Analyzing the Unique Aspects of Puffer Finance Design from the Perspective of Node Validation Rights

Author: Go2Mars Web3 Research

Puffer finance is a pioneer in helping individuals regain the power to build Ethereum staking rights, reducing the staking threshold to 2ETH, relying on secure-signer technology to prevent slash, and building restaking services on top of eigenlayer to provide validation and protection for other networks, thereby increasing economic potential.

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On September 15, 2022, at 14:44, Ethereum officially completed the merge. With the panda lit up on the screen and the words “POS Activated”, a new era has arrived. The original Ethereum execution layer is combined with the new POS (Proof of Stake) consensus layer beacon chain, abandoning POW (Proof of Work) and eliminating the need for energy-intensive mining, reducing energy consumption by approximately 99.95%, and also eliminating individual nodes in Ethereum.

The requirement for a single staking node in the Ethereum network converted to POS is 32 ETH. Even calculated at the low price of $1000 per ETH, it is as high as $32,000, which is an unacceptable price for most participants. Therefore, most people turn to pool staking and centralized exchanges, entrusting their Ethereum to larger entities for custody. Currently, there are four ways to stake Ethereum:

  • Individual Staking: Run your own hardware and stake 32 ETH to become a validator.

  • Staking as a Service: Stake 32 ETH, but pay someone else to run the hardware.

  • Pool Staking: Stake less than 32 ETH in a validator pool. Some mining pools provide ERC-20 liquidity tokens to represent staked ETH.

  • Centralized Exchange: Stake less than 32 ETH on a centralized exchange, the simplest option.

Among these four methods, centralized exchanges are subject to the most direct government regulation and are most likely to be influenced by the same will. Mining pools mitigate risks by increasing the number of node operators and running multiple validator sets. Represented by Lido, various methods are also adopted to reduce their centralization risks, such as using distributed validator technology to maximize the reduction of risks from single malicious operators, and so on. However, ultimately, these institutions, like centralized exchanges, are still registered legal entities and are at risk of being subject to regulatory authorities.

So, what if we return the right to validate to the users?

The first and foremost issue is the funding problem. Only by reducing the requirement for ETH staking can more people participate. Secondly, simplifying the operation. Ethereum randomly selects validators to construct and propose blocks, and randomly selects validator committees to prove these blocks. Any validator who fails to fulfill these responsibilities when required will be subject to economic penalties. Validators who commit more serious violations, such as proposing two different blocks for the same slot or proving two proposers for the same block, will face more severe punishment, known as slash. Node operators, as professionals, can avoid this to the greatest extent, but it is not practical for ordinary people to spend a lot of time and effort to avoid duplicate signatures to prevent slash. Therefore, a tool that lowers the staking threshold and automatically prevents slash is the best choice for ordinary people to build validation nodes.

Of course, the Ethereum Foundation also attaches great importance to and funds the development of such technologies. Secure_Signer technology is one of them, which can avoid slash to the greatest extent. Secure-Signer is an independent implementation of ConsenSys’ Web3Signer remote signing tool, which aims to prevent two types of failures that may cause slash.

  1. User error: By preventing access to the validator’s private key (even to the validator operator), slash caused by poor key management can be completely avoided.

  2. Client error: If the validator’s consensus client is hacked or suffers from slash, Secure-Signer will act as a backstop because the final signature operation is performed in a secure and isolated enclave.

Puffer finance is a pioneer in helping individuals regain the power to stake on Ethereum, reducing the staking threshold to 2 ETH. It relies on secure-signer technology to prevent slash and builds a restaking service on eigenlayer to provide validation and protection for other networks, thereby enhancing economic potential. With the launch of Secure-Signer, validators of various sizes are encouraged to contribute to the security of the Ethereum network through Puffer Pool. The protocol implements innovative solutions such as permissionless delegation threshold validators (pDTV) and secure routers, which are used for efficient inactive management and effective transaction delegation, respectively.

To prevent slash that may be caused by double signing, Secure-Signer generates and protects all BLS validator keys in its encrypted and tamper-proof memory. These keys can only be accessed at runtime and remain encrypted in static state, making them inaccessible to NoOps unless used to sign irrefutable block proposals or proofs.

Given that the keys are securely encrypted and bound to Secure-Signer, they prevent misuse between multiple consensus clients, protecting NoOps from unintentional slash caused by double signing. In addition, if their system is attacked, the keys are protected appropriately, safeguarding them from hacker attacks.

The integration of the new exchange brings strict security improvements, protecting honest NoOps from serious criminal activities. In the rare cases where malicious NoOps compromise SGX, they only discover their own validator private keys, ensuring the security of the mining pool is not compromised. Remote Attestation Verification (RAVe) confirms that NoOps are using Secure-Signer, fostering trust and a transparent environment throughout the ecosystem.

Puffer also charges only 2.5% protocol fees. Compared to Rocketpool’s 15%, Lido’s 10%, Frax Eth’s 10%, and centralized exchange staking services (which can charge up to 25%), this is much lower.

After the Shapella upgrade, liquidity staking protocols such as Lido have seen significant growth. As a leader among them, Lido currently occupies 31.7% of the market share, far surpassing competitors such as Coinbase and Binance, and surpassing the market cap set by Vitalik. Moreover, members of the Lido DAO are allowing Lido to strengthen its monopoly position, as a proposal to limit the size of Lido was opposed by 99.81% of participants.

We urgently need new participants to change this situation, including Puffer. Will the latest participants in this race become the heroes who slay the dragon?

Everything is unknown.

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