Author: Roland Roventa
Trump's victory has sparked a resurgence in DeFi, positioning Ethereum (accounting for 63% of the total locked value in global DeFi) to potentially break through with this momentum. Since the announcement of the U.S. presidential election results, the performance of the Ethereum ecosystem has consistently exceeded expectations.
However, the rollup-based scaling path of Ethereum, while crucial for scaling, faces a significant challenge: fragmentation. The current rollup ecosystem is in a winner-takes-all state, leading to the dispersion of liquidity, user attention, and user groups across mutually isolated L2 chains. To fully tap into the potential resurgence of DeFi, Ethereum must address these fragmentation dynamics, and it needs to resolve the current splitting issues to build a more unified and open network.
Bridging the gap: Addressing Ethereum's fragmentation and liquidity challenges
Puffer Finance's innovative solution – UniFi, directly addresses the fragmentation challenge of Ethereum. We believe that once the market recognizes that Puffer is not just another liquidity re-staking token (LRT), but an innovative infrastructure solution, its performance will exceed expectations.
Puffer's Past: Puffer originally began as a leading LRT protocol focused on providing decentralized staking solutions.
Puffer's Present: Puffer has now evolved into a unified solution centered around Ethereum. Puffer has transitioned from the first native liquidity re-staking protocol to a comprehensive Ethereum-integrated scaling ecosystem, consisting of three core components:
Decentralized Liquidity Re-staking Protocol (LRT)
Puffer's flagship product, equipped with slashing protection features, offers high yields and security, supporting decentralized re-staking within the Ethereum ecosystem.
UniFi Based Rollup Stack
A L2 based serialization solution that enables seamless interaction between L2>L2 and L2>L1, supporting atomic composability for efficient cross-chain operations.
UniFi Pre-confirmation AVS
The industry's first pre-confirmation AVS provides near-instant transaction finality for L1 and L2 transactions, significantly enhancing the speed and reliability of the Ethereum network.
Through the UniFi based rollup stack, Puffer Finance transforms Ethereum's fragmentation into a positive-sum ecosystem.
Part One: What is Puffer UniFi Based Roll-up Stack? How does it work?
What are based rollups?
Based rollups are an advanced scaling method that integrates directly with Ethereum's shared sequencer, without relying on centralized sequencers commonly used by other L2s (such as optimistic or zero-knowledge proof L2s). The core idea was first proposed by Justin Drake in a research article in March 2023:
"Based rollup, i.e., L1-ordered rollup, refers to a rollup whose ordering is driven by the underlying L1. Specifically, a based rollup means that the next L1 proposer can collaborate with L1 searchers and builders to include the next rollup block in the next L1 block without permission." - Justin Drake
For non-technical people, the above description may seem complex. Simply put, rollups based on the main chain validate transactions directly on L1, fully leveraging the efficiency of Ethereum's existing mechanisms. In contrast, other common rollup solutions (such as optimistic & ZK) typically validate transactions on L2 first and then submit them to L1.
By using based ordering (leveraging Ethereum L1 validators for ordering), the following advantages can be obtained:
Inheriting the activity and decentralization features of the Ethereum network: Ensures reliability and is not affected by single points of failure.
Infrastructure is simplified: No need to run separate sequencers.
Faster execution speed: Achieve faster transaction finality through pre-confirmation (which will be detailed later).
Aligning economic interests with L1: Creates new revenue opportunities for existing validators through non-capturable MEV (Maximum Extractable Value).
Reduce operational costs: As transaction ordering is handled by L1.
Based Rollups > Optimistic Rollups
By optimizing the underlying transaction ordering process, costs can be reduced, speed can be enhanced, while retaining Ethereum's inherent security and decentralization.
Puffer is Based
Puffer UniFi is a based rollup on Ethereum, enabling the creation of application chains through its tech stack.
It addresses the issue of liquidity fragmentation in Ethereum by achieving synchronized composability. Transactions on UniFi can directly interact with other based rollups without bridging, thus creating a unified liquidity and application layer. Developers can easily launch their own application chains, capture transaction fees, and leverage shared liquidity.
