Puffer has consistently adhered to principles aligned with Ethereum in its design and product evolution, demonstrating support for Ethereum's long-term vision.

Written by: LINDABELL

According to the latest strategic roadmap released by Puffer Finance, the platform has expanded from a native liquidity re-staking protocol to a decentralized infrastructure provider for Ethereum. Its product architecture has also been adjusted, adding Based Rollup Puffer UniFi and the pre-confirmation solution UniFi AVS in addition to Puffer LRT. Regarding these adjustments, Puffer stated, "Puffer's strategic roadmap represents the team's commitment to building the infrastructure necessary to support Ethereum's growth and resilience. From UniFi AVS to PUFI TGE, everything has been meticulously designed to align with Ethereum's core principles."

The Birth of Puffer

On November 29, 2023, Puffer co-founder Jason Vranek showcased Puffer's demo at the "Restaking Summit: Istanbul Devconnect" hosted by EigenLayer. Puffer is a native liquidity re-staking protocol aimed at designing a permissionless liquidity re-staking solution that reduces Slash risks and alleviates the issues of centralization and high entry barriers present in the current staking market.

The founding team of Puffer initially aimed to use verifiable technology to reduce the potential for slashing risks in liquidity staking protocols. Inspired by Ethereum Foundation researcher Justin Drake's proposal in his 2022 paper "Liquid solo validating" to reduce slashing risks for individual validators through hardware technology, the Puffer team developed the Secure Signer security signing technology at the end of 2022. This technology uses Intel SGX to store validator private keys in an enclave, preventing slashing risks due to key leakage or operational errors. The development of Secure Signer was also funded by the Ethereum Foundation in the fourth quarter of 2022.

Of course, Puffer has also attracted the attention of many investment institutions and angel investors. As of now, Puffer Finance has completed four rounds of financing, raising a total of $24.15 million. In June 2022, Puffer Finance completed a $650,000 Pre-Seed round led by Jump Crypto. Subsequently, in August 2023, Puffer Finance completed a $5.5 million seed round led by Lemniscap and Lightspeed Faction, with participation from Brevan Howard Digital, Bankless Ventures, and others. The funds from this round were used for further development of Secure-Signer. In April of this year, Puffer Finance completed another $18 million Series A round, led by Brevan Howard Digital and Electric Capital, with participation from Coinbase Ventures, Kraken Ventures, Consensys, Animoca, and GSR. This round of financing is primarily aimed at advancing the mainnet launch.

Puffer LRT Protocol: Native Liquidity Staking Protocol

Liquidity re-staking tokens (LRT) are an asset class developed around the EigenLayer ecosystem, designed to further enhance the capital utilization efficiency of Ethereum staking assets through a re-staking mechanism. The operational principle is to re-stake ETH or liquid staking tokens (LST) that are already staked on the Ethereum PoS network through EigenLayer to other networks, thereby obtaining additional rewards beyond the Ethereum mainnet staking rewards.

Since Ethereum transitioned to a PoS mechanism, an increasing number of staking products have emerged, driving the development of the staking market. However, some platforms like Lido have captured a significant share of the staking market, raising concerns about network centralization risks. Looking back to September 2023, Lido's share in the liquid staking market once reached 33%. However, with the rise of liquidity re-staking protocols, Lido's market share has gradually declined and is currently around 28%. Ethereum contributor Anthony Sasson stated that the vampire attack initiated by Puffer has had a significant impact on Lido, involving over $1 billion in capital flow.

As a permissionless decentralized native liquidity re-staking protocol, Puffer combines the dual strategies of liquid staking and liquidity re-staking, utilizing designs such as Secure Signer security signing technology and Validator Tickets (VT) to help independent validators effectively participate in the Ethereum staking and re-staking process, thereby enhancing yields while maintaining the decentralization level of the Ethereum network.

Additionally, to prevent excessive centralization of Puffer within the network, the protocol strictly limits the number of its validating nodes, not allowing them to exceed 22% of the total number of Ethereum network nodes, ensuring that it does not pose a threat to the trusted neutrality of Ethereum.

