native liquidity restaking protocol, Puffer combines the dual strategies of liquidity staking and liquidity restaking, utilizing Secure Signer security signing technology and Validator Tickets (VT) among other designs to help independent validators effectively participate in the Ethereum staking and restaking process, thereby enhancing yields while maintaining Ethereum's level of decentralization.
Additionally, to prevent excessive centralization of Puffer within the network, the protocol strictly limits the number of its validating nodes, not allowing them to occupy more than 22% of the total Ethereum network nodes, ensuring that the trusted neutrality of Ethereum is not threatened.
Lowering the staking access threshold from 32 ETH to a minimum of 1 ETH
To become a node on Ethereum requires 32 ETH, which is undoubtedly a high barrier for independent users. However, Puffer reduces the entry threshold for staking participation through a mechanism called Validator Tickets (VT), allowing node operators to operate validating nodes with just 2 ETH collateral (or only 1 ETH if using SGX). VT is an ERC20 token representing the right to operate an Ethereum validator for one day, and the price of VT is set based on the expected daily returns of running a validator. In other words, node operators need to lock a certain amount of VT to participate in staking and gradually release it to liquidity providers during the staking period, while validators can receive all rewards generated from PoS.
For example, similar to joining a franchise restaurant, users can choose to pay monthly returns or make a one-time upfront payment of expected returns for the next year to gain operational rights, while Puffer's VT mechanism follows the latter model. Additionally, node operators can receive 100% of the PoS rewards, thereby avoiding the 'lazy node' phenomenon in traditional staking models where participants choose to disengage or exit consensus due to insufficient rewards.
Achieving Dual Returns through EigenLayer
Puffer is a native liquidity staking protocol. Here, 'native' means that users can not only participate in Ethereum PoS consensus but also directly restake ETH. This means that stakers can gain validation rewards from Ethereum PoS as well as obtain additional earnings through the restaking mechanism, achieving dual returns. Furthermore, unlike traditional liquidity restaking products, Puffer does not rely on third-party liquidity providers but directly uses the ETH of native validators for restaking, avoiding centralization issues that may arise from domination by a few large staking entities. Through this approach, Puffer not only enhances yield but also strengthens the network's decentralization. Currently, Puffer's total locked value has reached $859.6 million, with an annualized yield of 3%.
Using Secure-signer and RAVe to Prevent Slash Risks
Puffer effectively prevents validator penalties resulting from operational errors through Secure-signer and RAVe (Remote Attestation Verification) remote proof technology. Secure-Signer is a remote signing tool based on Intel SGX hardware security technology, capable of generating, storing, and executing signing operations within an enclave, thus preventing validators from incurring slash penalties due to double signing or other signing errors. The purpose of the RAVe technology is to validate the remote proof reports generated by Intel SGX, ensuring that nodes are indeed running the verified Secure-Signer program. After verification, the system will record the validator key status on-chain, preventing malicious nodes from using unverified code or replacing critical operational logic.
It is worth mentioning that as a public good, the Secure Signer code has been open-sourced and can currently be viewed on Github.
Puffer launched its mainnet on May 9 this year. To further enhance the decentralization of the Ethereum network, Puffer plans to release version V2 in the fourth quarter of this year. This upgrade focuses on enhancing user experience and introduces several key features:
Fast Path Rewards (FPR): Allows users to directly extract consensus layer rewards from L2, avoiding cost issues due to high Gas fees during the EigenPod extraction process.
Global Mandatory Anti-Slash: Puffer V2 will implement an anti-slash mechanism across the protocol, further enhancing network security and decentralization.
Lowering collateral requirements: Puffer V2 also lowers the collateral requirements for NoOps (non-operational nodes), requiring only a small amount of pufETH collateral to address the slash risks arising from inactivity.
Puffer UniFi: Achieving 100 Milliseconds Transaction Confirmation through UniFi AVS
On July 6 of this year, Puffer released the Litepaper for its Based Rollup solution Puffer UniFi. As a Based Rollup, UniFi enhances the security and decentralization of the Ethereum network by utilizing Ethereum validators for transaction sorting while returning transaction value to L1.
Since Ethereum implemented a 'Rollup-centric' roadmap, a large number of L2 solutions have emerged in the market. According to L2Beat data, the number of Rollups in the market has exceeded 100. However, while these scaling solutions have enhanced Ethereum's scalability and user experience to a certain extent, they have also brought issues like liquidity fragmentation and centralized sequencers. The first issue is liquidity fragmentation; due to the lack of interoperability between different Rollups, liquidity and users are dispersed across various independent L2 networks, making it difficult for the overall ecosystem to form effective synergies. Moreover, users need to rely on cross-chain bridges when transferring assets between different Rollups, which not only increases operational costs but also poses certain security risks. Furthermore, most current Rollups use centralized sequencers, which extract additional rents from user transactions through MEV, thereby affecting the user transaction experience.