The goal of UniFi is to bring atomic composability to the Ethereum chain – redefining the possibilities of on-chain interaction. Through atomic composability, UniFi will allow Layer 1 and Layer 2 to achieve smooth, integrated interactions within a single Ethereum block. For example, users or protocols can deposit assets from L1 into UniFi, execute complex operations (such as swapping or liquidity mining), and then withdraw the assets back to L1 within the same 12-second Ethereum block. This is not only fast but also a major breakthrough in blockchain interoperability.
Puffer does not compete with L1, but collaborates with L1 to expand its functionalities in an integrated manner.
How does it work?
Inspired by research in collaboration with Justin Drake, Puffer UniFi employs Trusted Execution Environments (TEEs) in its processing stack. To achieve real-time proof, Puffer plans to use TEEs as a temporary auxiliary tool. The realization of real-time proof can significantly enhance interoperability. Once zero-knowledge proof (ZK proof) technology reaches sufficient speed, the prover can shift from relying on trusted hardware to a fully zero-knowledge-based solution.
Architecture Analysis of Puffer UniFi
Architecture Overview - Puffer's UniFi Pre-confirmation AVS provides users with L2 execution confirmation services. Users interacting through UniFi can experience sub-second transaction speeds. In UniFi's general Rollup, native earnings tokens can be used as fuel (Gas) tokens.
The consensus layer, data availability layer, and settlement layer are all handled by the base layer (Layer 1, i.e., Ethereum). Rollup focuses on the functionality of the execution layer.
This is precisely what makes Puffer's application chain (app-chain) unique.
Why is this important?
Puffer is building its own application chain (app-chain) using based rollups to achieve seamless integration of EVM protocols. This provides opportunities for everyone in the ecosystem to participate and benefit, whether individual validators or large dApps can benefit from a faster, more efficient, and more decentralized Ethereum. The fragmentation issue of Ethereum has existed for too long, and it is time to change this situation.
Ecosystem Overview
Growth will be phased:
Phase One: Puffer will introduce based rollups to users and developers. For protocols not yet ready to operate their own application chains, they can be deployed directly on UniFi.
Phase Two: UniFi will launch an SDK, enabling any dApp developer to quickly build and deploy their application chains in a simplified manner.
Part Two: UniFi Pre-confirmation AVS
UniFi offers near-instant execution confirmation through pre-confirmation (preconf) technology. This is not just an enhancement in speed but a whole new scalability solution for Ethereum. The pre-confirmation technology addresses Ethereum's fragmentation issue while providing extremely fast transaction confirmations.
How to achieve it? Due to Ethereum's 12-second block time limiting the finality of fast transactions, pre-confirmation (preconf) becomes essential for enhancing user experience. To address this issue, Puffer has developed a proprietary pre-confirmation AVS technology that offers near-instant (approximately 100 milliseconds) transaction confirmation guarantees, ensuring transactions will be included in the next block. This innovation greatly enhances the speed and reliability of the based rollup ecosystem.
How does it work?
Pre-confirmations (preconfs) are divided into two types: execution pre-confirmations (Execution) and inclusion pre-confirmations (Inclusion). Both can be used to provide users with faster transaction confirmations on L1 or L2: the advantage of execution pre-confirmation is to provide users with final and guaranteed commitments, including state confirmations after the transaction execution. For example, it can confirm the price at which the transaction was executed, significantly enhancing user experience.
Achieving execution pre-confirmation on L1 poses certain challenges; however, L2 execution pre-confirmation effectively addresses this issue. Puffer UniFi AVS leverages this capability to provide an optimized user experience.
Pre-confirmation guarantee mechanism: Pre-confirmation represents the proposer's (validator or authorized proposer) commitment to the user. If this commitment cannot be fulfilled, penalties should be applied, such as slashing. Re-staking protocols like EigenLayer play an important role in providing slashing guarantees for pre-confirmation. Notably, Puffer UniFi Pre-confirmation AVS is the first service of its kind running on EigenLayer.
