By Roland Roventa
Translation: Blockchain in Vernacular
Trump’s recent victory has sparked a DeFi renaissance, putting Ethereum in a good position to capitalize on this momentum, with the platform holding 63% of the world’s DeFi TVL. Ethereum may have found its long-awaited catalyst, putting it in an ideal position to benefit from regime change. Since the results of the U.S. presidential election were announced, the Ethereum ecosystem has steadily exceeded expectations.
However, Ethereum’s Rollup-centric roadmap, while critical to scalability, also creates a significant challenge: fragmentation. The current Rollup ecosystem operates in a winner-takes-most environment, dispersing liquidity, attention, and users across isolated L2s. To fully capitalize on this resurgent interest in DeFi, Ethereum must address these divisive dynamics to create a more unified and accessible network.
1. Bridging the divide: Solving Ethereum’s fragmentation and liquidity challenges
Puffer Finance's innovative solution, UniFi, addresses Ethereum's fragmentation challenge head-on. We believe Puffer will outperform once the market sees it as an innovative new infrastructure solution, not just another Liquid Restaking Token (LRT).
What was Puffer originally? Initially, Puffer was a leading LRT protocol focused on providing decentralized staking solutions.
What is Puffer now? Puffer has evolved into an Ethereum-centric unified solution.
Puffer has evolved from being the first native Liquid Restaking Protocol to a comprehensive Ethereum-integrated extension ecosystem consisting of three main components that will be explored in this article:
1) Decentralized Liquid Restaking Token (LRT)
Puffer’s flagship anti-slashing LRT provides enhanced yield and security, supporting decentralized staking within the Ethereum ecosystem.
2) Rollup Stack based on UniFi
A Layer 2-based ordering solution that enables seamless interoperability of L2<>L2 and L2<>L1 transactions, providing efficient atomic composability for cross-chain interactions.
3) UniFi PreconfAVS
The industry's first pre-confirmed AVS provides almost instant transaction finality for L1 and L2, significantly improving the speed and reliability of the Ethereum network.
Puffer Finance’s UniFi-based Rollup Stack transforms Ethereum’s fragmentation into an ecosystem with a positive sum.
2. UniFi-based Roll-up stack - What is it and how does it work?
1) What is L1-based Roll-up?
L1-based Roll-up is an advanced scaling method that directly integrates Ethereum's shared sorter, avoiding reliance on a centralized sorter (which is a common practice for other optimistic and zero-knowledge L2s). This concept was first proposed in a research article by Justin Drake in March 2023, and he defined it as follows:
“When the ordering of a roll-up is driven by the underlying L1, we call it an L1-based or L1-ordered roll-up. More specifically, an L1-based roll-up means that the next L1 block producer can collaborate with L1 searchers and builders to include the next roll-up block as part of the next L1 block without permission.” — Justin Drake
For non-technical people, this paragraph may be difficult to understand. In simple terms, L1-based Roll-up is an efficient solution that verifies transactions directly on L1 and makes full use of Ethereum's existing mechanisms. Other mainstream Roll-up solutions (such as optimistic and zero-knowledge) require transactions to be verified on L2 before sending them to L1.
By using L1-based ordering (ordering performed by Ethereum validators), the following benefits can be achieved:
Inheriting the liveness and decentralization characteristics of the Ethereum network, ensuring reliability without relying on a single point of failure.
The infrastructure is simpler because there is no need to run a dedicated sequencer.
Faster execution, thanks to the pre-confirmation mechanism, which enables faster transaction finality (discussed in detail later).
Economic alignment with L1, creating new income opportunities for existing validators through non-predatory MEV (Maximum Extractable Value).
Lower operational costs since transaction ordering is handled by L1.
The main disadvantage is that the L1-based Roll-up will transfer the MEV revenue to L1, and its own income will be limited to basic transaction fees.
