Introduction to ether.fi

Jafar224

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 enables them to withdraw their ETH by exiting validators at any time.

This is mainly manifested in two aspects:

1. Stakers generate and hold their own ETH keys.
2. NFTs are minted for each validator launched through ether.fi.

For most other delegated staking protocols, the starting point is stakers depositing their ETH, which is then matched with node operators. The node operators generate and hold the staking certificates. While this approach can make the protocol non-custodial, in practice, it often creates a custodial or semi-custodial mechanism, exposing stakers to significant and opaque counterparty risks.

With ether.fi, stakers can control their keys and retain custody of their ETH while delegating staking to node operators, significantly reducing the risks they face.

Technically, in Ethereum's PoS staking, two keys are generated: the withdrawal key and the validation key. The withdrawal key is used to withdraw the user's assets, while the validation key is required by node operators to validate blocks within a specified timeframe, thereby earning validation rewards.

Ether.fi achieves separation of management between withdrawal keys and validation keys in staking delegation through key management technology, further enhancing the security of ETH staking services. It also creates a node service marketplace where stakers and node operators can register nodes to provide infrastructure services, and the income from these services is shared among stakeholders and node operators.

Users can deposit funds into ether.fi and earn investment returns in the form of staking rewards (supply-side fees). During this process, ether.fi automatically restakes users' deposits with Eigenlayer to generate additional income. Eigenlayer utilizes staked ETH to support external systems such as rollups and oracles, enhancing the returns for ETH stakers by establishing an economic security layer.

The total sum of all staking rewards is distributed among stakers, node operators, and the protocol, with respective shares of 90%, 5%, and 5%. Users can overall receive Ethereum staking rewards, ether.fi loyalty points, rewards for restaking (including EigenLayer points), and rewards for providing liquidity to DeFi protocols.

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