EtherFi (ETHFI): Controlling and Maximizing Your ETH Staking Rewards

Ethereum’s (ETH) move to the proof of stake (PoS) block validation model in 2022, The Merge, opened up new opportunities for investors to earn ETH rewards while contributing to the network’s security and operations. A plethora of staking and restaking platforms quickly surfaced in the aftermath of The Merge. Many of these offered liquid staking services, the primary way of getting around the 32 ETH minimum collateral requirement.

However, most of the staking and restaking platforms in this sphere are based on custodial, permissioned models, with stakers not in control of their keys. ether.fi (ETHFI) is a new player in the field, having launched the bulk of its services in late 2023 to early 2024. It offers a comprehensive suite of Ethereum staking and restaking products in a noncustodial way. With ether.fi, you remain in control of the keys to your staked funds, and can choose from several different staking solutions, each designed with a specific user segment in mind.

Key Takeaways:

• ether.fi (ETHFI) is a decentralized staking protocol that offers a variety of flexible Ethereum staking and restaking services, including delegated full staking, highly affordable liquid staking and solo staking, using your own hardware and with no staking collateral required.

• The majority of ether.fi’s products offer noncustodial staking opportunities, letting you control the keys to your staking investments at all times.

• Its governance token, ETHFI, can be bought as a Spot pair on Bybit.

What Is ether.fi?

ether.fi is a decentralized app (DApp) that provides flexible ETH staking and restaking services, helping you to optimize your investment while contributing to Ethereum’s security and decentralization. Most staking alternatives on the platform are noncustodial and let you remain in complete control of your funds by owning your keys.

Main ETH Staking Options

ether.fi features several ETH staking and restaking options. One way to participate on the platform is to delegate your funds to a validator node and earn a share of their block rewards. This requires contributing 32 ETH (worth just over $112,000 as of late March 2024), the standard amount for an Ethereum validator. Staking more than 32 ETH is also possible, but must be in multiples of 32 — i.e., 64 ETH, 96 ETH and so on. The delegated staking service was the first staking product introduced by ether.fi. It was implemented on the platform in June 2023, during the project’s Phase One, the first of three key project development phases.

32 ETH is a substantial amount for many staking enthusiasts. These individuals can benefit from ether.fi’s other, more flexible staking options. In November 2023, during the project’s Phase Two, a liquid staking product was made available to the platform’s user community. Liquid staking on ether.fi allows you to stake as little as 0.001 ETH and earn staking rewards in a flexible way. When you stake ETH via the liquid staking mode, you’re issued eETH, the platform’s liquid staking token, a type of liquid staking derivative (LSD) token that’s used to accumulate rewards.

Phase Three of the project is included in ether.fi’s road map, but is currently in a speculative mode. ether.fi’s team considers the launch of additional services during this phase. Among these is node staking, which will allow validators and stakers to offer new infrastructural services on the network.

More Staking Alternatives

In addition to the main staking options above, the ether.fi platform provides two more staking alternatives – Solo Staker and 2 ETH B-NFT staking. Solo staking lets you set up an Ethereum validator node using your own hardware, but without the standard 32 ETH collateral requirement. The 2 ETH B-NFT option, to be launched in the future, will let you participate in staking with a 2 ETH investment by bonding a soulbound NFT called B-NFT. B-NFTs are actually one of the two variations of non-fungible tokens (NFTs) used in ether.fi staking (both of which will be discussed further in the upcoming section).

The ether.fi platform also allows you to restake your ETH funds via the EigenLayer restaking solution to earn additional retaking rewards. Stakers who use the platform’s liquid staking option are issued eETH LSD tokens, which can then be restaked on EigenLayer for additional rewards.

As well as the above staking options, ether.fi also features a couple of loyalty point initiatives. One of these is ether.fan, a service that allows you to mint a fan NFT when you stake your ETH. Users can accumulate ether.fan loyalty points, depending upon the amounts and tenures of staking. These points can then be used to win a variety of prizes.

Finally, in addition to the ether.fan loyalty points, there’s a separate system of loyalty points on ether.fi that are earned via liquid staking activity.

How Does ether.fi Work?

Mint eETH

Liquid staking is probably the most affordable and uncomplicated product for most users on the ether.fi platform. Using this option, you can contribute as much or as little as you prefer, with the minimum investment requirement just 0.01 ETH. When you lock your ETH, you’re provided with eETH LSD tokens at a ratio of 1:1. A synthetic asset that’s used to accrue your earnings, eETH essentially acts as your staking certificate.

An important advantage of ether.fi’s LSD token is the option to restake it natively on the EigenLayer platform for further rewards.

Solo Staker

Operation Solo Staker is ether.fi’s special program aimed at improving Ethereum's decentralization. Currently, there are about 5,500 Ethereum validators on its network, with half of them located in the U.S., and more than 50% of those operating out of a single data center in Virginia, thus raising concerns that the blockchain isn’t as decentralized as expected. The Solo Staker initiative enables users who have the requisite hardware for running an Ethereum validator node to participate in the staking process without posting 32 ETH as collateral.

ether.fi uses distributed validator technology (DVT) to facilitate its Operation Solo Staker program. DVT allows you to split one validator key between multiple nodes. Using DVT, ether.fi provides its own resources — ETH collateral and software — that enables users with suitable hardware but no funds to run a validator node.

