Interviewers: flowie, kit, ChainCatcher
Guest: Amir, core contributor of Puffer Finance
Editor: Marco, ChainCatcher
At a time when competition for re-staking narratives is intensifying, Puffer Finance is not the fastest player. On May 8, Puffer Finance announced the launch of the mainnet, and TEG and airdrops are still in progress.
But for Amir, a core contributor of Puffer Finance, Puffer is positioned to become the base layer of Ethereum, and there is no shortcut to this path. "The native staking and permissionless network that Puffer wants to create must solve a lot of trust issues and technical barriers."
Rather than investing a lot of energy into market hype, Amir would rather put user safety first and explore and meet user needs through small steps.
Amir's rigorous pace in product creation is also inseparable from his background in science and engineering. Amir graduated from the University of California, Santa Cruz and the University of Southern California, majoring in electrical and electronic engineering. Shortly after graduation, Amir joined NASA as an engineer to explore the empowerment of AI for the aerospace industry.
During this period, Amir, who is also a crypto enthusiast, began to explore the use of blockchain technology to solve the privacy and trust issues brought about by AI. Later, inspired by a paper from the Ethereum Foundation Research Institute, Amir and his college classmate Jason Vranek entered the Ethereum staking track that needs to solve various trust issues and founded Puffer Finance.
Puffer Finance can reduce the threshold for pledged funds from 32 ETH to 1 ETH, improving the efficiency of capital utilization for node operators. The anti-confiscation technology based on Intel SGX hardware and the economic guarantee of Ethereum node operators also reduce the risk of asset confiscation for users. After the mainnet is launched, Puffer Finance also plans to launch its own AVS service. Currently, Puffer Finance's TVL is nearly 1.8 billion US dollars.
Recently, Puffer Finance announced the completion of a US$18 million Series A financing round. In addition to crypto native funds such as Brevan Howard Digital and Electric Capital, and exchange funds such as Coinbase Ventures, this round of financing also attracted the participation of traditional financial giant Franklin Templeton.
Previously, Puffer Finance had received three rounds of financing, with participation from well-known institutions such as Binance Labs, Jump Crypto, and Eigenlayer founder Sreeram Kannan.
NASA Engineer's Journey into AI and Crypto
1. ChainCatcher: I learned from LinkedIn that you worked as an engineer at NASA before founding Puffer Finance. Why did you enter the Crypto field? What other important experiences do you have?
Amir: During my time at NASA, I worked in an innovative department where we focused on how new technologies such as AI could empower the aerospace industry.
Before joining NASA, he had already started using cryptocurrency and was fascinated by the new financial paradigm brought by blockchain.
My real attempt to become a blockchain developer stems from my exploration of AI and blockchain.
With the emergence of AGI (artificial general intelligence) and ChatGPT, we realized that users’ private data is not protected and can be easily leaked. So we began to get in touch with technologies such as zero-knowledge proof and trusted execution environment, and explored hardware-based or mathematics-based solutions to solve the problem of verifiable computing.
During a hackathon, we built a privacy-protected decentralized search engine that allows users’ input content to be encrypted. This project experience also provided the key architectural foundation for Puffer Finance.
2. ChainCatcher: You mentioned in a public podcast interview that you and Puffer Finance co-founder and CTO Jason Vranek were inspired by the staking research of Justin Drake, a researcher at the Ethereum Foundation, and thus chose to enter the Ethereum base layer to start your entrepreneurial journey. How long did you do the research at the time, and what kind of market pain points did you hope to solve?
Amir: Initially we wanted to use verifiable technology to solve the risk of confiscation of LSD.
While exploring verifiable technologies, we also discovered that there are many trust issues involved in the Ethereum liquidity staking process. Users deposit funds into liquidity staking providers, who act as middlemen to provide users’ funds to some centralized node operators, trusting them to provide verification and then distribute rewards to users.
However, due to trust issues, this will bring many risks. For example, what if the node operator is fined?