2) L1-based Rollup is better than optimistic Rollup
in short:
By optimizing the transaction ordering process at the base layer, costs can be reduced and speeds increased while maintaining the inherent security and decentralization of the Ethereum network.
3. Puffer is a solution based on L1
UniFi is an Ethereum-based Roll-up that allows the creation of App Chains through its technology stack.
They solved the problem of Ethereum liquidity fragmentation by achieving synchronous composability. Transactions on UniFi can interact directly with other L1-based Roll-ups without the need for cross-chain bridges, creating a unified liquidity and application layer. Developers can easily launch their own application chains, capture transaction fees and take advantage of shared liquidity.
Their goal is to bring atomic composability to Ethereum, redefining what is possible on-chain. Through atomic composability, UniFi will allow L1 and L2 to interact smoothly and integrated within a single Ethereum block. Imagine a user or protocol can deposit assets from L1 to UniFi, complete complex operations (such as transactions or yield farming) on-chain, and then withdraw back to L1 within the same 12-second Ethereum block. This is not only extremely fast, but also represents a major advancement in blockchain interoperability.
Puffer does not compete with L1, but extends the functionality of L1 in an integrated way.
1) How does it work?
Inspired by research with Justin Drake, Puffer UniFi uses Trusted Execution Environments (TEEs) in its processing stack. To achieve real-time proofs, Puffer uses TEEs as an initial "training wheel". Real-time proofs can improve interoperability. When zero-knowledge provers are fast enough, provers can evolve from relying on trusted hardware to fully zero-knowledge-based solutions.
2) Puffer Architecture Analysis
3) Architecture Overview
Puffer's UniFi Preconf AVS provides users with L2 execution confirmation, and users can experience sub-second transaction speeds when interacting with UniFi. In UniFi's universal Rollup, local revenue tokens can be used as Gas Tokens.
The consensus layer, data availability layer, and settlement layer are all components of the base Layer 1 (in this case Ethereum). Rollup is only responsible for the execution layer.
This is the uniqueness of the Puffer application chain.
4) Why is this important?
Puffer built its own application chain through L1-based Rollup, enabling seamless integration of the EVM protocol. This provides an opportunity for every participant in the ecosystem, from individual validators to large-scale decentralized applications (dApps), to participate and benefit, thereby promoting a faster, more efficient and more decentralized Ethereum development. Ethereum's fragmentation problem has lasted too long, and now is the time to change.
5) Ecosystem Overview:
6) Growth Phase
Growth will occur in phases:
Phase 1: They will introduce L1-based Rollup to users and developers. Protocols that are not yet ready to run their own application chains can be deployed directly on UniFi.
Phase 2: UniFi SDK will be launched, enabling any dApp developer to create their own application chain in a more simplified way.
4. UniFi Preconf AVS
UniFi provides near-instant execution confirmation through "Preconf". This is not just a speed improvement, but a new way to scale Ethereum. Preconf is a solution to Ethereum's fragmentation problem and provides ultra-fast confirmation.
1) How to achieve it?
Since Ethereum's 12-second block time limits the rapid finality of transactions, pre-confirmation (Preconf) becomes the key to improving user experience. To this end, Puffer has developed a proprietary Preconf AVS that can provide instant confirmation that a transaction will be included in the next block in about 100 milliseconds. This greatly improves the speed and reliability of the L1 Rollup-based ecosystem.
2) Working principle
There are two types of pre-confirmations: execution pre-confirmation and inclusion pre-confirmation. Both can be used to provide faster confirmations for L1 or L2 users. The advantage of execution pre-confirmation is that it can provide users with a final and guaranteed commitment, including the status of the transaction when it is executed. For example, it can confirm the execution price of the transaction, thereby improving the user experience.
It is more complicated to implement execution pre-confirmation at L1, but L2 execution pre-confirmation can solve this problem well. Puffer's UniFi AVS uses this feature to significantly improve the user experience.
