Ether.fi - Decentralized Finance, Matching Stakers to Operators
Providing a user-friendly liquid staking solution for Ethereum
Over the past few months, our team at Linum Labs have been working with a new decentralized finance (DeFi) protocol that matches stakers to operators - ether.fi. The protocol is unique in its design, being the only liquid staking protocol where stakers can retain control of their keys while delegating their staking responsibilities, and node operators to become active validators without needing the initial liquidity - both earning staking rewards.
What is staking?
Staking is the process by which participants in a blockchain network contribute their cryptocurrency holdings to support the network's operations. In exchange, stakers are rewarded with additional tokens as an incentive to keep the network running smoothly. However, the process of staking is often complicated, requiring participants to lock up their assets for extended periods and sacrificing liquidity and control over their holdings.
Staking on Ethereum
To become an Ethereum node validator, you need 32 Ether and a complete understanding of how to run your own node. As a validator, you'll be responsible for storing data, processing transactions, and adding new blocks to the blockchain by running a consensus and execution client. A failure to understand the requirements could potentially lead to slashing - when a portion of your staked ETH is taken as a penalty.
How does ether.fi work?
ether.fi aims to bring staking mainstream by providing a liquid staking solution that allows users to earn staking rewards on two levels:
- Without needing the technical understanding of node operation & maintaining control over their assets.
- Being able to stake with less than 32 Ether.
How to become a staker?
Launching with the Base Model, also called “Solo Staking”, the protocol allows a user to stake their ETH into ether.fi and mints 2 NFTs in return. These NFTs represent the 32 Ether needed to become a node validator.
- B-NFT: is a bonded NFT (soulbound) and represents 2 Ether
- T-NFT: is a transferable NFT and represents 30 Ether
This gives B & T-NFT holders 90% of the total staking rewards in the equivalent amounts that each NFT is worth, while the protocol & the operator receive 5% each.
How to become an operator?
Firstly, you must successfully register as a node operator on ether.fi. There is a running auction which allows registered operators to bid to become the next operator selected to run the validator.
There are two ways to become an active operator:
- Be the highest bidder in the auction
- The staker must select one of your bids to pair with
What’s coming next?
Phase 2 will release the Liquidity Pool and allow for fractionalised staking.
T-NFT holders will be able to sell their NFTs for e-ETH, the protocol’s liquid staking token. e-ETH tokens represent the user's staked ETH, providing liquidity for stakers and enabling them to access their funds at any time.
With fractionalised staking, users will be able to stake any amount of Ether & receive e-ETH in return, no longer needing 32 Ether to stake on Ethereum.
Once the ether.fi’s Liquidity Pool receives 32 ether from multiple validators, it will stake onto Ethereum & mint the T-NFT and B-NFTs.
Both B-NFT & T-NFT’s will be attributed to the LP (Liquidity Pool) and rewards will be split proportionally according to users eETH values, under the 90% total of rewards available to stakers.
This LP will handle the following swaps & change the way users stake
- Ether to eETH
- eETH to Ether
- T-NFT to eETH
The Shanghai upgrade to Ethereum enabled the withdrawal of staked ETH. For ether.fi, this simply means T-NFT holders can request to exit and B-NFT holders and Operators, being holders of the withdrawal key, can exit anytime once an agreement is in place.
What’s the hype?
The early adopter contract launched at EthDenver, already holds around $40 million, ready to be actioned directly into the protocol. Early adopters are gaining rewards, and once the protocol has officially launched, the deposited ETH will be converted into e-ETH.
ether.fi is an innovative DeFi protocol that offers a unique liquid staking solution for Ethereum. The impressive performance of its early adopter contract underscores the rising demand for accessible and flexible staking protocols in the DeFi ecosystem. With plans to integrate with other DeFi platforms, ether.fi is well-positioned to provide stakers with a convenient and rewarding experience while contributing to the growth and decentralization of the Ethereum network.
More articles to come that will deep dive into the record time smart contract engineering and frontend dApp engineering.