Today, with the rapid development of blockchain technology, the optimization of liquidity and pledge mechanisms has become the core of many projects. As a native liquidity re-staking protocol (nLRP), Puffer aims to fully leverage the power of re-staking and enhance the interests and security of stakers. This article will take an in-depth look at how Puffer works and the benefits it brings.
Overview
Puffer's design concept is to provide users with higher benefits and lower risks through innovative liquidity management and staking mechanisms. Puffer will start with a few empty PufferModules, which will be gradually populated as new validators join the protocol. Puffer governance plays a vital role in the oversight of restaking, including adding new modules, managing delegation to the RestakingOperator contract, and managing the operator's AVS commitments.
Puffer's operation process
Creation: In Puffer’s ecosystem, the governance mechanism will review and select restaking operators who operate on behalf of the RestakingOperator contract, ensuring that every step is rigorously audited. Governance is also responsible for delegating the module’s ETH to the RestakingOperator contract, a process that ensures the transparency and security of the protocol.
Staking: Stakers can deposit ETH through the PufferVault contract and mint pufETH nLRT, which serves as a redeemable receipt for their re-staked ETH. pufETH offers holders more rewards than traditional Liquid Staked Tokens (LST). Not only does pufETH contain PoS rewards and re-staking rewards, its value also grows rapidly due to the sale of validator tickets.
Register NoOp
To register a new validator, NoOps requires depositing a validator ticket and 1 or 2 ETH as collateral into the PufferProtocol contract. In return, the protocol mints pufETH, which will remain locked until the validator successfully exits. The role of locking pufETH is to coordinate NoOp incentives, protect stakers’ ETH, and increase NoOp profit margins.
To ensure the security of stakers, NoOps must distribute their encrypted validator key shares to guardian enclaves to prevent validator balances from getting too low or validator tickets running out. This requirement will evolve into a trustless solution as the Ethereum protocol is upgraded.
distribute
Each RestakingModule contract will contain a queue of pending NoOp registrations. PufferVault will accumulate 32 ETH blocks from deposits and rewards, and the guardian will provide these blocks to NoOps' pending validators on a recurring schedule to ensure that all modules of the protocol are served.
After a new validator is established in EigenPod, its ETH can be re-staking on Eigenlayer as collateral for its registered AVS. The NoOp validator will deposit 32 ETH into the BeaconDepositContract and wait for launch.
PoS rewards
Once a validator is activated, NoOp will be eligible to validate the number of days it has deposited validator tickets. During this period, NoOp retains 100% of PoS rewards, execution rewards are immediately deposited into their wallets, and consensus rewards are accumulated in the module’s EigenPod to be withdrawn after the NoOp withdrawal process.
Since NoOps receive 100% of the PoS rewards they generate, they have a strong incentive to maximize validator performance, thereby helping to protect stakers’ ETH.
Re-staking
The re-staking operator performs AVS on behalf of the module and receives a commission for the service. The fees accumulated by these AVS increase the value of pufETH. This mechanism allows stakers to earn higher returns compared to traditional LST.
By participating in the re-staking module, NoOps takes additional risk on their collateral. As compensation, they will receive a portion of the re-staking rewards, allowing them to earn more than through PoS alone without additional hardware or computing resources.
Exit mechanism
When a NoOp wishes to exit the protocol, they must ensure that their associated validators have exited the beacon chain. Once verifiable proof of validator withdrawal is provided, the contract will calculate any penalties due to inactivity or curtailment. The corresponding pufETH amount (equivalent to the ETH penalty) will be burned from NoOp’s locked collateral, and the remainder will be returned to NoOp. This process ensures that stakers are properly compensated for any potential ETH losses that may occur during the life of the validator.
in conclusion
Puffer tokens provide stakers with higher returns and lower risks through its innovative liquidity re-staking protocol. Through a sophisticated governance mechanism and transparent operating procedures, Puffer not only improves the security of staking, but also creates greater value for users. As blockchain technology continues to develop, the Puffer token will undoubtedly have a place in the market in the future.