Dedicated to becoming the base layer of Ethereum.

Interviewees: flowie, kit, ChainCatcher

Guest: Amir, Founder and Contributor of Puffer Finance

Editor: Marco, ChainCatcher

In the current narrative competition of re-staking incentives, Puffer Finance is not the fastest player. On May 8th, Puffer Finance announced the launch of its mainnet, with TGE and airdrops still in progress.

However, for Amir, the founder and contributor of Puffer Finance, the positioning of Puffer is to become the base layer of Ethereum, and there are no shortcuts on this path. "Puffer wants to create a native staking and permissionless network, which needs to solve a lot of trust issues and technical barriers."

Compared to putting a lot of effort into market speculation, Amir hopes to prioritize user safety and explore and meet user needs through a steady and cautious approach.

Amir's rigorous approach to product development is also inseparable from his background in engineering. Amir graduated from the University of California, Santa Cruz and the University of Southern California, majoring in electrical and electronic engineering. Shortly after graduating, Amir joined NASA as an engineer, exploring the empowerment of AI in the aerospace industry.

During this time, Amir, also a crypto enthusiast, began exploring the use of blockchain technology to address privacy and trust issues brought about by AI. Inspired by a research paper from the Ethereum Foundation Research Institute, Amir and his university classmate Jason Vranek delved into the Ethereum staking track that needed to solve various trust issues, founding Puffer Finance.

Puffer Finance has been able to lower the staking threshold from 32 ETH to 1 ETH, improving the capital utilization efficiency of node operators. Additionally, the penalty-resistant technology based on Intel SGX hardware and the economic guarantee of Ethereum node operators have reduced the risk of asset confiscation for users. After the mainnet launch, Puffer Finance also plans to introduce its own AVS service. Currently, Puffer Finance's TVL is close to $1.8 billion.

Recently, Puffer Finance announced the completion of a $18 million Series A financing round, which not only attracted native crypto funds such as Brevan Howard Digital and Electric Capital, as well as exchange funds like Coinbase Ventures, but also drew the participation of traditional financial giant Franklin Templeton.

Journey of AI and Crypto Exploration as a NASA Engineer

1. ChainCatcher: According to your LinkedIn profile, you were mainly an engineer at NASA before founding Puffer Finance. Why did you later enter the crypto field? What other important experiences do you have?

Amir: During my time at NASA, I worked in an innovative department that focused on the empowerment of new technologies such as AI in the aerospace industry.

Before joining NASA, I had already started using cryptocurrencies and was very fascinated by the new financial paradigm brought about by blockchain.

My transition to becoming a blockchain developer was primarily due to my exploration of AI and blockchain.

With the emergence of AGI (Artificial General Intelligence) and ChatGPT, we realized that users' privacy data was not protected and was easily leaked. This led us to explore technologies such as zero-knowledge proofs and trusted execution environments to discuss hardware- or math-based solutions for verifiable computation.

During a hackathon, we built a decentralized search engine that could protect user privacy by encrypting their input content. This project experience also provided a crucial architectural foundation for Puffer Finance.

2. ChainCatcher: In a public podcast interview, you mentioned that you and Puffer Finance's co-founder and CTO Jason Vranek were inspired by Ethereum Foundation researcher Justin Drake's staking research, which led you to choose to enter the entrepreneurial journey at the base layer of Ethereum. How long did you research at that time, and what market pain points were you hoping to solve?

Amir: Initially, we wanted to use verifiable technology to address the risk of slashing in liquid staking.

While exploring verifiable technology, we also discovered many trust issues involved in Ethereum's liquidity staking process. Users deposit funds into liquidity staking providers, who act as intermediaries, providing users' funds to some centralized node operators and trusting them to distribute rewards to users after verification.

However, these trust issues bring a lot of risks. For example, what if the node operator is slashed?

In June 2022, Ethereum Foundation researcher Justin Drake published a research paper titled "Liquid solo validating," discussing how to use hardware to reduce the risk of slashing for solo validators and improve the capital utilization efficiency of liquid staking. Inspired by this paper, we created a penalty-resistant solution for Solo Staking/Home Staking at the end of 2022, which we now call Secure-Signer technology. It runs on Intel's SGX to prevent slashing behavior.

In addition, through Secure-Signer technology, Puffer can safely lower the validator threshold requirement from 32 ETH to just 1 ETH, significantly reducing the participation threshold for solo validators. Secure-Signer technology also received funding from the Ethereum Foundation.

Not limited to re-staking, dedicated to becoming the base layer of Ethereum

3. ChainCatcher: Puffer Finance has mentioned multiple times that your narrative is not limited to Restaking. What is your positioning? What are the differentiating and innovative points compared to other re-staking protocols?

Amir: Firstly, Puffer Finance is the only permissionless Ethereum liquidity staking protocol that allows individual node validators to enter.

Secondly, many LRT or other LST protocol teams are essentially just simple smart contracts, leaving much of the infrastructure construction to centralized operators. However, Puffer's positioning is to become the base layer of Ethereum, aiming to make the decentralized operation of Ethereum validators more feasible. We hope to unlock more features for users, and re-staking is one of them.

Re-staking allows the security of the Ethereum POS mechanism to be shared, and allows stakers or node operators to earn more rewards.

In the future, Puffer also plans to further drive the development of the Ethereum stack using re-staking. The Ethereum stack currently has many issues that need to be addressed, such as the need for composability and the problem of fragmented liquidity between Layer2 solutions.

In addition, Puffer is actively exploring some cutting-edge solutions, such as how the Puffer team, familiar with AI, can securely process on-chain data.

4. ChainCatcher: Puffer Finance has currently lowered the staking threshold from 32 ETH to 1 ETH. What challenges did Puffer Finance encounter during development?

