Puffer: Empowered by Secure Signer Technology, the Dark Horse in the LSD Arena
After Shanghai’s upgrade, the Beacon Chain has opened withdrawals, and the ETH staking rate has increased from 14.13% to 21.46%. Currently, the Beacon Chain allows 2,470 validators to exit or activate daily. (For every increase of 65,536 active validator nodes, one additional validator can exit or activate per Epoch). The appearance and gradual increase in node liquidity provides a foundation for new LSD protocols to compete for market share. However, since the Shanghai upgrade on April 12, Lido’s market share slightly dropped from 31.62% to the current 30.77%. The top three LSD protocols (Lido, Rocket Pool, and Frax) saw their combined market share rise from 34.71% to 34.84%. No new LSD protocol has emerged as a contender. This can be attributed to barriers such as complex product structures, the advantage of being a first mover due to cross-chain network effects, and the cost of technology and trust associated with an emphasis on security.
Puffer boasts a strong team and financial backing. It also has the support of the ETH Foundation. Their pioneering Secure-Signer technology offers enhanced security for user funds. Such robust security enables nodes to offer lower collateral, thereby reducing the entry threshold and increasing financial leverage. Puffer holds promise in claiming a spot in the prominent LSD race.
What challenges does ETH staking currently face? (Why do we need Puffer?)
1. To ensure the decentralization, censorship resistance, and security of the ETH network, it’s critical that no single group of validators controls more than 1/3, 1/2, or 2/3 of the total. Lido currently holds a 30.77% market share, posing a potential security risk for the ETH network. The network requires more diversified and distributed nodes.
2. A significant portion of ETH staking takes place in centralized exchanges, large mining pools, and relatively centralized LSD protocols. These entities are susceptible to regulatory influences, potentially undermining the ETH network’s censorship resistance. For a more resilient ETH network, there’s a need for a vast number of decentralized individual or household nodes to participate in validation.
How does Puffer address these challenges?
Puffer believes that the main obstacles hindering individual nodes from participating in staking are the high entry threshold (32 ETH), severe penalties for validation errors, and the relatively low annualized return rate for ETH staking.
To address the high entry barrier and severe penalties for validation errors, Puffer has developed Secure-Signer safe signing and RAVe remote attestation technologies. Using the Trusted Execution Environment (TEE) provided by Intel SGX hardware, the validator key management and signing logic are shifted from the consensus client to the Enclave. This setup prevents validation errors that could lead to financial penalties by enforcing specific signing logic and restricting access to the validator’s private key. Compared to DVT technology, Secure-Signer offers a more cost-effective solution to avoid financial penalties. Both technologies can be used simultaneously by validators. Due to the reduced risk of financial penalties, the Puffer protocol can also reasonably reduce the node collateral to 2 ETH, significantly lowering the entry barrier for individual staking. The development and implementation of these technologies have been recognized and funded by the ETH Foundation.
How does Puffer avoid financial penalties?
Addressing the current low yield issue of ETH staking, Puffer is built upon Eigenlayer. Puffer nodes can re-stake via Eigenlayer’s AVS, enhancing hardware utilization and boosting the overall yield.
In summary, Puffer’s protocol structure is similar to Rocket Pool. However, Puffer has lowered the risk of financial penalties by introducing its proprietary Secure-Signer security signing technology. This allows the node collateral to be reduced to 2 ETH (compared to Rocket Pool’s minimum of 8 ETH), facilitating a lower entry barrier for individual staking and increasing financial leverage. The raised leverage enables the protocol to set a lower node fee, thereby enhancing the user’s yield, positioning Puffer favorably in market competition. Simultaneously, Puffer’s integration with Eigenlayer augments the overall yield.
Puffer protocol’s development is still in its early stages. It is expected to launch its testnet in the latter half of this year, with the mainnet slated for 2024. The Puffer team boasts impressive technical prowess and has received a $120,000 donation from the Ethereum Foundation. Ethereum Foundation researcher Justin Drake serves as a team advisor. Puffer has undergone two financing rounds. The first raised $650,000 in June of the previous year, led by Jump Crypto, with participation from Arcanum Capital and IoTeX. The second round, announced on August 8th this year, raised $5.5 million, led by Lemniscap and Lightspeed Faction. Contributors included Brevan Howard Digital, Bankless Ventures, Animoca Ventures, Kucoin Ventures, Sreeram Kannan (Founder of Eigen Layer), Frederick Allen (Head of Staking Business at Coinbase), Discus Fish (Co-founder of F2pool and Cobo), Richard Malone (Chief Business Officer at Obol), Mr. Blockchain (Core contributor at Curve), and Ramble (President of the North American Blockchain Association). The protocol’s positive trajectory is further bolstered by its strong investor background.
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