Preface
On March 13, 2024, Binance issued a document announcing that the latest launchpool is ether.fi of the Liquid Restaking track. This is also the first retake project to log in to Binance.
According to the website rootdata, the project has received two rounds of financing. The first was a seed round of US$5.3 million on February 28, 2023, led by North Island Ventures, Chapter One, and the second was on February 27, 2024. Rigang raised US$27 million, led by CoinFund and Bullish.
From Defillama’s Dashboard, we can see that ether.fi ranks first among all Liquid Restaking protocols (as of March 15, 2014), with a value of US$3.026 billion, which is more than double that of the second-placed Puffer Finance. , so what is the special feature that allows ether.fi to capture so much liquidity and win the favor of Binance?
This article will give you an in-depth understanding of the ether.fi protocol.
Liquidity Staking and Re-Staking
After Ethereum 2.0, the consensus mechanism changes from Pow (Proof of Work) to PoS (Proof of Stake), it is necessary to directly pledge ETH assets to ensure the security of its network and obtain benefits.
However, if you operate a node alone, there are relatively high financial and technical thresholds. For example, you need at least 32 ETH to activate a node and maintain a verification node at the same time. You need to have a computer with good performance and a large enough hard disk capacity. Professional Software knowledge, good network bandwidth, etc. These rigid requirements are very unfriendly to novices or novices.
Liquidity Staking
As mentioned above, at least 32 ETH are needed to activate a node, so the joint pledge model represented by Lido was born, that is, users pledge a small amount of ETH through Lido, and the user gets 1:1 stETH, and Lido then fragments it The ETH is integrated into 32 to activate the configured nodes.
The stETH here is a token of LSD (Liquid Staking Derivatives, Liquid Staking Derivatives), which is equivalent to the certificate of pledging ETH. Its quantity is always equal to the pledged ETH. It is called LST (Liquid Staking token, Liquid Staking Derivatives). Token).
The advantage of this is that it can not only lower the threshold for user participation, but also increase the liquidity of the originally locked assets. Users can hold stETH and continue to participate in Defi activities such as lending, trading, and liquidity mining.
Liquidity re-hypothecation
The ReStake concept was first proposed by Eignlayer founder Sreeram Kannan, who wanted to solve the problems of blockchain security and decentralization.
The "consensus" mechanism is a very basic and critical function in a blockchain network, which ensures that all participants in the network can agree on the order of transactions. This is achieved through a series of algorithms, such as BTC’s Proof of Work (Pow) or ETH’s current Proof of Stake (Pos) mechanism.
Under the PoS mechanism, the more validators are added (the more tokens are staked), the higher the cost and difficulty of attacking the network, and the more secure the network will be.
In this technical background, any module that is not deployed or certified on EVM cannot take advantage of the security of Ethereum's trusted underlying layer, such as side chains based on the new consensus mechanism, new virtual machines, oracles and other middleware.
The only way is to create a new trust network to protect their system. If you want to build a new PoS network (such as BNB chain), you need to issue coins to achieve its security function. They must convince ecological participants to assume this This approach is undoubtedly inefficient and costly due to the risk of the new token’s price plummeting.
EigenLayer is a protocol based on Ethereum that introduces the concept of restaking, allowing users who natively pledge ETH or use liquid pledge tokens (LST) to choose to join the EigenLayer smart contract to re-pledge their ETH or LST, and Extend cryptoeconomic security to other applications on the network for additional rewards.
To sum it up in plain language, other projects can outsource security work to EignLayer.
(Note: Active Verification Service (AVS), any system that requires its own distributed inspection rules for verification, such as side chains, data availability layers, new virtual machines, cross-chain bridges, etc.)
The rationale for the existence of ether.fi
So since there is already a re-pledge agreement like EignLayer, why are there still liquidity re-pledge protocols like ether.fi and buffer? Because there are currently three main methods of re-pledge: EigenLayer native re-pledge, EigenLayer LST re-pledge and liquidity re-pledge agreement. The following is a brief comparison between the three different staking methods.
