Written by: Anatol Antonovici | Updated May 29, 2024
Reviewed by: Mike Martin
Fact checked by: Ryan Grace
Ether.fi is reinventing Ethereum staking by offering maximum returns thanks to EigenLayer restaking and DeFi yields.
Table of Contents
🍒 tasty takeaways
Ether.fi is a liquid restaking protocol that automatically restakes ETH through EigenLayer and offers a liquid restaking token (LRT) for use in DeFi.
Ether.fi’s TVL has surged by over 3,600% since the beginning of 2024.
ETHFI is Ether.fi’s governance token that launched in March 2024.
Ether.fi Summary
| Feature | Details |
|---|---|
| Protocol | Decentralized Ethereum staking with EigenLayer restaking and liquid tokens for DeFi. |
| TVL Growth | Increased over 3,600% since early 2024, reaching almost $4 billion. |
| Ether.fi Token (ETHFI) | Launched March 2024, governance token with a current market cap around $440 million. |
| Liquid Product | Offers automated DeFi strategy, aiming for 20% APY using staked and restaked ETH. |
| Accessibility | Reduces entry barriers, offers staking for any ETH amount, enhancing DeFi accessibility. |
| Risks | Exposed to centralization and slashing risks inherent in EigenLayer technology. |
What Is Ether.fi?
Ether.fi is a decentralized staking protocol that enables Ethereum stakers to maximize their potential rewards.
The platform works similarly to liquid staking protocols like Lido. It enables users to deposit ETH or liquid staking tokens (LSTs) for staking and receive an equivalent asset, eETH, which can be used in decentralized finance (DeFi) for yield opportunities.
However, unlike standard liquid staking protocols, Ether.fi offers native restaking by leveraging EigenLayer technology. This feature ensures an additional reward stream that can boost the stakers’ returns.
The goal of Ether.fi is to make staking more accessible, profitable, and genuinely decentralized.
The protocol raised over $30 million in two rounds, with Series A led by Bullish and CoinFund.
Source: X Post
Ethereum Staking Today
Following the Ethereum Merge upgrade, which is part of the blockchain’s transition from Proof of Work (PoW) to Proof of Stake (PoS), ETH holders can participate in the block validation process by staking their coins and running a node.
Validators must lock at least 32 ETH to help secure the network and earn rewards, with annual rates ranging from 3.5% to 7%. As of this writing, the minimum requirement means spending about $100,000, which is prohibitive for most retail users. On top of that, validators have to lock their ETH during staking, potentially losing many opportunities in DeFi.
Liquid Staking Protocols Transform Staking
Retail users can become delegators by staking any ETH amount with specialized services pooling capital, reducing entry barriers, and maintaining a high degree of decentralization.
A popular option is decentralized staking solutions, which provide liquid staking tokens (LSTs) on a 1:1 basis for locked ETH, allowing stakers to explore DeFi opportunities while their funds are staked.
Over $40 billion worth of ETH is locked with liquid staking protocols.
Source: DeFiLlama
EigenLayer triggered another major trend in Ethereum staking: restaking. This new strategy enables retail ETH holders to increase potential rewards by repurposing the staked ETH to share mainnet security to so-called Actively Validated Services (AVSs). These include layer 2s, data layers, bridges, or decentralized applications (dapps).
You can go to our in-depth guide on EigenLayer to learn more about it.
EigenLayer unlocks additional yield by extending Ethereum mainnet’s security to dapps.
Since its launch in 2023, the total value locked (TVL) through EigenLayer has surged to about $15 billion.
Source: DeFiLlama – EigenLayer
EigenLayer enables users to deposit ETH and LSTs, but the drawback is that restaked LSTs are non-usable in DeFi. The protocol imposes a 7-day withdrawal period for redemption.
How Does Ether.fi Work?
Ether.fi is a liquid restaking protocol acting as a Lido-like service for EigenLayer: instead of staking ETH through Ethereum, the protocol automatically restakes via EigenLayer.
Ether.Fi users can stake ETH or LSTs and receive eETH on a 1:1 basis. While ETH and LST deposits are automatically restaked through EigenLayer for higher staking rewards, eETH can be used to explore DeFi opportunities for maximum profits. Therefore, Ether.Fi stakers benefit from three streams of income:
- Pure ETH staking
- Additional rewards are generated by restaking through EigenLayer (via EigenLayer points)
- DeFi yield
Source: Ether.fi
Ether.fi vs Liquid Staking Protocols
Ether.fi Adoption
Ether.fi’s TVL has skyrocketed from $100 million at the beginning of 2024 to almost $4 billion as of mid-May 2024.
Source: DeFiLlama – ether.fi Growth
Interestingly, a good chunk of the TVL came from Tron’s Justin Sun, who deposited 120,000 ETH or about $480 million on March 13. That day still holds the record for the most considerable transfer amount.
