Non-custodial, strong capital, fast-paced analysis of the journey of ether.fi, the leader in re-staking

On March 18, the Ethereum re-staking protocol ether.fi was launched on major exchanges. After opening high, it fell back to around $3, and then continued to rise, reaching a high of $8.66 in less than two weeks. It is rare for a new project to have such a short-term increase. In addition, the re-staking track is becoming more and more intense, so ether.fi, as the leader, is naturally worthy of attention.

This article will comprehensively interpret the leading project ether.fi in this field, helping readers understand the project while also hoping to find out its value.

Strong performance

Judging from the price trend, ether.fi has performed well since its listing. As of the time of writing, the lowest price of ETHFI was $2.83 and the highest was $8.66, with an increase of 208%. For a new currency on the exchange, a two-fold increase in a short period of time is relatively objective.

From the perspective of project chain data performance, according to DefiLama data, the current TVL of ether.fi is 3.252 billion US dollars. As can be seen from the above figure, Ether.fi TVL has entered a high growth mode since January this year. In just three months, it has increased from around 100 million US dollars to more than 3 billion US dollars, an increase of 30 times.

Comparing with other competitors in the same field, it can be clearly seen that ether.fi is far ahead of other similar competitors, and its TVL is about twice that of the second-place Renzo. In terms of TVL growth, the monthly growth of ether.fi, Renzo, and swell network is around 100%, with Renzo being the largest.

Regarding the generally high growth of TVL in the re-staking track, a senior industry analyst said that this is mainly due to the huge expected demand for project parties that can provide consensus-safe AVS services. At the same time, the re-staking track is also favored by a number of institutions and investors.

Golden Finance once compared the development of several leading projects in an article in early February this year titled "The re-staking track continues to heat up and compares the development status of representative projects". It also pointed out the possibility of an explosion in the re-staking track due to the Ethereum Cancun upgrade. Readers can go there to check it out.

Introduction to ether.fi

ether.fi is a non-custodial staking protocol built on Ethereum, founded by Mike Silagadze and launched in 2023.

Unlike other liquidity staking protocols, ether.fi allows participants to retain control of their keys when staking tokens and can exit the validator at any time to reclaim their ETH.

This is mainly reflected in two aspects:

Stakers generate and hold their own staked ETH keys.

NFTs are minted for each validator launched through ether.fi.

For most other delegated staking protocols, the starting point is that stakers deposit their ETH and are matched with node operators, who generate and hold staking certificates. While this approach can make the protocol non-custodial, in practice it creates a custodial or semi-custodial mechanism in most cases. This can expose stakers to significant and opaque counterparty risk.

With ether.fi, stakers control their keys and retain custody of their ETH while delegating their stake to node operators, significantly reducing the risk they are exposed to.

Technically speaking, in Ethereum’s PoS staking, two keys are generated: a withdrawal key and a verification key. The withdrawal key is used to withdraw the user’s assets, while the verification key is used by the node operator to verify the block within a specified time in order to obtain verification rewards.

ether.fi uses key management technology to separate the withdrawal key and verification key in the staking delegation, further optimizing the security of ETH staking services. It also creates a node service market where stakers and node operators can register nodes to provide infrastructure services, and the revenue from these services is shared with stakeholders and node operators.

Users can deposit funds into ether.fi and receive a return on their investment in the form of staking rewards (supply-side fees). In the process, ether.fi can also automatically stake the user's deposit to Eigenlayer to earn income. Eigenlayer uses the staked ETH to support external systems (such as rollups and oracles). It increases the returns of ETH stakers by establishing an economic security layer.

The sum of all staking rewards is distributed among stakers, node operators, and protocols at 90%, 5%, and 5%, respectively. Users can generally obtain: Ethereum staking rewards; ether.fi loyalty points; re-staking rewards (including EigenLayer points); rewards for providing liquidity to Defi protocols.

Financing information:

ether.fi completed a financing of US$5.3 million on February 2, 2023, led by North Island Ventures, Chapter One and Node Capital, with participation from BitMex founder Arthur Hayes.

