Hey folks, welcome back to the bullmarket where it seems like different narratives are popping up left and right. Today I’m going to be talking about Ether.fi, a protocol that’s part of two hot narratives — alrdr0ps and re-staking. Ether.fi, which I’ll go into depth later, is an $ETH liquid staking protocol comparable to Lido. Yet what Ether.fi allows stakers to do is to get direct access to Eigenlayer, an $ETH re-staking protocol which may be the biggest game changer for the Ethereum ecosystem…since well…maybe ever.
What is Eigenlayer and why is it so significant?
Perhaps the simplest explanation I’ve heard for Eigenlayer is that it allows for a re-adaptation of the Ethereum’s validation trustless network and repurposing it for something else. By having people re-stake their Ethereum through Eigenlayer, not only do you easily incorporate an entire decentralized trustless system, but through Eigenlayer that system can essentially be reprogrammed to suit whatever purpose suits you, whether it be a new protocol, an oracle, or an entirely new blockchain.
With new programmability, this is potentially great news for $ETH stakers that re-stake on Eigenlayer because not only will you be earning #realyield for providing trust on Ethereum, but this opens up an additional possibility for rewards and incentives from whoever you’re providing trust for that’s being built on top. I’m not going to go into a deep-dive into the 60-or-so different projects that are currently enlisted to start utilizing Eigenlayer (perhaps I’ll leave that for another article), but perhaps the most hyped is EigenDA, which is Eigenlayer’s Data Availability layer which should rival Celestia.
By re-staking your LST, as you can track on Ether.fi’s website, you will start earning “Restaked Points” which have given great speculation that re-stakers will be able to get $EIGEN tokens potentially as early as Q2 or Q3 early this year.
Sounds great! So how can I stake?
Unfortunately you can’t, or at least not with any conventional liquid-staked derivates such as Rocket Pool, Lido, Coinbase, or Stader. At the time of writing liquid restaking has been capped and currently only withdrawals are available:
The caveat to all this is that re-staking is currently capped only for LSTs, not if you run your own Ethereum node and want to join in on the action.
Enter Ether.fi
Ether.fi is a protocol that bypasses conventional LSTs and allows $ETH holders to not only stake their $ETH, but also gives you the ability to natively re-stake your $ETH as well. In other words, Ether.fi essentially turns 2 steps into 1 through the staked re-staked LST known as $eETH.
As you can see in the graphic above, similar to other LSTs you can currently earn around 3.49% APR from having staked $ETH, but with $eETH you will also earn additional Eigenlayer points for your $ETH has been re-staked as well — all done through one simple transaction.
Arguably $eETH is even better than any of its competitors because once wrapped, $eETH gives you further utility to earn even more through DeFi, just like we realized when Lido first started issuing $stETH. Currently the DeFi integrations include:
Assuming products like $eETH get full adoption, I imagine that it will make LSTs like $rETH and $stETH completely obsolete, especially if it gets realized by the rest of the market that you can earn much more by re-staking your staked $ETH.
Loyalty Points
Apart from potentially earning some $EIGEN, by staking with ether.fi you can get double the exposure and earn their “Loyalty Points.” According to their gitbook, “The protocol will be remitting 100% of these points [both from Ether.fi and Eigenlayer] received to eETH holders from day 1.”
Apart from being an early adopter or simply holding on to $eETH itself, additional loyalty points can be earned by utilizing it in one of their DeFi strategies (see graphic above), verifying your e-mail address, or most recently announced, by following them on DeBank:
And lastly, just like any good incentives program, you can earn additional points by referring friends and family through your own customized referral link.
Other Considerations
VC-backed — Ether.fi has received a significant amount of VC funding including the likes of big players like Arrington Capital and Maelstrom (Arthur Hayes’ VC). That being said, if there are any future token releases in the future, you can be sure that some of these firms will have their share in it too. Personally I always see VC-backed projects as a double-edged sword, it may be “too-backed-to-fail,” but it also means that retail could get dumped on as well.
Re-staking is new and may introduce new risks — because the fundamentals of Ethereum aren’t necessarily changing when it’s re-staked, re-staking doesn’t seem to leverage your risk, but I would imagine that depending on the new use-cases that are applied to Eigenlayer, that new slashing conditions and events may occur. Additionally like with any new(er) protocol, any involvement puts you at smart contract risk, even if you’ve been audited 4 times.
Quadruple Returns — besides earning $EIGEN, ether.fi loyalty points, and $ETH yields, entering into this strategy should generate rewards from whatever protocol/application/blockchain that is built on top of Eigenlayer, and it’s clear that ether.fi anticipates this as well too:
Conclusion
I first heard of Eigenlayer last summer, but it wasn’t only until recently where I took the time to learn what all the hype is about, and from what I’ve gathered, re-staking could be a game-changer for Ethereum. Ether.fi captures all the potential upside of what re-staking could bring and I imagine that if it proves its worth, that we’ll see a lot of different projects like it going forward.
If you’re interested in learning more about Eigenlayer then I highly recommend that you listen to Jessie Eckel’s latest Steady Lads podcast with EigenLayer’s founder Sreeram Kannan, for I think it’s probably the simplest breakdown I’ve heard. Otherwise if you’re more tech-savvy I recommend you watch Bankless’ interview done with Sreeram last month.
If you’re interested in utilizing ether.fi yourself, please consider supporting this blog and use my referral link so that I can earn some more loyalty points.
And as always, thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!