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EtherFi Meaning

Apr 26, 2024 | Updated Apr 26, 2024
The EtherFi protocol is a decentralized, non-custodial liquid staking platform built on the Ethereum blockchain.

What Is EtherFi?

EtherFi defines a decentralized, non-custodial delegated staking protocol that allows users to stake their ETH holdings to support validators. It facilitates the concept of native restaking by integrating with EigenLayer. This native Ethereum restaking involves reusing and repurposing the staked ETH tokens for other networks or applications– thereby compounding to realize higher yields over time. 

The liquid staking platform utilizes Ethereum’s proof of stake (PoS) consensus mechanism. This means that users can stake or lock up their ETH holdings in a smart contract. In return, the stakers receive a restaking liquid token in the form of an eETH token.

The eETH token complements the protocol’s native token, ETHFI, to allow users to directly control the staking and restaking processes. ETHFI is also used as the governance token and to reward users. And, as a governance token, it grants users the right to vote on decisions that impact the ecosystem, such as the development and operations of the platform.

What Are the Key Features of Ether.Fi?

One of Ether.Fi’s defining features is the liquid staking functionality. To clarify this, rather than staking their ETH for prolonged periods, stakers receive liquid tokens – staked ETH (eETH), in this case – to represent their locked ETH. The liquid token can be traded or used in other decentralized applications (dApps) within the Ethereum ecosystem. 

Another distinctive feature is its capacity to create a unique non-fungible token (NFT) for every validator involved in the staking process. The NFTs typically contain the defining characteristics of every validator. In addition, they facilitate metadata storage, which is essential for future innovations in the restaking infrastructure.

The NFTs are of two distinct types – transferable NFT (T-NFT) and bound NFT (B-NFT) – that serve as proof of ownership for the locked Ether. They also symbolize the staker’s control over their staked ETH. 

For instance, the B-NFT is specifically connected to the individual holding the validator keys; that is, it is bound to the staker’s address. It also acts as an insurance against slashing penalties. Technically, B-NFT and T-NFT represent the withdrawal certificates for 2 ETH and 32 ETH, respectively.

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