In addition, ether.fi also completed a US$23 million financing in February this year, with support from more than 95 investment institutions and individual investors including Amber Group, BanklessVC, and OKX Ventures.

Currently, ether.fi has published information on 5 team members in its official Docs, including founder Mike Silagadze: currently the CEO of DeFi fund company Gadze Finance, and founder of Canadian higher education platform Top Hat (US$130 million in Series E financing in 2021).

Token Economics:

The ether.fi token economic model shows that the total supply of the ether.fi token ETHFI is 1 billion, the initial circulating supply is 115.2 million, 2% of the token distribution is used for Binance Launchpool, 11% will be allocated to airdrops, 32.5% will be allocated to airdrop investors and consultants, 23.26% will be allocated to the team, 1% will be allocated to the Protocol Guild, 27.24% will be allocated to the DAO Treasury, and 3% will be used to provide liquidity.

However, judging from the unlocking time, ETHFI will not be released in large quantities until next year, and will not reach more than 60% until 2026. This indirectly reflects that the market chips of ETHFI are relatively scarce.

However, according to the airdrop information of ether.fi on March 18, the top 20 addresses on the reward list contributed one-third of the TVL (273,000 ETH) to ether.fi and received 9.96 million ETHFI airdrops.

The person who received the most airdrops was Justin Sun, who deposited 120,000 ETH (US$435 million) into ether.fi on the 13th and received 3.45 million ETHFI airdrops. From the perspective of the pledge-to-airdrop ratio, it is about 1:3, which means that users can only get 3 ETHFIs by staking 1 ETF, which is only US$26 based on the highest price of ETHFI.

Project Progress and Roadmap

In March this year, ether.fi launched the second season of StakeRank, which will run from March 15 to June 30, and the rewards will account for 5% of the total supply of ETHFI. Not long ago, ether.fi airdropped 68 million ETHFI (6.8% of the total), and the project also launched the Restaking Paradigm product with Manta Network.

In February, the DeFi yield market Pendle announced a partnership with Ethereum staking protocol ether.fi to launch the first LRT asset eETH on Arbitrum. In January, ether.fi announced the establishment of an advisory board, whose members include independent Ethereum educator sassal.eth, Polygon founder Sandeep Nailwal, Arrington Capital founder Michael Arrington, Ethereum Foundation member SnapCrackle.eth, etc.

In November last year, the ether.fi mainnet was launched and the liquidity staking token eeth was released. In October, ether.fi launched the liquid staking token (LST) eETH and announced its decentralization roadmap. In May, ether.Fi launched the first phase of the mainnet.

According to its official website roadmap:

Last August, ether.fi launched the first DVT mainnet validator in conjunction with Obol Labs, which was then included in the first batch of validators on the mainnet, which are run by a geographically dispersed group of small independent operators.

Last October, ether.fi open-sourced its smart contract suite. In November, eETH was launched, which is ether.fi's Liquid Stake token. Users will be able to participate in Ethereum staking in a completely permissionless manner and buy and sell staked assets on demand.

In April this year, ether.fi expects to complete the second phase of DVT integration. In DVT Phase 1, ether.fi worked with Obol Labs to provide mainnet DVT - verification shared by different individuals, where no one has the full validator key. Phase 2 will move to fully automated integration, where users will arrive, apply and start as individual stakers, unmanaged and unassisted by ether.fi and Obol.

At the same time, ether.fi will also implement DAO governance and TGE.

In addition, ether.fi mainnet v3 is scheduled to be released in early Q2 and will include some special features, such as the ability for users to run personal nodes with 2 ETH Bond.

summary

Since last year, there have been more and more discussions and research on the re-pledge track. At the beginning of this year, the re-pledge track has a momentum of full-scale explosion, and ether.fi, as the leader of the track, was the first to be listed on the exchange and performed well, which inevitably made investors more optimistic about this track.

For users who prefer to earn by staking, security and yield are the biggest considerations. Ether.fi's DVT technology can greatly ensure the security of users' staking targets, and relatively speaking, it can also provide users with good returns. Therefore, ether.fi's products and services do have certain prospects, but the smart contracts and technical security aspects still need to be tested by time.