Reducing the Staking Entry Barrier from 32 ETH to a Minimum of 1 ETH

To become a node on Ethereum, 32 ETH is required, which is undoubtedly a high barrier for independent users. Puffer lowers the entry barrier for participation in staking through a mechanism called Validator Tickets (VT), allowing node operators to run validating nodes with only a 2 ETH collateral (or just 1 ETH if using SGX). VT is an ERC20 token that represents a day's right for node operators to run an Ethereum validator, with the price of VT set based on the expected daily earnings from running the validator. In other words, node operators need to lock a certain amount of VT to participate in staking, which is gradually released to liquidity providers during the staking period, while validators can receive all rewards generated from PoS.

For example, similar to joining a franchise restaurant, users can choose to pay monthly for earnings or make a one-time payment for the expected earnings for the next year to gain operational rights, and Puffer's VT mechanism follows the latter model. At the same time, node operators can receive 100% of the PoS rewards, thus avoiding the "lazy node" phenomenon in traditional staking models, where participants choose to passively engage or exit consensus when earnings are unsatisfactory. Additionally, as a form of equity ticket, VT not only supplements staking funds but also possesses liquidity, allowing it to be traded in the secondary market.

Achieving Dual Returns through EigenLayer

Puffer is a native liquidity staking protocol. Here, "native" means that users can directly use ETH for re-staking in addition to participating in Ethereum PoS consensus. This means that stakers can not only earn validation rewards from Ethereum PoS but also gain additional earnings through the re-staking mechanism, achieving dual returns. Furthermore, unlike traditional liquidity re-staking products, Puffer does not rely on third-party liquidity providers but directly uses the ETH of native validators for re-staking, avoiding the centralization issues that may arise from a few large staking entities dominating the market. Through this approach, Puffer not only enhances yield but also strengthens the network's decentralization. Currently, Puffer's total locked value has reached $859.6 million, with an annualized yield of 3%.

Preventing Slash Risks with Secure-signer and RAVe

Puffer effectively prevents validators from being penalized due to operational errors through Secure-signer and RAVe (Remote Attestation Verification) remote attestation technology. Secure-Signer is a remote signing tool based on Intel SGX hardware security technology, capable of generating, storing, and executing signing operations within an enclave, thus preventing validators from suffering slashing penalties due to double signing or other signing errors. The role of RAVe technology is to verify these remote attestation reports generated by Intel SGX, ensuring that nodes are indeed running the verified Secure-Signer program. After verification, the system records the status of the validator's keys on-chain, preventing malicious nodes from using unverified code or replacing critical operational logic.

It is worth mentioning that as a public good, the Secure Signer code has been open-sourced and is currently available on GitHub.

Puffer launched its mainnet on May 9 of this year. To further enhance the decentralization of the Ethereum network, Puffer plans to release version V2 in the fourth quarter of this year. This upgrade focuses on enhancing user experience and introduces several key features:

• Fast Path Rewards (FPR): Allows users to directly extract consensus layer rewards from L2, avoiding cost issues caused by high gas fees during the EigenPod extraction process.
• Global Anti-Slash Enforcement: Puffer V2 will implement an anti-slash mechanism across the protocol, further enhancing the network's security and decentralization.
• Reduced Collateral Requirements: Puffer V2 will also lower the collateral requirements for NoOps (non-operational nodes), requiring only a small amount of pufETH collateral to address slashing risks due to inactivity.

Puffer UniFi: Achieving 100 Millisecond Transaction Confirmation through UniFi AVS

On July 6 of this year, Puffer released the Litepaper for its Based Rollup solution, Puffer UniFi. As a Based Rollup, UniFi enhances the security and decentralization of the Ethereum network by utilizing Ethereum validators for transaction ordering while returning transaction value to L1.

Since Ethereum adopted a "Rollup-centric" roadmap, a large number of L2 solutions have emerged in the market. According to L2Beat data, the number of Rollups in the market has now exceeded 100. However, while these scaling solutions have improved Ethereum's scalability and user experience to some extent, they have also introduced issues such as liquidity fragmentation and centralized orderers. The first issue is liquidity fragmentation; due to the lack of interoperability between different Rollups, liquidity and users are dispersed across various independent L2 networks, making it difficult for the overall ecosystem to form effective synergies. Additionally, users need to rely on cross-chain bridges when transferring assets between different Rollups, which not only increases operational costs but also poses certain security risks. Furthermore, most current Rollups use centralized orderers, which extract additional rent from user transactions through MEV, impacting the user transaction experience.