In June 2022, Justin Drake, a researcher at the Ethereum Foundation, published a research paper titled "Liquid solo validating", which discussed how hardware can be used to reduce the risk of slashing for individual validators and improve the capital utilization efficiency of LSD.
Inspired by this paper, we created an anti-slashing solution for Solo Staking/Home Staking around the end of 2022, which we now call Secure-Signer secure signature technology. It runs on Intel's SGX to prevent slashing.
In addition, through the Secure-Signer secure signature technology, Puffer was able to safely reduce the threshold requirement for validators from 32 ETH to only 1 ETH, significantly reducing the participation threshold for individual validators. The Secure-Signer secure signature technology has also received funding from the Ethereum Foundation.
Not limited to re-staking, committed to becoming the base layer of Ethereum
3. ChainCatcher: Puffer Finance has mentioned many times that your narrative is not limited to Restaking, so what is your positioning? What are the differences and innovations compared to other restaking protocols?
Amir: First of all, Puffer Finance is the only permissionless Ethereum liquidity staking protocol that allows entry by any individual with node verification work.
Secondly, many LRT or other LST protocol teams are essentially simple smart contracts, which actually leave a lot of infrastructure construction to centralized operators, but Puffer is positioned to become the base layer of Ethereum, aiming to make the decentralized operation of Ethereum validators more feasible. We hope to unlock more functions for users, such as re-staking.
Re-staking allows the security of Ethereum’s POS mechanism to be shared and provides more rewards for stakers or node operators.
In the future, Puffer also plans to use re-staking to further advance the Ethereum stack. The Ethereum stack still has many problems to solve, such as the need for composability and the large amount of liquidity fragmentation between Layer2.
In addition, Puffer is also actively exploring some cutting-edge solutions, such as AI, which the Puffer team is familiar with, and how to perform secure data processing on the chain.
4. ChainCatcher: Puffer Finance has currently lowered the threshold for pledged funds from 32 ETH to 1 ETH. What difficulties did Puffer Finance encounter in its development?
Amir: Many people also asked me why Puffer is slower than some of its competitors.
What I would say to this is that what Puffer is creating is native staking and a permissionless network. And building a trustless system like this takes a long time. You have to solve a lot of problems, not only those based on game theory and problems caused by distrust, but also a lot of technical obstacles.
We need to think about how to trust the node operator to stay offline? If it goes offline, how to deal with it? The arbitrary offline of the node operator means that users will face losses in many aspects such as capital cost and opportunity cost.
To this end, we introduced an economic guarantee and penalty mechanism. Basically, under this penalty condition, if the node operator goes offline or is fined, they will lose their own money, so that users are well protected.
Smart contracts triggering validator withdrawals will not be available until the Ethereum Pectra upgrade is introduced in late 2024 or early 2025, so we have to create custom out-of-protocol solutions to address features that are not enabled in Ethereum.
5. ChainCatcher: Restaking will increase the utilization rate of funds while also increasing new slashing risks. In addition to lowering the threshold for pledged funds, how does Puffer Finance ensure the security of liquidity pledgers or node operators? What are the difficulties?
Amir: Of course it adds more risk because you are protecting more activities with the same assets.
Currently, the slashing function for re-staking has not been officially launched. Once it is launched, as an LRT like us, we must be very careful to protect users from the upcoming slashing risks.
We are taking a closer look at each AVS (Active Validation Service) and paying close attention to their slashing rules.
For AVS whose slashing rules may be affected by external risks, such as the appreciation of the US dollar, it is difficult to predict and resist the risk fluctuations of slashing. We need to do our best to ensure that users do not come into contact with such AVS.
Additionally, we are working with teams like EigenLayer to create standardization for key management and slashing resistance for AVS.
Puffer V2 will be available in the coming months. We want to ensure that all user keys are protected throughout the stack, from staking, re-staking, and into any other applications we provide to our users.
With the recent launch of permissionless validators, we are also closely tracking the validator operations through automated means.
