Background: The Reality Crisis of Centralized Monopoly Markets

Targeting the pain points and crises in the current staking track, Puffer Finance emerged. Since September 2022, after Ethereum’s transition from POW to POS proof-of-stake, more users have begun to pay attention to its staking logic. With the opening of the beacon chain withdrawals after the Shanghai upgrade, the ETH staking rate has also increased significantly. Currently, a single staking node of Ethereum requires 32 ETH. As a result, ETH is staked in centralized exchanges, large mining pools, and leading LST protocols.

According to Dune data, the ETH staked in Lido accounts for 28.6% of the overall staking rate of Ethereum, significantly exceeding the market consensus that the staking rate of a single LSP protocol cannot exceed 33%. This monopoly phenomenon has affected the decentralization and security of the network. “Ethereum’s trust neutrality and censorship resistance have been seriously threatened. To solve this staking reality crisis, Puffer Finance has proposed a new staking solution, creating a native liquidity staking protocol (nLRP) and deep integration with EigenLayer to increase yields and encourage the participation of small and medium-sized node operators in validation,” the project team explained.

Recently, Puffer Finance officially announced on social media that the mainnet has been launched, marking the beginning of the “Chapter Four” for the project. Users can deposit ETH, stETH, or wstETH and plan to update the existing scoring system. With a commitment to decentralizing Ethereum, what innovative concepts and technologies does Puffer Finance have? Starting from the construction path of the native liquidity re-staking platform, how can we understand the new direction of managing on-chain assets and facilitating trading? Let’s explore together!

Overview: Puffer Finance Staking Concept

Puffer Finance is a native liquidity re-staking platform built on EigenLayer, which accumulates PoS and re-staking rewards by introducing native liquidity re-staking tokens (nLRT). Its core development goal is to maintain Ethereum’s “trust neutrality” and enhance its decentralization.

To achieve this, Puffer Finance protocol nodes use Puffer anti-slashing technology to enhance the security of staked assets and improve capital utilization efficiency. Validators can participate in Ethereum network validation with as little as 1 ETH, and a whole new set of staking module systems is introduced to execute re-staking strategies, providing a secure re-staking platform for liquidity stakers to earn PoS and re-staking rewards. Currently, Puffer has received early support from industry leaders including Eigenlayer founder, Coinbase staking business director, and Ethereum core researcher Justin.

In May last year, Puffer Finance received a grant from the Ethereum Foundation to support the open-source remote signing tool Secure-Signer; in August, it completed a $5.5 million seed round financing. Recently, the staked LST token on Eigenlayer has reached nearly $20 billion. The issuance of LST tokens on Einglayer has exceeded expectations. In addition to strategic investments from Binance Labs, and a $18 million Series A financing completed in April this year, all of these developments have put the project on a fast track of continuous progress.

Basic knowledge about LST

Liquid Staking Tokens (LST) represent vouchers for staked ETH, providing liquidity for stakers. These ETH are still locked on the beacon chain, and stakers can passively receive PoS rewards without operating validators. LST has the following technical advantages:

• Liquidity: Stakers can engage in various DeFi transactions with liquidity tokens without retrieving staked assets.
• Easy to Use: Rewards are automatically accumulated into LST without any action required by stakers.
• Flexibility: Through LST, users can participate in various DeFi protocols, increasing potential revenue streams.

Advantages: Technological Path Against Centralization

Decentralization: Permissionless Native Liquidity Re-staking Protocol

Although there are various projects in the market that provide convenient liquidity staking services, providing opportunities for ordinary users to participate in Ethereum staking, these platforms have not fundamentally solved the centralization trend problem at the underlying level of Ethereum, leading to the concentration of a large number of node operation rights in a few large monopolistic operators, weakening the decentralization of the Ethereum network.

To address the problem of node centralization in Ethereum staking, Puffer Finance has designed a permissionless native liquidity re-staking protocol to enhance the decentralization and censorship resistance of Ethereum. “We make ‘at-home staking and validation’ more feasible through innovative technical designs. Node operators can easily participate in the Puffer validator cluster, increase investment returns under the premise of reducing staking risks with independently developed anti-slashing technology and VT,” the project team explained. This staking solution that changes the Ethereum’s centralization pattern simplifies the process of ecological investment and opens up new profit paths, making it an attractive choice for many participants in the cryptocurrency field, whether liquidity stakers or node operators.

