Key Points

  • Puffer is a native liquidity re-staking protocol (nLRP) based on EigenLayer.

  • It aims to improve the performance and diversity of Ethereum Proof-of-Stake (PoS) validators, thereby increasing the convenience and decentralization of native re-staking.

  • Puffer’s slashing protection mechanism and validator tickets ensure continuous rewards and improve security for stakers.

Introduction

Puffer’s main goal is to establish a new standard for the secure operation of validators while maintaining the decentralized nature of Ethereum.

Puffer Finance introduces a new way to stake Ethereum, making it easier to re-stake liquidity. It addresses the centralization and accessibility challenges of the staking process through a permissionless framework, native re-staking functionality, and a commitment to decentralization. With its strong slashing protection mechanism and validator tickets, the protocol provides continuous rewards and improves the security of ETH stakers.

However, before we explore how Puffer works, it is necessary to clarify the difference between liquidity staking and liquidity re-staking.

Comparison between Liquidity Staking and Liquidity Re-staking

Liquid staking refers to the process of tokenizing staked assets. For example, when users stake ETH on platforms such as Lido, they receive stETH. Liquid staking tokens (LST) such as stETH allow users to contribute to network security without sacrificing liquidity. Once ETH native staking is complete, users can use LST on other platforms.

Liquidity re-staking takes the concept of liquidity staking a step further by extending the practice of using staked ETH to improve blockchain security to other “external” modules and systems (such as oracles, sidechains, and rollups). This allows validators to better leverage their holdings and earn benefits beyond staking rewards.

How does Puffer Finance work?

Puffer aims to improve the performance and diversity of Ethereum Proof of Stake (PoS) validators. Unlike the traditional staking model that requires validators to lock up a large amount of funds (32 ETH) and maintain technical infrastructure, Puffer provides a more convenient way to stake. With Puffer, individuals can become validators with as little as 1 ETH, which lowers the barrier to entry and improves decentralization.

Native Liquidity Re-Pledge Protocol (nLRP)

Puffer is built on top of the EigenLayer, a specialized blockchain layer optimized for staking operations. Puffer operates as a native liquidity re-staking protocol (nLRP):

  • Native means that Puffer only uses native ETH.

  • Liquidity refers to the liquidity staking mechanism that provides users with liquidity staking tokens (LST). For every ETH a user stakes on Puffer, they can get 1 pufETH. In this way, users can use pufETH in other DeFi apps while staking ETH.

  • Re-pledge refers to a liquidity re-pledge mechanism that allows users to use ETH deposited in Puffer as collateral for EigenLayer services.

In other words, Puffer's native liquidity re-staking mechanism allows validators to not only maintain their validator status and earn returns, but also use their staked ETH for other activities. This improves capital efficiency and ensures that validators' assets are fully utilized, thus helping to build a stronger staking ecosystem.

Permissionless framework

Puffer Finance uses a permissionless framework that allows anyone to run a validator on its protocol. This democratization of staking ensures diversity and decentralization of validators, thereby reducing centralization risks. Puffer aligns with the platform's decentralized philosophy by removing barriers to entry and enabling individual stakers to participate in the Ethereum consensus mechanism.

Slashing Protection and MEV Autonomy

Puffer uses an innovative slashing protection mechanism to protect validator assets. Puffer uses anti-slashing hardware support and strong security protocols to minimize the possibility of validators being slashed due to malicious behavior or operational errors.

In addition, Puffer also supports validators to independently determine their maximum extractable value (MEV) strategy, allowing validators to obtain more rewards while maintaining security and integrity.

Validator Tickets and Additional Rewards

Puffer Finance introduces the concept of validator tickets, which guarantee rewards to stakers regardless of their performance. This innovative approach provides continuous rewards to stakers, incentivizing them to participate in the protocol first. In addition, Puffer's integration with Eigenlayer can also provide more rewards to validators, incentivizing them to participate in staking and contribute to the ecosystem.

Puffer Airdrop

As of April 2024, Puffer has not made an official announcement regarding an airdrop. However, users can earn Puffer points by depositing stETH or providing liquidity to the Puffer platform. Although we cannot be completely sure, some users speculate that users holding these points may be eligible to participate in airdrops and receive token allocations later.

Conclusion

Puffer’s mission is to establish a new standard for the safe operation of validators, with a focus on maintaining the decentralized nature of Ethereum. To this end, the protocol uses anti-slashing technology to reduce risk and enables multiple validators to increase the diversity of node operators.

The Puffer Finance protocol provides an easily accessible decentralized innovative solution for Ethereum validators and stakers. By leveraging liquidity staking, slashing protection, and native liquidity re-staking capabilities, Puffer can improve the efficiency of the Ethereum PoS ecosystem and enable everyone to participate.

Further reading


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