6. ChainCatcher: Puffer Finance recently launched its mainnet. What are the new changes compared to the testnet stage?
Amir: The launch of the Puffer mainnet means that the native liquidity re-staking function has been launched on Puffer. The stETH deposited in Puffer is withdrawn from the Lido protocol and converted into ETH, further realizing the decentralization of the Ethereum network.
In addition, stakers can now enjoy AVS rewards. The anti-punishment and secure key management features reduce the risk of penalties for users during staking and re-staking.
7. ChainCatcher: What are the important roadmaps for the future?
Amir: The next stage goal is to further lower the user staking threshold, such as making the staking funds as close to 0 as possible, so that we can become a completely permissionless and decentralized protocol.
Specifically after the mainnet goes online this year: First, we will expand to some Layer2s to provide users with more low-gas options.
Secondly, we will open the withdrawal function. I know that some protocols have been opened in advance, but Puffer still wants to ensure the safety of users and will gradually open it after various indicators are checked. We will provide two withdrawal solutions, one is fast withdrawal and the other is traditional withdrawal like Lido.
Additionally, there is currently no penalty mechanism on AVS, but this will become very important once it goes live. Puffer plans to launch its own AVS to provide higher rewards to its stakers and node operators through staking.
I believe that by the end of 2024, the market will be able to see the new paradigm that LSD/LRT protocols such as Puffer Finance bring to Ethereum, just as Layer2 is important to Ethereum.
8. ChainCatcher: What features will Puffer Finance have when it launches its own AVS service in the future?
Amir: AVS is part of our roadmap. It provides customized services for more complex nodes. The scalable application scenarios are very large, leaving a lot of room for AVS service providers.
For example, in the current wave of on-chain AI, one of the biggest demands of AI + Crypto projects may be verifiable computing, trusted execution environment, etc. Puffer has experience in AI + Crypto development in the past, and has also developed many new architecture plans around Layer2. Puffer also runs on the basic layer and has a trusted execution environment, so it has the ability to make unique AVS.
Puffer is also more concerned about improving the Ethereum base layer itself, such as Ethereum transactions, MEV, timely confirmation, etc. There is room for improvement in all aspects. I believe that in addition to providing data availability layer services for EigenLayer, Puffer can provide more high-quality services.
The LRT War Has Just Begun
9. ChainCatcher: Some re-staking agreements have already launched TEG and airdrops. What plans does Puffer Finance have in this regard? When is the expected time? Has the points incentive plan been adjusted?
Amir: Tokens are very necessary for community governance and we need to ensure that the community is taken care of.
My team and I are working hard for TEG and hope to choose a good time. The specific time cannot be announced for the time being, but there will be news soon.
Puffer Finance's points incentive activity has entered Chapter 4. Chapter 4 introduces a new Puffer points mechanism and expands the ecosystem. Participants only need to continue to participate in staking to get more benefits.
10. ChainCatcher: Puffer Finance has received financing from many well-known capitals or individuals, including exchange funds such as Binance Labs, traditional financial giant Franklin Templeton, and the founder of Eigenlayer. What do you think is the biggest highlight of Puffer Finance that attracts investors?
Amir: First of all, Puffer is committed to exploring cutting-edge technologies based on Ethereum.
Secondly, in the recent $18 million financing that Puffer obtained, investors may be mainly optimistic about Puffer’s subsequent upgrades, because this upgrade will provide users with better ecosystem services.
In addition, Puffer is a community-driven project. We understand the needs of the community very well and are willing to build Puffer with the community.
11. ChainCatcher: The current Ethereum pledge rate is around 30%. What breakthroughs do you think the Ethereum pledge market will see with the rise of re-staking? What stage has the competition in the Ethereum re-staking track entered?
Amir: The Ethereum pledge rate will definitely be capped when it reaches a certain point, and some projects will also control the Ethereum pledge rate. This also allows re-staking to obtain additional returns. At present, re-staking is still in a very early stage, and everything has just begun. Most protocols, like Puffer, are still in a roadmap planning stage, and there are still many contents waiting for actual implementation.