Preconfirmations require reliable guarantees. Since preconfirmations are commitments made by the proposer (validator or delegated proposer), failure to deliver will result in penalties such as slashing. Heavy staking protocols like EigenLayer play a key role in providing slashing guarantees for preconfirmations. Notably, Puffer’s UniFi Preconf AVS is the first such AVS to run on EigenLayer.
3) UniFi: The catalyst for the unified Ethereum ecosystem
UniFi's Synchronous Composability is disruptive. Interactions across Rollups can be performed as if on a single chain, eliminating the need for L2 bridges (no one likes using bridges), reducing costs, and mitigating security risks of asset transfers. UniFi's approach unifies liquidity, enables developers and users to interact seamlessly across chains, and improves the user experience of Ethereum like never before.
For developers, UniFi provides a unique opportunity to scale applications in a unified, low-friction environment. By eliminating the need for centralized ordering, UniFi significantly reduces operating costs, allowing developers to focus on products without worrying about the complexity of managing isolated L2. UniFi's setup makes launching an L1-based Rollup almost as easy as deploying a smart contract, significantly lowering the barrier to entry for developers and encouraging innovation.
4) Unlocking Income: How Puffer’s Rollup-based and pre-confirmed blockchain creates value for the Ethereum ecosystem
All revenue streams will generate treasury rewards and will be governed by $PUFFER Tokens.
Puffer's upgraded revenue model (not just LRT) leverages Rollup and pre-confirmation to create sustainable value in the Ethereum ecosystem. Based on Rollup, Puffer generates sorting fees by letting Ethereum validators manage transaction sorting. This approach supports seamless interoperability between Ethereum L1 and L2 and between L2s, creating unified liquidity and composability. Through sorting fees integrated with the Ethereum validator network, Puffer captures transaction-based revenue while strengthening Ethereum's native economic value.
Users can prioritize transactions by paying pre-confirmation tips, which provides Puffer with an additional source of income in addition to transaction fees. These fees and tips are returned to the Puffer ecosystem, enriching its native Tokens pufETH and unifiETH, and providing benefits to Token holders.
As Puffer contributor Amir explains:
“If every user pays a premium for pre-confirmations to ensure faster and more reliable transactions on Ethereum, then AVS is tied to every transaction a user makes on Ethereum. This creates a very powerful revenue-generating AVS that can continuously provide organic returns without the need for additional tokens or secondary mechanisms.”
5) Launch vePuffer
The key to a protocol achieving sustainable long-term price performance lies in its token economics design. Excellent protocols must have a well-thought-out token model that focuses on providing value to long-term holders. Mechanism Capital focuses on token economics design and supports teams that innovate and maximize their token value capture.
Puffer Finance launched vePuffer as an update to token economics with the goal of delivering value to holders and aligning incentives across the ecosystem.
Key features include:
Decentralized governance: Through vePUFFER, the community can vote on the allocation of PUFFER points, in line with Puffer’s decentralized goals.
Tradable Points: Season 2 ERC20 PUFFER Points are tradable, providing flexibility for early profit or additional purchases.
Flexible strategies: Tradable points allow users to choose to hold, sell or buy based on personal strategy and market sentiment, enhancing risk management.
Bribe Market: Protocols can offer rewards to vePUFFER holders to encourage them to vote for their own pools, thereby increasing their annualized rate of return (APR) and liquidity.
Competitive Protocols: Bribery system allows protocols to attract votes to increase APR, drive participation and align incentives.
Community-driven rewards: The vePUFFER model promotes governance, speculation, and diverse strategies, empowering users to shape ecosystem incentives.
6) How Puffer's UniFi stands out: Innovating the Ethereum Rollup Ecosystem
With the launch of UniFi, Puffer creates an opportunity for Ethereum to transform from a fragmented Rollup environment to a unified positive-sum ecosystem, bringing together developers, users, and liquidity in unprecedented ways. The result is a stronger and more resilient Ethereum that can meet the needs of billions of people.
