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 to include not only Puffer LRT but also Based Rollup Puffer UniFi and the pre-confirmation solution UniFi AVS. 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 the 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 restaking protocol aiming to create a permissionless, slash-resistant liquidity restaking solution to address centralization and high entry barriers in the current staking market.

The Puffer founding team initially set out to mitigate slash risks in liquid staking protocols using verifiable technology. Inspired by Ethereum Foundation researcher Justin Drake’s 2022 paper “Liquid Solo Validating,” which proposed hardware-based solutions to reduce slash risks for solo validators, the Puffer team developed the Secure Signer technology at the end of 2022. Secure Signer leverages Intel SGX to store validator private keys within an enclave, protecting against slash risks from key leakage or operational errors. This development received a grant from the Ethereum Foundation in Q4 2022.

Puffer has also garnered significant attention from institutional and angel investors. To date, Puffer Finance has completed four funding rounds, raising a total of $24.15 million. In June 2022, it secured a $650,000 pre-seed investment led by Jump Crypto. This was followed by a $5.5 million seed round in August 2023, led by Lemniscap and Lightspeed Faction, with participation from Brevan Howard Digital and Bankless Ventures, which funded further development of Secure Signer. In April 2023, Puffer Finance raised an additional $18 million in a Series A round led by Brevan Howard Digital and Electric Capital, with participation from Coinbase Ventures, Kraken Ventures, Consensys, Animoca, and GSR, primarily to support the mainnet launch.

Puffer LRT Protocol: Native Liquidity Staking Protocol

Liquidity Restaking Tokens (LRT) are a category of assets emerging within the EigenLayer ecosystem, designed to further enhance capital efficiency for staked Ethereum assets through restaking mechanisms. LRT operates by allowing ETH or Liquid Staking Tokens (LSTs) already staked in the Ethereum PoS network to be restaked through EigenLayer into other networks, earning additional rewards beyond those from Ethereum’s mainnet staking.

Since Ethereum transitioned to a PoS model, the staking market has grown rapidly, with more staking products entering the space. However, platforms like Lido have gained a dominant share in the staking market, raising concerns about centralization risks. For instance, as of September 2023, Lido held up to 33% of the liquid staking market share. However, with the rise of liquidity restaking protocols, Lido’s market share has gradually declined to around 28%. Ethereum contributor Anthony Sasson remarked that Puffer’s vampire attack significantly impacted Lido, shifting over $1 billion in funds.

As a permissionless, decentralized native liquidity restaking protocol, Puffer combines both liquid staking and liquidity restaking strategies. Utilizing Secure Signer technology and Validator Tickets (VT), Puffer empowers independent validators to efficiently participate in Ethereum staking and restaking processes, enhancing their yields while preserving Ethereum’s decentralization.

To prevent Puffer from becoming overly centralized within the network, the protocol strictly limits its validator nodes to no more than 22% of Ethereum’s total network nodes, ensuring it does not pose a threat to Ethereum’s trustless neutrality.

Lowering Staking Entry Requirements from 32 ETH to as Low as 1 ETH

Running a validator node on Ethereum typically requires 32 ETH, a high threshold for individual users. Puffer addresses this with a mechanism called Validator Tickets (VT), which reduces the entry requirement, allowing node operators to start with just a 2 ETH deposit (or 1 ETH if using SGX). VT is an ERC-20 token representing a one-day right to operate an Ethereum validator, and its price is set according to the validator’s expected daily earnings. Node operators must lock a specified amount of VT to participate in staking, releasing these gradually to liquidity providers throughout the staking period while retaining the full PoS rewards.

This model can be likened to operating a franchise restaurant, where users can either pay monthly for ongoing profits or prepay a year’s expected earnings to secure operational rights. The VT mechanism follows this latter model, allowing node operators to earn 100% of PoS rewards, thus avoiding the “lazy node” issue where operators withdraw due to insufficient returns in traditional staking setups. Additionally, as a form of equity ticket, VT can supplement staking capital and is tradable on secondary markets, adding liquidity.

Dual Rewards Through EigenLayer

Puffer is a native liquid staking protocol. Here, “native” means that users can directly restake ETH in addition to participating in Ethereum’s PoS consensus. This allows stakers to earn both validation rewards from Ethereum PoS and additional rewards through the restaking mechanism, achieving dual returns. Unlike traditional liquidity restaking products, Puffer does not rely on third-party liquidity providers but instead uses the native validators’ ETH for restaking, avoiding potential centralization issues often caused by large staking entities dominating the space. This approach not only enhances yields but also strengthens network decentralization. Currently, Puffer has a total value locked of $859.6 million, with an annual yield of 3%.

