Ether.fi Explained: eETH, Liquid Vaults & ETHFI

What is Ether.fi?

Ether.fi is a decentralized protocol offering liquid staking and restaking solutions for Ethereum. Users stake ETH to mint eETH, a liquid token that accrues staking rewards, EigenLayer restaking yields, and loyalty incentives, enabling higher returns while retaining composability in DeFi.

The platform has a decentralized stack, with features like user-controlled validator keys, reducing counterparty risks, and Operation Solo Staker, which supports permissionless node operation to enhance Ethereum’s security and geographic diversity.

In addition to staking, Ether.fi offers products such as Liquid Vaults for automated yield generation and a crypto-backed Visa card for spending and borrowing. With over $8 billion in total value locked (TVL), it is one of the largest DeFi protocols by assets under management.

‍

How Ether.fi and eETH Works

Ether.fi is a non-custodial staking protocol that lets users stake ETH while retaining control of their validator keys. It uses Distributed Validator Technology (DVT) to enhance security and decentralization. Stakers earn rewards from Ethereum staking and restaking, while eETH, a liquid staking token, enables seamless participation in DeFi without locking assets.

Here’s a break down of the minting and staking processes underpinning Ether.fi and eETH:

• ETH Deposit: Users deposit ETH into the Ether.fi protocol to begin staking.
• Validator Key Management: Validator keys are generated by users and encrypted for secure sharing with node operators, ensuring users maintain control.
• NFT Representation: Each validator is assigned two NFTs: the T-NFT (30 ETH, transferable) for economic ownership and the B-NFT (2 ETH, non-transferable) for operational control, including monitoring and exits.
• Staking and Restaking: ETH is staked to earn consensus and execution layer rewards, while EigenLayer restaking generates additional yield.
• Liquid Staking: Users mint eETH, a liquid staking token, enabling participation in DeFi while earning rewards.
• Decentralized Node Operations: Users can operate nodes via permissionless staking or Ether.fi’s supported solo staking program.

‍

What are Liquid Vaults?

Ether.fi’s Liquid Vaults automate DeFi yield generation, allowing users to deposit assets like eETH, weETH, WETH, or stablecoins (USDC, DAI, USDe) and earn optimized returns. The vaults allocate funds across integrated protocols such as AAVE, Pendle, and Uniswap V3.

Here are some of the most popular vaults available on the platform:

• Liquid ETH Yield Vault: Maximizes ETH yield through DeFi strategies, offering 8.2% APY with $557M TVL.
• Market-Neutral USD Vault: Delivers 17.9% APY on stablecoin deposits using diversified, low-risk strategies.
• UltraYield Stablecoin Vault: Provides 30% APY with market-neutral strategies designed for stable returns.

Vaults are built using Veda’s smart contract architecture, which incorporates automated risk monitoring, programmatic exits during adverse conditions, and integration with multiple DeFi platforms. 

‍

Ether.fi Protocol Revenue Model

Ether.fi earns revenue through a 10% commission on staking rewards, with 5% going to the protocol treasury and 5% to node operators. This fee structure supports protocol development while incentivizing node operators to maintain infrastructure.

The platform also operates a node services marketplace, where stakers and node operators provide infrastructure services. Revenue from these services is shared between the protocol and participants, creating a direct and sustainable economic model.

‍

Ether.fi Tokenomics

The ETHFI token governs Ether.fi’s protocol and treasury, giving holders voting power on upgrades, staking services, and resource allocation. 

With a fixed supply of 1 billion, 11.52% is initially circulating, and further distributions are planned to sustain protocol development and attract more staked ETH. 

Here is the token allocation and distribution at launch:

• Core Contributors: 23.26%, vested over 3 years.
• DAO Treasury: 27.24%, funds protocol development and the Protocol Guild.
• User Airdrops: 11%, rewards early adopters and contributors.
• Partnerships: 6%, supports ecosystem collaboration.
• Investors: 32.5%, vested over 2 years.

‍

Ether.fi Founder

Ether.fi was co-founded by Mike Silagadze, its CEO, who previously founded Top Hat, a 500-employee education tech company with millions of users. He is also a venture partner at Ripple Ventures, with a degree in Electrical Engineering from the University of Waterloo.

The team includes Rok Kopp (Chief Customer Officer), Rupert Klopper (VP of Engineering), Seongyun Ko (Director of Engineering), and Jozef Vogel (COO).

‍

Bottom Line

Ether.fi offers a secure and decentralized approach to Ethereum staking, giving users control of their validator keys and access to higher returns through eETH and automated Liquid Vaults. 

Its revenue model and ETHFI token-based governance ensure long-term sustainability and community-driven growth, making it a robust solution for staking and DeFi integration.