Puffer UniFi: The Catalyst for Ethereum's Next Chapter – Unification
The synchronized composability of UniFi is a disruptive innovation. Interactions across Rollups operate as if on a unified chain, without the need for L2 bridges (which everyone dislikes), thereby lowering costs and alleviating security risks associated with asset transfers. UniFi's approach achieves liquidity unification, enabling developers and users to interact seamlessly across chains, significantly enhancing Ethereum's liquidity and user experience.
Implications for Developers: UniFi offers developers a unique opportunity to scale applications in a unified and low-friction environment. By eliminating centralized sequencers, UniFi significantly reduces operational costs, allowing developers to focus on the product itself without worrying about the complexities of isolated L2 applications. Moreover, UniFi's architecture makes deploying a based rollup nearly as simple as deploying a smart contract, greatly lowering the entry barrier for developers and encouraging innovation.
Revenue Gains: How Puffer's Based Rollups and Pre-confirmations Drive Value in the Ethereum Ecosystem
All revenue sources will convert into the earnings of the fund treasury, governed by the $PUFFER token.
Puffer's upgraded revenue model (note that it is not just an LRT) fully leverages based rollups and pre-confirmation technology to create sustainable value within the Ethereum ecosystem. Through based rollups, Puffer generates ordering fees, thanks to the mechanism that allows Ethereum validators to manage transaction ordering. UniFi not only supports seamless interoperability between Ethereum L1 and L2 but also between L2s, achieving the unification of liquidity and composability. By integrating ordering fees into the Ethereum validator network, Puffer captures transaction-based revenue while reinforcing the value of Ethereum's native economy.
Users can also pay pre-confirmation tips to prioritize their transactions. This provides Puffer with an additional revenue source, forming a diversified income alongside transaction inclusion fees. These fees and tips will be re-injected into Puffer's ecosystem, further enriching the value of its native tokens pufETH and unifiETH while providing additional returns to token holders.
As explained by Puffer core contributor Amir:
"If each user pays an additional fee for these pre-confirmations to ensure faster and more reliable transactions on Ethereum, then AVS will be closely associated with each user's transaction on Ethereum. This builds a very powerful, efficient income-generating AVS capable of stably producing organic returns."
About vePuffer
One of the key factors enabling the protocol to achieve sustainable long-term price growth is tokenomics. An excellent protocol must have a well-designed token model focused on creating value for long-term holders. At Mechanism Capital, we focus on the design of tokenomics, supporting teams that can innovate and maximize token value capture.
Puffer Finance is launching vePuffer as an update to its tokenomics. Its aim is to deliver value to token holders and align incentive mechanisms throughout the ecosystem. To this end, they have introduced the following innovations:
Decentralized Governance:
vePUFFER enables the community to participate in the allocation voting of PUFFER points, aligning with Puffer's decentralized goals.
Tradable Points:
The ERC20 PUFFER points in the second quarter support trading, allowing users to earn early returns or make additional purchases through trading, thereby increasing flexibility and arbitrage potential.
Flexible Strategies:
Tradable points enable users to decide whether to hold, sell, or buy based on personal strategies and market sentiment, enhancing risk management capabilities.
Bribery Market:
Protocols can incentivize vePUFFER holders to increase the voting count in their pools, thereby enhancing APR and liquidity.
Competitive Protocols:
The bribery mechanism allows protocols to attract votes to enhance APR, promote user participation, and create consistent incentive mechanisms.
Community-driven reward mechanism:
The vePUFFER model supports governance, speculation, and diversified strategies, empowering users to shape the incentive mechanisms of the ecosystem.
Why Puffer's UniFi stands out: Reshaping the Rollup landscape of Ethereum
By launching UniFi, Puffer creates an opportunity for Ethereum to transition from a fragmented Rollup environment to a unified, positive-sum ecosystem. This ecosystem brings developers, users, and liquidity together in unprecedented ways. The end result? A stronger, more resilient Ethereum that can meet the needs of billions of users.
Disclaimer: The content of this article does not constitute any investment advice.
