What Is EtherFi? Ethereum Liquid Restaking Protocol
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What Is EtherFi? Ethereum Liquid Restaking Protocol

Created 2mo ago, last updated 2mo ago

EtherFi is an ETH liquid restaking protocol allowing users to natively restake ETH with EigenLayer.

What Is EtherFi? Ethereum Liquid Restaking Protocol

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In June 2023, amidst the slowly recovering crypto markets, EigenLayer launched on Ethereum, bringing a brand new primitive to the crypto space. It opened Ethereum to the concept of restaking, or the staking of ETH liquid staking derivative tokens to secure other protocols or even chains through restaking. EigenLayer opened with a guarded launch capped at 3,200 tokens for each of the three supported tokens: Lido’s stETH, Rocketpool’s rETH and Coinbase’s cbETH.
Since then, EigenLayer has reopened deposits four more times, today holding a whopping $12.3 billion, or 3.17 million ETH tokens, in total value locked (TVL), placing EigenLayer only second in TVL ranking to Lido.

Source: DeFiLlama

However, staking with EigenLayer was not a free lunch. Depositors were subjected to a seven day withdrawal period from EigenLayer to keep the protocol stable. As such, just as ETH stakers sought out liquidity via liquid staking tokens, EigenLayer stakers once again yearned for liquidity to utilize their tokens for other purposes.

Enter ETH liquid restaking.

A new breed of protocols emerged with the success of EigenLayer to meet this need in the market, creating the ETH liquid restaking subsector which now holds almost $7 billion in TVL. EtherFi sits at the top of this chain, with $2.98 billion in TVL alone.

What Is EtherFi?

EtherFi (ETHFI) actually began its journey long before the EigenLayer launch, placing their focus on the decentralization of the Ethereum validator scene through increasing accessibility to ETH staking, while at the same time maintaining a non-custodial approach. They recognized the high barriers to entry associated with running a validator node, stemming from technical requirements and high capital requirements.
EtherFi first launched their non-custodial staking service, enabling users to stake ETH in 32 ETH increments with a set of selected and trusted node operators. This service allowed stakers to maintain control of withdrawal keys, ensuring that they had full control of their tokens at all times.
The other side of their roadmap was to further decentralize the ETH validator node ecosystem, which they kicked off in August 2023. This initiative leveraged distributed validator technology (DVT) to distribute validator keys across a set of operators to minimize risks while pushing decentralization of the network. User pursuing staking through this path can choose one of two paths:
  • Path 1: Permissionless staking via DVT, where users provide the hardware and a 2 ETH bond. EtherFi supports via technical support and the remaining 30 ETH required to form the 32 ETH stake.
  • Path 2: Users must pass a KYC and selection process as well as provide the hardware required. However, the 2 ETH bond from Path 1 is no longer required, with EtherFi providing all 32 ETH in this case. This path is also known as Operation Solo Staker.

Source: EtherFi

Through both of these measures, EtherFi distributed validator operations geographically across a network of diverse and independent node operators, while reducing the barrier to entry tremendously for node operation.

EtherFi as a Liquid Restaking Protocol

That said, EtherFi only saw a huge expansion in TVL after its integration with EigenLayer as an ETH liquid restaking protocol. EtherFi allowed depositors to stake their ETH liquid staking tokens (LSTs) with EigenLayer, while receiving a liquid receipt token to represent their position. This liquid receipt token, eETH, represents their staked LSTs and automatically rebases to accrue rewards earned by the staked LSTs with EigenLayer.
Users can also wrap their eETH as Wrapped eETH (weETH), enabling them to utilize the token across a variety of DeFi applications. Users can provide their weETH into liquidity pools to facilitate swaps between weETH and other tokens on protocols such as Balancer and Curve Finance. WeETH can also be lent out for interest on money market protocols, Morpho Blue and Silo Finance. Other integrations include vault protocols such as Sommelier Finance, leverage protocols such as Gearbox and of course, even further restaking on other applications like Zircuit. The EtherFi team continues to integrate new protocols, expanding the options for weETH holders.

Source: EtherFi

By holding eETH or weETH, holders earn both EigenLayer points as well as EtherFi loyalty points on top of the base ETH staking yield as well the restaking yield from EigenLayer.

Source: EtherFi

Additionally, unlike some of its counterparts, EtherFi allows for native liquid restaking. This means that while many protocols had to wait for EigenLayer to raise its caps before being able to deposit their users’ tokens with EigenLayer, EtherFi did not. They achieved this through direct native restaking on EigenLayer, which did not have a cap. This move helped users maximize their earnings in EigenLayer points, which propelled EtherFi to become the top liquid restaking protocol by TVL.

The EtherFi Token and Tokenomics

To further decentralize the protocol, EtherFi will be launching their token, ETHFI, on Binance. This wil come alongside the formation of the EtherFi decentralized autonomous organization (DAO) to decentralize governance of the protocol. The ETHFI token will have a maximum supply of 1 billion tokens, of which 115.2 million, or 11.52% of the total supply, will be circulating on launch.
Majority of the tokens are allocated to the team as well as investors and advisors with 23.26% and 32.5% of total supply respectively. The other significant portion is allocated to the DAO treasury with 27.24% of the token supply. An allocation of 11% has also been set aside for an airdrop, which has not been announced yet.

Source: Binance

Majority of the Team and Investors & Advisors tokens will be unlocked linearly from 2025 onwards, with most of the token supply unlocking by 2028.

Source: Binance

Binance Launchpool and Token Launch

Binance announced the launchpool for the ETHFI token on March 12, as the 49th launchpool project. Users can now stake BNB or FDUSD in separate pools for four days to farm for ETHFI tokens, with the pools opening on March 14. After the launchpool ends on March 18, depositors will receive their respective token allocations from a pool of 20 million ETHFI tokens, or 2% of the total token supply. At the same time, the token will go live on the exchange for trading.
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