Investing in ether.fi
Nonce Classic is thrilled to back ether.fi alongside North Island, Chapter One, Bullish, Foresight Ventures, Amber, Okx Ventures and more.
After the Merge, Ethereum’s consensus mechanism transitioned from Proof of Work (PoW) to Proof of Stake (PoS), making the security of the Ethereum network proportional to the total value of ETH staked by validators. However, ETH staked in Ethereum 1) cannot be used in DeFis and 2) other protocols’ security, limiting its usage. LST (Liquid Staking Token) projects like Lido initially emerged to address the first issue, followed by Eigenlayer’s restaking solution to tackle the second limitation. Despite these efforts, restaked ETH still suffers from these aforementioned issues. Naturally leading to the emergence of LRT (Liquid Restaking Token) projects that adopt a similar approach to LST.
The LST market is currently dominated by Lido, holding over 70% market share. Several factors have contributed to Lido’s success, but two main reasons stand out:
- Being the first to offer the most accessible LST to the public thereby quickly securing sufficient liquidity
- Integrating with other DeFi platforms, making Lido’s LST usable more
Unlike the LST market, where Lido could race ahead of everyone else, the LRT market saw the entrance of multiple players almost simultaneously. Among these, ether.fi stands out for taking its lead in the LRT market through a strategy akin to Lido.
Enter ether.fi
ether.fi was the first to support Native Restaking, allowing users to restake ETH directly, thus overcoming the limitations of existing LST projects that only support staking and LRT projects that support Liquid Restaking. Additionally, it maximized users’ DeFi experience by quickly expanding integrations with other DeFi services from an early stage unlike other LRT projects.
Eigenlayer enables restaking ETH through two methods: 1) Liquid Restaking and 2) Native Restaking. The former restakes LST tokens (e.g., stETH) which is earnt by staking ETH on an LST platform, while the latter allows for direct restaking ETH itself. The Liquid Restaking method has a restaking cap and can be complex for those without LST tokens, as they must stake ETH through an LST platform first and then restake it on Eigenlayer. Moreover, even if LRT projects supporting the former method manage their system securely, they are exposed to security issues in the LST platforms they use.
By being the first LRT project to support Native Restaking, ether.fi has addressed all the drawbacks associated with Liquid Restaking. This enabled ether.fi to quickly increase its market share in the LRT market following its service launch in November 2023. Despite the emergence of competitors, this seems to be the key reason for ether.fi’s ability to maintain the leading position in the LRT market.
Additionally, ether.fi has rapidly advanced its integration with other DeFi platforms such as Pendle and Balancer, now enabling the use of ether.fi’s eETH on 15+ DeFi services. eETH holders can earn rewards through a combination of staking interest, restaking interest, Eigenlayer points, ether.fi points, plus additional rewards provided by other DeFi platforms.
And That Is Just the Beginning
Since the emergence of ether.fi, there has been an increase in LRT projects supporting Native Restaking, all actively supporting integration with DeFi platforms. Then has ether.fi lost its unique edge? Rather, the true capabilities of all LRT projects, including ether.fi, will become evident after the launch of multiple AVS (Actively Validated Services) on EigenLayer. The essence of LRT lies in curating AVS and preventing slashing for participating validators to maximize users’ restaking yields.
The co-founders of ether.fi have been harmonizing their partnership and cultivating their expertise in staking services since 2021 by operating a staking-based hedge fund company. Moreover, they aim to support stable validating activities through collaborations with professional node operating companies like DSRV, a41, and Cosmostation. Furthermore, having undergone more than four audits, collaborating with various AVS, and establishing their own risk management system, they are actively preparing for the official launch of EigenLayer. This positions ether.fi not just as a team reliant on the pre-EigenLayer LRT hype but as a trusted player in the market with deep expertise and stability.
Ether.fi’s growth is closely linked to the growth of Eigenlayer. Although ether.fi’s Total Value Locked (TVL) cannot surpass that of Eigenlayer, there tends to be a correlation with ether.fi’s TVL increasing as Eigenlayer’s TVL grows. From December 2023 to March 2024, Eigenlayer’s TVL surged by 4800%, now ranking second in the DeFi ecosystem’s TVL. Reflecting this trend, ether.fi’s TVL also rose by 5700%, suggesting anticipated greater growth for both Eigenlayer and ether.fi in the future.
ether.fi opens ethereum’s most exciting liquidity narrative since its birth. With new opportunity found with a true market need, built by a verified team nonce Classic is ecstatic to back crypto’s new leading narrative.
About nonce Classic
nonce Classic is a VC born out of Seoul’s largest Web3 hacker house. Backed by a strong alliance of builders and angels, nonce Classic lays out a bedrock for founders by providing a strong community of like-minded people
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Disclaimer: This article is for general information purposes only and is not investment advice or solicitation. You should consult a professional for investment decisions or advice. The information contained herein has been obtained from other sources, but nonce Classic has not independently verified it and makes no warranty as to its accuracy or suitability. This article reflects the opinions of the author and does not necessarily reflect the opinions of others associated with nonce Classic. Opinions are subject to change at any time without notice.
