What is Puffer Finance?

Puffer’s main goal is to establish a new standard for the safe 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 solves the centralization and accessibility challenges of the staking process through a permissionless framework, native restaking functionality, and a commitment to decentralization. With its strong slashing protection mechanism and validator tickets, the protocol continues to provide rewards and also improves the security of ETH stakers.

However, before discussing 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

Liquidity staking refers to the process of tokenizing pledged assets. For example, when users stake ETH on platforms such as Lido, they can receive stETH. With liquid staked tokens (LST) like stETH, users can contribute to network security without sacrificing liquidity. After completing the native staking of ETH, users can use LST on other platforms.

Liquidity Re-Staking takes the concept of liquidity staking a step further, extending the practice of using pledged ETH to improve blockchain security to other "external" modules and systems (such as oracles, sidechains, and aggregations). In this way, validators can better utilize their holdings and obtain other benefits in addition to staking rewards.

How does Puffer Finance work?

Puffer is designed to improve the performance and diversity of Ethereum Proof-of-Stake (PoS) validators. Unlike traditional staking models that require 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 a validator with as little as 1 ETH, thereby lowering the entry barrier and increasing the degree of decentralization.

Native Liquidity Redemption Protocol (nLRP)

Puffer is built on EigenLayer, a dedicated blockchain layer optimized for staking operations. Puffer operates as a Native Liquidity Redemption Protocol (nLRP):

• Native means Puffer only uses native ETH.

• Liquidity refers to a liquidity staking mechanism that provides users with liquid staking tokens (LST). For every 1 ETH pledged by users on Puffer, they will receive 1 pufETH. In this way, while staking ETH, users can also use pufETH in other DeFi Apps.

• Re-hypothecation refers to the liquidity re-hypothecation mechanism, which allows users to use the ETH deposited in Puffer as collateral for the EigenLayer service.

In other words, Puffer’s native liquidity re-staking mechanism allows validators to not only maintain their validator status and earn income, but also use their staked ETH for other activities. This move increases funding efficiency and ensures validators’ assets are fully utilized, helping to build a stronger staking ecosystem.

Permissionless Framework

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

Slash Protection and MEV Autonomy

Puffer uses an innovative slashing protection mechanism to protect validator assets. Puffer leverages anti-slash 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 Extra Rewards

Puffer Finance introduces the concept of validator tickets, which guarantee rewards to stakers regardless of the performance of the validator. This innovative approach provides ongoing incentives to stakers to be the first to participate in the protocol. In addition, Puffer’s integration with Eigenlayer can provide validators with additional rewards to incentivize them to participate in staking and contribute to the ecosystem.

Puffer Airdrop

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

Conclusion

Puffer’s mission is to establish a new standard for the safe operation of validators, focusing 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 innovative, decentralized and easily accessible solution for Ethereum validators and stakers. By leveraging liquidity staking, slash protection, and native liquidity re-staking, Puffer makes the Ethereum PoS ecosystem more efficient and accessible to everyone.

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