Overall, the Puffer Finance protocol flywheel:

• Staking ETH: Users stake ETH to receive PufETH (Puffer’s liquidity staking tokens) as vouchers for future rewards.
• Earn Rewards: Earn rewards through PoS validation (supported by anti-slashing technology) and re-staking rewards obtained through integration with EigenLayer, increasing overall returns.
• Improve Earnings: PufETH holders participate in various DeFi protocols to increase earnings.
• Validator Tickets: Node operators run validators with minimal ETH (as low as 1 ETH), adjust incentive mechanisms to promote the sustainable development of the Puffer protocol.

Re-Staking: Collaboration between Stakers and Node Operators

In terms of the obvious benefits of increasing user earnings, the perfect optimization of Puffer Finance staking mechanism allows participants to receive dual staking rewards from Ethereum and Eigenlayer. Puffer Finance can provide a more native, low-risk token — ETH as collateral for AVS validation in the future. In the logic of dual staking, it adheres to Ethereum’s consistent decentralized value concept. Re-staking node operators perform AVS validation services and charge commissions. The re-staking rewards of the protocol further increase the value of pufETH. NoOps takes on additional risks for its collateral and earns part of the re-staking rewards as compensation,” the project team explained.

This re-staking mechanism is driven by stakers and node operators (NoOps) together:

• NoOps joins the Puffer node module by purchasing validator tickets (VT) and paying 1 ETH as collateral. Node operators purchase VT in advance to gain the right to run validators and can retain 100% of PoS rewards when validating. NoOps earns more by joining the re-staking module and delegating validators’ ETH to re-staking operators as collateral.
• Stakers can deposit any amount of ETH, which, along with the protocol’s NoOp funds, serves as collateral to run validators. They receive native liquidity re-staking tokens (nLRT) as collateral and vouchers for future rewards. Through the protocol, by selling VT (validator tickets) to node operators, they earn PoS rewards and re-staking rewards, continuously increasing the profits of pufETH holders.

Important Notes:

PufETH immediately accumulates PoS rewards, which come from the fees paid by puffer nodes to purchase VT and do not depend on NoOp’s long-term validation performance.

Open Source: Innovative Development of Secure-Signer and RAVe Anti-Slashing Technology

In addition to the business logic of decentralization and re-staking, Puffer Finance uses independently developed Secure-Signer (remote signing tool) and RAV technology to solve slashing issues in the Ethereum and Eigenlayer networks, providing participants with low-risk dual returns. “Puffer Finance’s open-source technology Secure-Signer and RAV introduce the first ‘anti-slashing’ technology to Ethereum. The same method is used to build an ‘anti-slashing’ mechanism for AVS, which maximally protects the security of stakers’ funds,” the team mentioned.

Specifically:

Secure-Signer (Secure Signing)

Secure-Signer is a remote signing tool that represents the validator client managing validator keys. It can run on the validator client locally and on remote servers. It can be installed and run on hardware that supports SGX, indicating that its selected validator client uses Secure-Signer as the remote signer.

Puffer’s Secure-Signer was supported by the Ethereum Foundation. This anti-slashing tool follows the Web3Signer specification and, together with the validator client, enforces strict anti-slashing rules through hardware devices, protecting validators from slashing. It aims to prevent various attacks on Intel SGX and uses a trusted execution environment (TEE) to provide data confidentiality and integrity. In SGX, the Enclave is a protected area in memory used to store code and data, ensuring that the code is executed as expected without tampering, and the data is encrypted and protected.

To prevent possible slashing events caused by double-signing, the secure signer generates and protects BLS validator keys in encrypted and tamper-proof memory. Since the key is bound and encrypted with Secure-Signer, there is no risk of cross-client use, which can protect nodes from the risk of slashing due to double-signing and ensure that the key is not stolen by hackers. The application of Secure-Signer significantly reduces the risk of node slashing in the Puffer Finance project, allowing the Puffer protocol to safely reduce the collateral requirements of node operators, thereby benefiting the entire Puffer validator cluster.