Stake the Full 32 ETH

Users who have at least 32 ETH to spare can take advantage of the full staking mode via the ether.fi platform, whereby you select a preferred node operator to whom you delegate your stake. Node operators are the platform’s partners who make their infrastructure available to perform Ethereum block validation duties. On the ether.fi system, they flag their availability to take on a validator role by posting bids. You can choose any validator from those available, or simply assign your 32 ETH stake to the highest bidder.

Although you delegate your funds to a validator node, you remain in possession of the keys to your stake at all times.

Upon assigning your stake to a node operator, your validator node is launched, and you’re issued two NFTs representing your stake claim — T-NFT and B-NFT.

T-NFT represents your claim to 30 of the 32 ETH total stake, and B-NFT reserves your claim to the remaining 2 ETH. T-NFT is a fully transferable asset, while B-NFT is soulbound to you as a staker, and cannot be transferred or sold. Soulbound tokens are non-transferable crypto assets typically used as a form of blockchain-based ID to represent credentials, memberships and other identity-related attributes.

The B-NFT token is the controlling asset in the staking operation. A B-NFT holder can exit their validator node and stop staking at any time, while a T-NFT holder will need to send the exit request to their associated B-NFT holder. 

Bond 2 ETH for B-NFT

The ether.fi platform plans to introduce another staking option — 2 ETH for B-NFT. As noted above, B-NFTs are non-transferable, soulbound tokens representing a claim to a 2 ETH stake. Staking 2 ETH, rather than the full 32 ETH, will certainly be a more affordable alternative for many stakers. The exact mechanism of this staking mode will be unveiled by the project’s team in the future. 

ether.fi Key Products

In addition to the key staking services above, ether.fi’s product suite includes three more solutions — Stake, Liquid and Cash. The first two are already available to users as of late March 2024, while the Cash product is to be launched within the next 12 months.

Stake

Somewhat confusingly named, Stake is actually a liquid restaking solution, rather than a staking product. It allows you to natively restake your ETH via the EigenLayer platform, a major partner of ether.fi. EigenLayer is a leading player in the Ethereum restaking market. It facilitates the restaking of ETH and LSD tokens on a variety of decentralized networks and apps linked to the Ethereum blockchain.

Liquid

Liquid is a managed decentralized finance (DeFi) strategy vault on ether.fi. Using the product, you can earn high yields with managed risk by contributing funds in one of the three crypto assets — ETH, eETH or weETH. weETH is the wrapped version of the eETH LSD token that can be used to access staking and liquidity services on DeFi protocols beyond EigenLayer.

Cash

The Cash product is a work in progress at the moment. It will allow you to spend and borrow funds using your ether.fi account balance, including on platforms beyond the blockchain environment. As part of the product offering, ether.fi plans to introduce a credit card that can be loaded with funds from your account on the platform.

What Is ETHFI?

ETHFI is the platform’s native cryptocurrency. Its primary function is to facilitate on-platform governance processes. Holders of the token can take part in ether.fi’s governance via the platform’s decentralized autonomous organization (DAO). DAO members can vote on various matters, such as allocating funds from the ether.fi treasury, new token utilities, revenue distribution options, new strategy vaults and more.

ETHFI was launched on Mar 18, 2024 with a total and maximum token supply of 1 billion. The token’s supply allocation shares are illustrated in the chart below.

ETHFI Airdrop

Of the 11% of the ETHFI supply reserved for userairdrops, 6% will be distributed via the Airdrop Season 1 campaign, and the remaining 5% will be allocated via Airdrop Season 2. The Season 1 airdrop started upon ETHFI’s token generation event (TGE) on Mar 18, 2024, and will run for 90 days. Users eligible for the airdrop include a variety of early contributors to the platform, including the following:

• Holders of eETH or weETH

• Holders of fan NFTs

• Participants in the Solo Staker program

• Holders of loyalty badges

• Referrers — those who have referred one or more individuals to ether.fi

Unclaimed ETHFI tokens from Airdrop Season 1 will be included in Airdrop Season 2 allocation.

Is ether.fi a Good Investment?

You might consider investing in the newly launched ETHFI token based on the following factors:

1. ether.fi’s platform offers a rich variety of staking and restaking options, while letting the user control the keys to their investment. Very few other staking solutions can provide the same flexibility and choice of noncustodial staking options as ether.fi.

2. The ETHFI token has a supply limitation built into its tokenomics. This may act as a price support and/or growth factor for the token over the long-term perspective.

Where to Buy ether.fi (ETHFI)

The ETHFI token is available on Bybit via Spot pair with USDT (ETHFI/USDT) and USDT Perpetual contract (ETHFIUSDT). Additionally, until Apr 1, 2024, new and existing users of Bybit’s trading platform can take part in an ETHFI campaign to qualify for a share of the 100,000 ETHFI prize pool. What’s more, new users can join an exclusive Lucky Draw with a 100,000 ETHFI prize pool till Mar 31, 2024.

Closing Thoughts

With rising appreciation for noncustodial staking and restaking options, ether.fi is likely to become a key player in this niche of the crypto industry. Offering a number of flexible and affordable staking options, the platform has an excellent chance of establishing itself as a premier Ethereum staking and restaking provider.

With more products and services in the pipeline, such as Cash, 2 ETH staking (by bonding a B-NFT) and node staking, we can expect to hear more about the ether.fi project later in 2024 and beyond.

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