Amir: Many people have asked me why Puffer is slower compared to some competitors.

To this, I would like to say that Puffer aims to create a native staking and permissionless network. Building such a trustless system takes a long time. You have to solve many problems, not only those arising from distrust based on game theory, but also many technical barriers.

We need to consider how to trust the node operators to not go offline. If they do go offline, how should we respond? The arbitrary offline behavior of node operators means that users will face various losses such as capital costs and opportunity costs.

To address this, we have introduced economic guarantees and penalty mechanisms. Essentially, under this penalty condition, if node operators go offline or are slashed, they will lose their own money, thus providing good protection for users.

By the end of 2024 or early 2025, after the Ethereum Pectra upgrade, the smart contract-triggered validator withdrawal will be introduced, which was not available before, so we must create custom off-chain solutions to address the unavailable features in Ethereum.

5. ChainCatcher: Restaking increases capital utilization but also introduces new slashing risks. In addition to lowering the staking threshold, how does Puffer Finance ensure the security of liquidity stakers or node operators? What are the challenges?

Amir: It will certainly increase more risks because you are using the same assets to protect more activities.

The slashing feature of re-staking has not been officially launched yet. Once it is launched, protocols like ours need to be very careful to protect users from the upcoming slashing risks.

We are carefully studying each AVS (Active Verification Service) and closely monitoring their slashing rules.

For AVS that may be affected by external risks, such as the impact of the appreciation of the US dollar, it is difficult to predict and mitigate the risk of slashing fluctuations. We need to do our best to ensure that users do not engage with such AVS.

In addition, we are collaborating with teams like EigenLayer to standardize key management and penalty-resistant mechanisms for AVS.

Puffer V2 will be launched in the coming months. We aim to ensure that all user keys are protected in every stack, from staking and re-staking to any other applications we provide for users.

With the recent activation of permissionless validators, we are also closely monitoring the operations of validators through automation.

6. ChainCatcher: Puffer Finance recently launched its mainnet. What are the new changes compared to the testnet phase?

Amir: The launch of the Puffer mainnet means that the native liquidity re-staking feature has been activated on Puffer. Staked stETH from the Lido protocol is converted to ETH when deposited into Puffer, further decentralizing the Ethereum network.

In addition, stakers can now enjoy rewards from AVS. The penalty-resistant and secure key management features reduce the slashing risk for users in staking and re-staking.

7. ChainCatcher: What are the upcoming key milestones?

Amir: The next phase aims to further lower the user staking threshold, making the staking funds as close to 0 as possible, to become a fully permissionless, decentralized protocol.

Specifically, after the mainnet launch this year: First, we will expand to some Layer2 solutions to provide users with more low gas options.

Second, we will enable withdrawals. I know that some protocols have already enabled withdrawals in advance, but Puffer still wants to ensure user safety and will gradually open withdrawals after all metrics have been checked. We will provide two withdrawal options: fast withdrawals and traditional withdrawals similar to Lido.

In addition, there is currently no penalty mechanism for AVS, but once it is launched, it will become very important. Puffer plans to launch its own AVS to provide higher rewards for its stakers and node operators through staking.

I believe that by the end of 2024, the market will see new paradigms brought by LSD/LRT protocols like Puffer Finance for Ethereum, just as Layer2 is important for Ethereum.

8. ChainCatcher: What are the unique features of Puffer Finance's upcoming AVS service?

Amir: AVS is part of our roadmap and provides customized services for more complex nodes, with a very large potential for scalable application scenarios. For example, one of the biggest demands in the current wave of AI + Crypto projects may be verifiable computation and trusted execution environments. Puffer has experience in AI + Crypto development and has formulated many new architectural plans around Layer2. Operating at the base layer, Puffer has the ability to create unique AVS with a trusted execution environment.

Puffer also focuses on improving the Ethereum base layer itself, such as transactions, MEV, and timely confirmations. I believe that in addition to providing data availability layer services for EigenLayer, Puffer can provide more high-quality services.

LRT War has just begun

9. ChainCatcher: Some re-staking protocols have already conducted TGE and airdrops. What are Puffer Finance's plans in this regard? When can we expect it? Have there been any adjustments to the incentive program?

Amir: For community governance, tokens are essential, and we need to ensure that the community is taken care of.

My team and I are working hard for the TGE and hope to choose a good timing. The specific time cannot be announced yet, but there will be news soon.

Puffer Finance's incentive program has entered Chapter 4, which has introduced a new Puffer points mechanism and expanded the ecosystem. Participants only need to continue participating in staking to earn more rewards.

10. ChainCatcher: Puffer Finance has received funding from many well-known capital or individuals, including exchange funds like Binance Labs, traditional financial giant Franklin Templeton, and the founder of Eigenlayer. What do you think is the biggest attraction for investors in Puffer Finance?

Amir: Firstly, Puffer is dedicated to exploring cutting-edge technologies based on Ethereum.

Secondly, in the recent $18 million funding round, investors may be very optimistic about the upcoming upgrades for Puffer, as this upgrade will provide better ecosystem services for users.

In addition, Puffer is a community-driven project. We understand the needs of the community very well and are willing to co-build Puffer with the community.

11. ChainCatcher: Currently, the Ethereum staking rate is around 30%. In your opinion, with the rise of re-staking, what other breakthroughs can we expect in the Ethereum staking market? What stage has the competition in the Ethereum re-staking track entered?

Amir: The Ethereum staking rate will definitely reach a ceiling at some point, and some projects will control the staking rate of Ethereum. This also allows re-staking to receive additional returns. Currently, re-staking is still in a very early stage, and everything is just getting started. Most protocols, including Puffer, are still in the roadmap planning stage, and there is still a lot of content waiting to be implemented.

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