RAVe (Remote Authentication)

RAVe is an indispensable technology in the operation of the Puffer Finance project, full name: Remote Attestation Verification, which allows Enclaves to interact securely with the blockchain and is committed to achieving the permissionless operation of the Puffer protocol. Remote attestation (RA) allows any untrusted party to prove that it is running a specific SGX Enclave. When using instant messaging software that uses SGX, it allows the software to prove to user devices that it is running privacy protection programs, ensuring high integrity and confidentiality of off-chain computation processes.

In Puffer Finance, RA is how nodes prove they are running Secure-Signer. When generating validator keys, the secure signer enclave submits the validator’s public key in the USERDATA field of the RA report; RAVe verifies the node’s proof of RA and extracts its validator public chain and registers it on the chain, allowing nodes to prove to the protocol that they are securely running secure signers to generate new validator keys and prove to the contract that they are running nodes in Enclaves as expected.

Furthermore, the RAVe technology in Puffer Finance also integrates ZKP (zero-knowledge proof) to confirm project execution. It hands over the issue of “stealth re-staking” to be solved jointly by Enclave and RAVe, achieving encrypted transaction operations and coordination under encryption, integrating security, usability, and profitability.

Future Prospects for Security and Decentralization of Puffer Finance

As the LST track becomes increasingly popular, Puffer Finance resolutely chose the innovative direction of native liquidity re-staking in the context of centralized market monopolies. “Through the ‘pre-mainnet’ phase, Puffer has successfully captured about 1–2% of Lido’s market share, demonstrating higher security and decentralized technological characteristics, and bringing users higher returns,” the team discussed the future development vision of the project. Puffer Finance aims to bring user assets to a safer and more profitable future of liquidity re-staking and maximize the elimination of security risks for user staked assets.

Empowering developers with MEV autonomy enhances revenue potential

After the mainnet goes live, Puffer Finance plans to provide better verification experience for node operators with the introduction of validator tickets (VT), allowing them to have MEV autonomy to increase validator revenue potential. Currently, Puffer is the only decentralized native liquidity re-staking protocol that gives 100% PoS verification rewards to Ethereum validators.

Facing the issues of node monitoring and protection in the future operation of the project, the Puffer Finance team stated that Puffer operates automatically and in a decentralized manner, without any extra operations. If a validator’s balance is less than 31.75 ETH on a given day, or if the validator tickets (VT) are exhausted, they will be automatically withdrawn from verification. In the event of a slashing, NoOp will automatically lose the staked funds.

Collaboration with Rivalz, fostering loyal PufETH holders

Recently, Puffer Finance announced a partnership with Rivalz through the X platform. Rivalz, as the first AI-driven DePIN RollApp, aims to bring more user benefits to the Puffer platform while bringing more exposure and a larger user base to the Rivalz project. When users deposit 1 ETH, stETH, or wstETH, they not only receive bonus rewards from PufETH (5,000 Puffer points), they also receive up to 20,000 Rivalz points at once. Additionally, holding PufETH earns users 25 Rivalz points per hour. “Whether you are an experienced staker or a novice restaker, now is the best time to join the Puffer community!”

🧩 Click to learn more about cooperation program participation details:

https://quest.puffer.fi/home

In conclusion, the Puffer Finance team is committed to maintaining Ethereum’s trust neutrality. They hope that more developers and users will actively participate in running Puffer nodes, participating in Puffer staking, and contributing to the decentralized development of Ethereum while receiving rewards for their contributions. This will enhance the risk resistance of stakers’ assets and increase the capital utilization efficiency and sustainable returns for Ethereum node validators.

statement:

1. This article is reproduced from [TinTinLand], the original title is “Breaking through the centralization dilemma of the LST/LRT track, how Puffer Finance reshapes the future of Ethereum and pledges”. If you have any objections to the reprint, please contact Gate Learn Team, the team will handle it as soon as possible according to relevant procedures.

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