Puffer's UniFi solution aims to address these issues through decentralized transaction sorting based on validators. Unlike traditional centralized sorting solutions, while transactions in UniFi are processed by Puffer nodes, these nodes are Ethereum's native staking nodes, thus delegating transaction sorting rights to decentralized validators and fully leveraging Ethereum's security and decentralization characteristics.
Additionally, UniFi addresses the issue of liquidity fragmentation through synchronous composability and atomic composability. Applications based on UniFi can rely on the provided sorting and pre-confirmation mechanisms, thus enabling seamless interoperability with other Based L1 sorted Rollups or application chains. Furthermore, by utilizing Puffer's TEE-multiprover technology, UniFi can achieve atomic-level composability with L1, allowing for instant L1 settlement and direct access to L1 liquidity to enhance the efficiency of cross-layer transactions and applications, facilitating developers in building more efficient applications.
However, while Based Rollup mitigates the risks of centralized sequencers by delegating transaction sorting to L1 validators, its transaction confirmation speed is still limited by L1's block time (approximately 12 seconds), making it impossible to achieve fast confirmations. To address this issue, Puffer has introduced AVS services based on EigenLayer, providing a pre-confirmation mechanism that achieves a transaction confirmation time of 100 milliseconds.
In Puffer UniFi AVS, through EigenLayer's restaking mechanism, validators can use their ETH staked on the Ethereum mainnet for UniFi's pre-confirmation verification services without needing to stake additional new funds. This improves capital utilization efficiency to some extent and lowers the participation threshold. Additionally, UniFi AVS leverages the economic security of the Ethereum mainnet. If validators participating in the pre-confirmation do not comply with their commitments, they naturally face the risk of their staked ETH being slashed on the mainnet, thus eliminating the need to design additional slashing measures for Puffer's pre-confirmation mechanism.
Validators participating in Puffer UniFi AVS must possess ownership of EigenPod to ensure that UniFi AVS services can enforce slash penalties, thus constraining the behavior of validating nodes that violate pre-confirmation commitments. Additionally, node operators need to run Commit-Boost in the server or environment where their validator client resides, responsible for handling communication between validators and the pre-confirmation supply chain.
In just two weeks since its launch, the UniFi AVS platform has already secured 1.05 million ETH in staking, with over 32,000 validators participating. In the future, Puffer also plans to combine the Ethereum Foundation's neutral registry contract mechanism, allowing any L1 proposer to voluntarily register as a pre-confirmation validation node. This means that every validator on the Ethereum mainnet can choose to become a pre-confirmation validator, further expanding the system's level of decentralization.
Summary
As the Ethereum ecosystem gradually expands, ensuring that various projects and participants work towards the same goals has become a core issue of long-term community concern. This alignment (Ethereum alignment) is considered key to the long-term success of the Ethereum network. Early on, the community broke it down into three dimensions: 'Cultural Alignment', 'Technical Alignment', and 'Economic Alignment', while Vitalik Buterin proposed a new set of metrics in his recent article 'Making Ethereum Alignment Legible', including open-source, open standards, decentralization and security, and 'synergistic effects'. Of course, regardless of the standards adopted, the core objective is to ensure that protocols, communities, and projects remain aligned with the overall development direction of Ethereum, thus providing positive support for the sustainable development of the ecosystem.
It is commendable that Puffer has consistently adhered to principles aligned with Ethereum in its design and product evolution, demonstrating support for Ethereum's long-term vision. Through integration with EigenLayer, Puffer enables more independent validators to participate in the staking network, thereby enhancing Ethereum's level of decentralization. Moreover, Puffer's UniFi solution returns the transaction sorting rights to Ethereum's native staking nodes, aligning with Ethereum in terms of security and decentralization.
Currently, Puffer Finance has released its tokenomics, with 75 million PUFFER tokens (accounting for 7.5% of the total supply) allocated for the first season of the Crunchy Carrot Quest airdrop. The eligibility snapshot for the first-season airdrop was completed on October 5, 2024, and users can claim their tokens through the token claim portal from October 14, 2024, to January 14, 2025. With the official launch of the PUFFER token, whether Puffer can achieve further decentralization and user growth while advancing its goal of alignment with Ethereum remains to be seen.