Preventing Slash Risks with Secure-Signer and RAVe

Puffer effectively prevents validator slash penalties caused by operational errors through Secure-Signer and RAVe (Remote Attestation Verification) remote attestation technology. Secure-Signer, a remote signing tool based on Intel SGX hardware security technology, can generate, store, and execute signing operations within an enclave, thereby preventing validators from incurring slash penalties due to double signing or other signing errors. The role of RAVe technology is to verify the remote attestation reports generated by Intel SGX, ensuring that nodes are indeed running the verified Secure-Signer program. After verification, the system records the validator key status on-chain, thus preventing malicious nodes from using unverified code or replacing key operational logic.

It is worth noting 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 improving 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 Forced Anti-Slash: Puffer V2 will implement an anti-slash mechanism across the protocol scope, further enhancing the network’s security and decentralization.
• Reduced Margin Requirements: Puffer V2 will also lower the margin requirements for NoOps (non-operating nodes), requiring only a small amount of pufETH collateral to address slash risks caused by 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 the “Rollup-centric” roadmap, numerous L2 solutions have emerged in the market. According to data from L2Beat, the number of Rollups currently exceeds 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 to form effective synergies within the overall ecosystem. Additionally, users need to rely on cross-chain bridges to transfer assets between different Rollups, which not only increases operational costs but also poses certain security risks. Furthermore, most current Rollups utilize centralized orderers, which extract additional rents from user transactions through MEV, negatively 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, transactions in UniFi are processed by Puffer nodes, which are native Ethereum staking nodes. This approach allocates transaction ordering rights to decentralized validators, fully leveraging Ethereum’s security and decentralization features.

Extended Reading: What is a Based Rollup that Inherits Ethereum Activity?

Additionally, UniFi addresses liquidity fragmentation through Synchronous Composability and Atomic Composability. Applications based on UniFi can rely on its provided ordering and pre-confirmation mechanisms, allowing seamless interoperability with other Rollups or application chains that also use Based L1 ordering. Moreover, by utilizing Puffer’s TEE-multiprover technology, UniFi achieves atomic-level composability with L1, allowing for instant L1 settlements 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, while Based Rollups delegate transaction ordering to L1 validators to avoid the risks posed by centralized orderers, their transaction confirmation speed remains limited by L1 block times (approximately 12 seconds), preventing rapid confirmations. To address this issue, Puffer introduced an AVS service based on EigenLayer, providing a pre-confirmation mechanism that achieves a 100-millisecond transaction confirmation time.

Extended Reading: Why Does a Based Rollup Need Preconfirmation (Preconfs) Technology?

In the Puffer UniFi AVS, through EigenLayer’s re-staking mechanism, validators can use the ETH they have staked on the Ethereum mainnet for UniFi’s pre-confirmation validation service without needing to stake additional funds. This enhances capital efficiency and lowers the barrier to participation. Furthermore, UniFi AVS leverages the economic security of the Ethereum mainnet. If validators participating in pre-confirmation fail to adhere to their commitments, they risk having their staked ETH on the mainnet penalized, eliminating the need for additional penalty measures for Puffer’s pre-confirmation mechanism.

To participate in Puffer UniFi AVS, validators must own an EigenPod to ensure that the UniFi AVS service can enforce slash penalties, thus constraining the behavior of validating nodes that violate pre-confirmation commitments. Additionally, 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 plans to integrate with the Ethereum Foundation’s neutral registration contract mechanism, allowing any L1 proposer to voluntarily register as a pre-confirmation validator. This means that every validator on the Ethereum mainnet can choose to become a pre-confirmation validator, further expanding the system’s decentralization.

Summary

As the Ethereum ecosystem continues to expand, ensuring that projects and participants are working toward a common goal has become a central, long-term focus for the community. This alignment (Ethereum alignment) is considered key to Ethereum’s long-term success. Early on, the community divided this into three dimensions: “cultural alignment,” “technical alignment,” and “economic alignment.” Recently, Vitalik Buterin proposed a new set of criteria in his article “Making Ethereum Alignment Legible,” which includes open-source commitment, open standards, decentralization and security, and “positive-sum effects.” Regardless of the criteria used, the core objective is to ensure that protocols, communities, and projects remain aligned with Ethereum’s overall direction, providing positive support for the ecosystem’s sustainable development.

Notably, 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, enhancing Ethereum’s decentralization. Furthermore, Puffer’s 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, allocating 75 million PUFFER tokens (7.5% of total supply) for the first season of the Crunchy Carrot Quest airdrop. The eligibility snapshot for the first season airdrop was completed on October 5, 2024, and users can claim tokens through the token redemption 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 alignment with Ethereum’s goals.

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