Puffer Finance Explained: pufETH, UniFi AVS & Rollup

What is Puffer Finance?

Puffer Finance is a liquid restaking protocol (nLRP) on Ethereum, allowing users to stake ETH and mint pufETH, a token that captures rewards from both Ethereum PoS and EigenLayer restaking. Its use of Validator Tickets (VTs) enables node operators to run validators with minimal ETH (1-2 ETH), making the system highly capital-efficient.

With over $3.75 billion in staked ETH and flagship products like pufETH ($850 million) and UniFi AVS ($2.9 billion), Puffer Finance enhances staking returns while addressing Ethereum’s scalability and liquidity needs.

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Puffer Liquid Restaking Token (LRT)

The Puffer Liquid Restaking Token (pufETH) is Puffer Finance’s native liquid staking token (nLRT), designed to deliver Ethereum PoS and EigenLayer restaking rewards. It tokenizes staked ETH, boosting yield beyond traditional liquid staking tokens by capturing rewards from both validator activity and restaking. 

With $853 million in TVL, pufETH offers stakers immediate returns and seamless DeFi compatibility, letting them tap into higher yields without managing their own validator. It’s a capital-efficient way to optimize staking returns in Ethereum’s evolving ecosystem.

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UniFi AVS

UniFi AVS is a product of Puffer Finance, designed to provide sub-second transaction confirmations and instant L1 withdrawals for Ethereum rollups. Built on EigenLayer, it leverages restaked ETH as collateral to enhance scalability and transaction speed while maintaining decentralization. 

With over $2.9 billion in TVL, UniFi AVS plays a key role in Puffer’s mission to improve Ethereum's efficiency and throughput.

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UniFi Based Rollup Explained

Puffer's UniFi Based Rollup is an upcoming project that aims to fix Ethereum's fragmentation and scaling issues. By using based sequencing on Ethereum's L1 and integrating preconfirmations from restaked validators, UniFi offers lightning-fast, low-cost transactions with sub-second finality.

The real edge? UniFi’s synchronous composability lets rollups interact directly, eliminating the need for bridges. It means seamless liquidity across the ecosystem, gasless transactions, and faster throughput for apps that need speed, like DeFi and GameFi. 

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How Does pufETH Work?

pufETH is Puffer Finance's Liquid Restaking Token (LRT), enabling users to stake ETH and earn rewards from Ethereum Proof of Stake (PoS) and restaking via EigenLayer. When users stake ETH, they mint pufETH, which increases in value over time as it collects additional rewards from restaking and validator operations. 

Here’s a quick breakdown to try and make things easier:

• ETH Staking: Users stake ETH in the protocol and mint pufETH, representing their staked ETH plus future rewards.
• Reward Mechanism: pufETH accumulates both PoS and EigenLayer restaking rewards, increasing its value.
• Validator Tickets: Validator Tickets (VTs) allow node operators, called NoOps, to run validators using pooled ETH. NoOps buy these tickets, which generate extra income for pufETH holders.
• NoOps: NoOps (Node Operators) run validators with minimal ETH (1-2 ETH collateral) by purchasing VTs, earning 100% of their validator’s execution and consensus rewards.
• DeFi and Liquidity: pufETH is fully liquid and DeFi-compatible, allowing holders to trade or use it within other protocols.

These mechanics ensure pufETH holders gain yield from both staking rewards and NoOps’ validator operations, enhancing overall profitability.

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Puffer Tokenomics and Utility

The $PUFFER token is the native governance token for the Puffer Protocol and UniFi ecosystem. Holders of $PUFFER govern critical aspects such as fee and value accrual, validator bond requirements, and treasury management.

Key Utilities of $PUFFER

• Puffer LRT (pufETH): Holders vote on key protocol parameters, select restaking operators, and manage AVS (Active Validation Services) participation.
• UniFi AVS: Token holders influence fee structures, rollup support, and security parameters, guiding the integration of new preconfirmation services.
• UniFi Rollup: They manage fee parameters, ecosystem rewards, and rollup upgrade decisions, ensuring long-term value creation.

PUFFER Allocations

• Total Supply: 1,000,000,000 tokens
• Ecosystem & Community: 40% for community incentives and liquidity
• Airdrops: 13% across two seasons to reward early supporters
• Investors: 26% vested over 3 years
• Team & Advisors: 20% vested over 3 years, ensuring long-term commitment
• Protocol Guild: 1% allocated to support Ethereum core development

The protocol also features vePUFFER, a flexible governance model where users stake $PUFFER to mint vePUFFER NFTs, accumulating voting power over time. Unstaking is allowed without fixed lockups, but resets voting power, balancing long-term engagement with flexibility.

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Is Puffer Finance Safe?

Puffer Finance implements strong security measures to safeguard staked ETH, including advanced anti-slashing technology and requiring NoOps to lock 1-2 ETH in collateral, reducing slashing risks. It also enforces strict guardrails for AVS operators and undergoes comprehensive audits to ensure system integrity. 

With over $3.7 billion in total value locked, the high TVL reflects market confidence in its safety. However, as with any DeFi protocol, there are inherent risks in smart contracts that users should be aware of.

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Bottom Line

Puffer Finance is a highly efficient liquid restaking protocol on Ethereum, delivering enhanced returns via pufETH and UniFi AVS. With billions in TVL, it stands as one of the largest LRT platforms in DeFi, signaling strong market confidence in its scalability and security. 

The $PUFFER token powers governance, giving users control over protocol decisions, while vePUFFER offers flexible staking options. However, as with all DeFi protocols, smart contract risks remain, and users should stay cautious.