ETHFI is the native utility and governance token of Ether.Fi, a non-custodial, decentralized staking protocol built on the Ethereum blockchain. It powers a secure and seamless delegated staking service, offering users innovative income streams. A key innovation is Ether.Fi's Operation Solo Staker, which enhances decentralization by deploying nodes across diverse global regions. This significantly reduces counterparty risk between node operators and the protocol.
Beyond its utility functions, ETHFI serves as a governance token, empowering its community to collaboratively shape the future of decentralized finance (DeFi). It has a fixed supply, and its distribution through strategic airdrops reinforces its decentralized and user-empowered nature. On the ether.fi protocol, users can mint eETH—Ethereum’s first native liquid restaking token. This allows participants to earn multiple rewards by restaking their ETH, including Ethereum staking rewards, loyalty points, restaking rewards, and the ability to provide liquidity to other DeFi protocols.
The Development Roadmap of ETHFI
The Ether.Fi protocol was designed from the ground up to address the core needs of decentralization and self-custody. The founding team's initial goal was to stake their own Ethereum securely while maintaining full control of their keys. This led to the development of a self-service delegated staking method where users always retain control.
In June 2023, the protocol's dApp enabled the secure staking of individual ETH, requiring 32 ETH per validator. This service was supported by a network of verified node operators. Shortly after, a partnership with Obol Labs led to the successful launch of the first mainnet validators using Distributed Validator Technology (DVT) in August 2023. These were managed by a geographically dispersed set of small, independent operators.
The first phase of DVT integration, which was partially automated as a proof-of-concept, was completed in August 2023. A second phase aimed at full automation was planned. In a move to bolster trust within the Ethereum community, the team open-sourced its smart contract code in October 2023, enhancing the protocol's perceived quality, reliability, and security.
November 2023 marked the launch of eETH, Ether.Fi's liquid staking token. This allowed users to participate in Ethereum staking in a completely permissionless manner, with the ability to instantly buy and sell their staked assets. The project also announced plans to open-source its software services and code by February 2024 to encourage broader ecosystem collaboration.
Upcoming milestones included the completion of the second phase of DVT integration by April 2024, enabling permissionless solo staking for independent users. That same month, Ether.Fi planned to transition to DAO governance with its token launch, ensuring protocol autonomy and long-term sustainability. A final, longer-term goal involves the "hardening" of its smart contracts by removing upgradeability functions to guarantee software stability and security, though a firm timeline for this step was not yet established.
How the ETHFI Staking Protocol Operates
The ETHFI staking protocol is designed for large-scale stakers (32 ETH or more), providing a secure method to participate. The process involves connecting to the protocol's web application, generating private keys to communicate with node operators, creating mnemonic phrases and validator keys, and encrypting these keys to initiate staking.
Detailed Staking Process
First, a user must deposit 32 ETH to meet the requirement for a single validator. Through the Ether.Fi web app, users connect their wallet and choose to participate in programs like the "Early Adopters" or a limited release. They are then prompted to deposit the required amount of ETH for their desired number of validators.
Users then select a node operator. They can either choose a specific operator or opt for the "highest bidder" in a validator auction. After selection, the user must confirm the service price or the operator's bid.
Security Best Practices
Security is paramount throughout this process. It is highly recommended to use an isolated computer and a USB drive for all operations. Utilizing a hardware wallet like Ledger or Trezor to safeguard your mnemonic phrase and private keys is essential. If these keys are compromised, your staked ETH could be stolen.
Using the Desktop Application
The generation of withdrawal and validator keys is handled through Ether.Fi's dedicated desktop application. This application is designed to run offline to prevent any potential online attacks. After the keys are generated, the user must encrypt them and finalize the staking request by uploading the encrypted validator key file (a StakeRequest file).
The desktop app includes a built-in database and seamless encryption features to protect all sensitive keys and data. Upon first use, users set a password that is used to protect the mnemonic and verification data.
Generating Mnemonics and Keys
Users have the option to generate a new mnemonic phrase, import an existing one, or use a saved phrase. For optimal security, it is strongly advised to generate a new mnemonic phrase specifically for use with Ether.Fi to avoid the risk of running duplicate instances of the same validator keys. Once generated, this phrase must be stored offline and encrypted.
Finalizing the Stake and Validation
After the keys are generated and encrypted, the desktop application automatically sends the staking request to the Ether.Fi application. The user confirms this action, which triggers three events: the encrypted keys are uploaded to IPFS, the deposited ETH is sent to the official Ethereum staking deposit contract, and the node operator is notified to begin running the validator.
Users can unstake and withdraw their ETH at any time. Upon successful registration, a confirmation screen appears, and users gain access to a dashboard to monitor their validator's performance.
How Ether.Fi Ensures the Security of Staked Assets
Ether.Fi employs a multi-layered approach using advanced technologies and strategic partnerships to ensure the highest level of security for staked assets.
Decentralized and Non-Custodial Protocol
As a fully decentralized and non-custodial protocol, Ether.Fi ensures users always retain control of their keys. Funds and key control are never handed over to a central authority, drastically reducing the single point of failure risk inherent in centralized management models.
EigenLayer Restaking Technology
Through its integration with EigenLayer, Ether.Fi utilizes restaking technology. This allows users' staked ETH to provide economic security for external systems like rollups and oracles, building a broader economic security layer. This not only enhances asset liquidity and potential yield but also strengthens the overall security of the ecosystem.
SSV Network Integration
The partnership with the SSV Network integrates Distributed Validator Technology (DVT) with restaking. DVT makes validator operation more distributed and fault-tolerant, significantly increasing the protection level of staked assets and improving the overall stability of the network.
Investment Protection Network
Ether.Fi further enhances network security by building a large investment protection network. This means the platform leverages not just technological means but also financial mechanisms to provide an additional layer of protection for user assets.
Transparent Documentation and Security Measures
Ether.Fi maintains a high level of transparency by detailing its security measures and potential risks in public technical documentation. This open approach helps build user trust and allows participants to make fully informed decisions about their staking activities.
Frequently Asked Questions
What is the main purpose of the ETHFI token?
ETHFI serves a dual purpose as both a utility and governance token within the Ether.Fi ecosystem. It powers the protocol's operations and gives holders the right to participate in governance decisions, voting on proposals that shape the future of the platform.
How does liquid restaking with eETH work?
When you stake ETH on Ether.Fi, you receive eETH, a liquid restaking token. This token represents your staked position and continues to accumulate rewards. Because eETH is liquid and transferable, you can use it within other DeFi protocols to earn additional yield while still benefiting from base staking rewards.
Is staking with Ether.Fi considered safe?
Ether.Fi employs a non-custodial model, meaning you never relinquish control of your keys. Its use of advanced security technologies like DVT and partnerships with established projects like EigenLayer further decentralize and secure the validation process, making it a robust and secure staking solution. However, all crypto activities carry inherent risk.
What is the minimum amount of ETH required to stake?
For solo staking through their desktop application, the protocol requires a minimum of 32 ETH to run a single validator. However, for users looking to explore more strategies with smaller amounts, the liquid restaking token eETH provides a accessible alternative.
Can I unstake my ETH at any time?
Yes, the protocol is designed to allow users to unstake and withdraw their ETH at any time. The process is initiated through the user's dashboard, providing flexibility and control over your staked assets.
Where can I learn more about the technical details of the protocol?
For a deep dive into the technical mechanics, security audits, and detailed documentation, the best place to start is the official Ether.Fi website, which provides comprehensive resources for users and developers. You can also get advanced methods and insights through their official social channels.