Puffer's UniFi solution aims to address these issues through decentralized transaction ordering based on validators. Unlike traditional centralized ordering solutions, while transactions in UniFi are processed by Puffer nodes, these nodes are native staking nodes of Ethereum. Therefore, the UniFi solution allocates transaction ordering rights to decentralized validators, fully leveraging Ethereum's security and decentralization features.

See also: What is a Based Rollup that Can Inherit Ethereum's Vitality?

In addition, UniFi addresses the issue of liquidity fragmentation through synchronous composability and atomic composability. Applications based on UniFi can rely on its provided ordering and pre-confirmation mechanisms, enabling seamless interoperability with other Rollups or application chains that also utilize Based L1 ordering. Moreover, by using Puffer's TEE-multiprover technology, UniFi can achieve atomic-level composability with L1, allowing for instant L1 settlement and direct access to L1 liquidity, thereby enhancing the efficiency of cross-layer transactions and applications, making it easier for developers to build more efficient applications.

However, although Based Rollups delegate transaction ordering to L1 validators to avoid the risks posed by centralized orderers, their transaction confirmation speed is still limited by L1's block time (approximately 12 seconds), making it impossible to achieve rapid confirmation. To address this issue, Puffer introduced the AVS service based on EigenLayer, providing a pre-confirmation mechanism that achieves a transaction confirmation time of 100 milliseconds.

See also: Why Does Based Rollup Need Preconfirmation (Preconfs) Technology?

In Puffer UniFi AVS, through EigenLayer's re-staking mechanism, validators can use their staked ETH on the Ethereum mainnet for UniFi's pre-confirmation verification service without needing to stake new funds. This improves the efficiency of fund utilization and lowers the participation threshold. Additionally, UniFi AVS leverages the economic security of the Ethereum mainnet. If validators participating in pre-confirmation do not adhere to their commitments, they naturally face the risk of having their staked ETH on the mainnet slashed, eliminating the need for Puffer's pre-confirmation mechanism to design additional slashing measures.

Validators wishing to participate in Puffer UniFi AVS must possess ownership of EigenPod to ensure that the UniFi AVS service can enforce slashing penalties, thereby constraining the behavior of validating nodes that violate pre-confirmation commitments. Furthermore, node operators must run Commit-Boost in the server or environment where their validator client is located, responsible for handling communication between validators and the pre-confirmation supply chain.

Within just two weeks of its launch, the UniFi AVS platform has already secured 1.05 million ETH in staking, with over 32,000 validators participating. In the future, Puffer also plans to integrate with the Ethereum Foundation's neutral registration contract mechanism, allowing any L1 proposer to voluntarily register as a pre-confirmation validating node. This means that every validator on the Ethereum mainnet can choose to become a pre-confirmation validator, further expanding the system's level of decentralization.

Conclusion

As the Ethereum ecosystem continues to grow, ensuring that various projects and participants work towards the same goal has become a core issue of long-term concern for the community. This consistency (Ethereum alignment) is considered key to the long-term success of the Ethereum network. Early on, the community broke it down into three dimensions: "cultural alignment," "technical alignment," and "economic alignment." Recently, Vitalik Buterin proposed a new set of metrics in his article "Making Ethereum Alignment Legible," including open-source nature, open standards, decentralization and security, and "positive-sum effects." Regardless of the standards adopted, the core goal remains to ensure that protocols, communities, and projects can align with Ethereum's overall development direction, thereby providing positive support for the sustainable development of the ecosystem.

It is commendable that Puffer has consistently adhered to principles aligned with Ethereum in its design and product evolution, demonstrating support for Ethereum's long-term vision. Through integration with EigenLayer, Puffer enables more independent validators to participate in the staking network, thereby enhancing Ethereum's level of decentralization. The Puffer UniFi solution returns transaction ordering rights to Ethereum's native staking nodes, aligning with Ethereum in terms of security and decentralization.

Currently, Puffer Finance has released its tokenomics, with 75 million PUFFER tokens (accounting for 7.5% of the total supply) allocated for the Crunchy Carrot Quest Season 1 airdrop. The eligibility snapshot for the first season airdrop was completed on October 5, 2024, and users can claim their tokens through the token claim portal from October 14, 2024, to January 14, 2025. With the official launch of the PUFFER token, it will be worth watching whether Puffer can achieve further decentralization and user growth while advancing its goal of maintaining alignment with Ethereum.

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