It can be seen that through liquidity re-pledge protocols such as ether.fi, it can greatly simplify users' participation in EignLayer operations and there is no deposit limit. At the same time, such protocols will also release Liquid Re-Pledge Tokens (LRT, Liquid ReStaking Token). ), allowing users to participate in other Defi projects in the ecosystem.
Advantages of ether.fi
Regarding the superiority of ether.fi, I have actually shown it in the title of the article. I excerpted the sentence "Not your keys, not your coins" from the official introduction video of ether.fi. It can be seen that ether.fi pursues ultimate decentralization and non-custodial, and users can withdraw their liquidity at any time.
The user roles participating in ether.fi are as follows. Let’s focus on the first two. ether.fi helps users exit liquidity by introducing T-NFT, B-NFT and eETH for different roles.
ether.fi is a truly non-custodial and decentralized staking protocol that gives holders full control of their assets while harnessing the power of permissionless decentralization. This protocol provides a secure and seamless delegated staking service while delivering higher returns and reduced costs through innovative revenue streams and aggressive operational efficiency optimization.
In order to ensure that users have ownership of their assets, Ether.fi has taken the following measures:
Full control of validator keys: Unlike other delegated staking services like Rocket Pool and Lido, Ether.fi allows stakers full control of their validator keys. These keys are necessary to trigger the exit of the verification node and are the key to guaranteeing the ownership of the user's assets.
Using T-NFT and B-NFT: represents a claim on staked ETH. T-NFTs are transferable and can be liquidated into ETH or eETH, while B-NFTs are tied to the person who generates and retains the validator key. B-NFT represents ownership of the validator key, and the B-NFT holder is responsible for exiting the node if necessary. In exchange for additional liability, B-NFT holders earn 50% more than T-NFT and eETH holders.
Secure transfer to node operator: In order for a node operator to run a validator node on behalf of a staker, they must have access to the staker’s validator key. Ether.fi uses a secure and unique ECIES implementation that allows stakers to share validator keys while retaining control over them.
Future security enhancements: While shared validator keys are an improvement for most stakers, Ether.fi plans to further enhance security by leveraging EIP-5630 or sharded keys with Distributed Validator Technology (DVT) and improve user experience.
In short, Ether.fi guarantees users ownership of their assets by giving stakers full control over their validator keys and using specific NFTs to represent claims on staked assets, and share the keys through a secure mechanism , ensuring the security and transparency of the staking process.
(The liquidity withdrawal mechanism of Ether.fi is relatively complicated, it is recommended to refer to the official documentation: https://etherfi.gitbook.io/etherfi/ether.fi-whitepaper/technical-documentation)
How to participate in ether.fi
Currently, the main ways to participate in ether.fi are as follows: staking a small amount of ETH to obtain eETH, applying to join the Solo Staker plan, staking multiples of 32 ETH, participating in the Binance launchpool, and purchasing in the secondary market.
1. Go to https://app.ether.fi/ to link the wallet, pledge ETH to get eETH and earn interest
2. You can fill in the application form https://www.ether.fi/solo-staker#solo-staker-form to join the Solo Staker program. Simply put, the Solo Staker program is where Ether.fi provides ETH, software, and technical support to bring solo stakers online. All you need is the hardware to run the validator and an internet connection. Once your machine is online, it will support and verify the Ethereum network and you will be rewarded!
3. If you are a large ETH owner, you can pledge multiples of 32 ETH to become multiple validators. The following is the official operation guide: https://etherfi.gitbook.io/etherfi/solo-stakers/32-eth-stakers
4. You can participate in Binance’s latest launchpool to participate in mining https://launchpad.binance.com/zh-CN
5. Secondary market trading. After ethfi is listed on Binance, you can purchase it in the secondary market. Here is a price estimation article from Odaily for reference (the reasonable price range is 4.5 USDT~8.66 USDT, corresponding to a circulating market value of 518 million USD to USD 1 billion.),
https://www.odaily.news/post/5193747
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Reference documentation:
Etherfi official documentation: https://etherfi.gitbook.io/etherfi
EigenLayer official documentation: https://docs.eigenlayer.xyz/eigenlayer/overview
Binance Research report: https://www.theblockbeats.info/en/news/51842
https://foresightnews.pro/article/detail/55642
