Puffer Finance (https://www.puffer.fi/) proposes adding pufETH as a collateral asset in Aave’s Ethereum V3 market. pufETH is a liquid restaking token that enables users to earn both Ethereum staking rewards and additional returns through restaking on EigenLayer. Its growing adoption, deep liquidity, and robust security measures make pufETH a strong candidate to enhance Aave’s asset offerings and attract additional liquidity.
Background
pufETH is the liquid staking token of Puffer Finance, the only premissionless liquid restaking protocol built on Ethereum. By leveraging EigenLayer’s restaking capabilities, pufETH allows users to participate in Ethereum’s Proof-of-Stake (PoS) with as little as 2 ETH, offering enhanced returns and decentralized validator participation.
Key highlights of pufETH and Puffer Finance include:
Grant:
Ethereum Foundation for developing Secure-Signer
Innovative design
Leading anti-slashing design for AVSs and validators
First preconfirmation AVS on EigenLayer with 2.8M ETH of economic security
High Adoption and TVL:
Puffer Finance holds over $279 million (~80K ETH) in total value locked (TVL) within its ecosystem, with an additional $141 million integrated across DeFi platforms like Curve, Pendle, and Karak.
Puffer has established approxmiately $11 million pools of pufETH on Curve (Curve.fi)
Security and Trust:
Puffer has been audited by 10 leading firms and employs Secure-Signer technology and anti-slashing mechanisms to safeguard user funds and validators.
Six security partners audit Puffer’s code base.
Permissionless Participation:
Puffer’s anti-slashing technology allows for permissionless and decentralized validator participation, ensuring robust network security while reducing slashing risks.
Strong Industry Backing:
Puffer Finance is supported by top-tier investors such as Binance Labs, F-Prime, Franklin Templeton, and Coinbase Ventures.
Benefits for Aave
Yield Opportunities:
By listing pufETH, Aave users can earn Ethereum staking and restaking rewards in addition to traditional borrowing and lending income. This enhances capital efficiency and provides a competitive advantage over other lending platforms.
Security and Transparency:
Puffer Finance’s advanced security measures and transparent on-chain operations ensure a high level of trust and reliability for borrowers and lenders.
Diversification and Market Growth:
Adding pufETH as the only permissionless LRT allows Aave to diversify its collateral offerings, catering to a growing demand for liquid staking assets. This can further increase Aave’s TVL and protocol activity.
Incentives
To encourage user participation and support the listing of pufETH on Aave, the Puffer Finance Foundation proposes:
Governance Incentives:
Allocating up to 10% of Puffer’s $CARROT (Puffer’s onchain incentives) token supply to incentivize borrowers and lenders interacting with pufETH on Aave. These incentives will reward early adopters and help seed liquidity in the pufETH market.
Borrowing and Supplying Rewards:
A portion of the $CARROT token incentives will be distributed to users borrowing against or supplying pufETH on Aave, enhancing protocol activity and adoption.
Specification
Risk Parameters and analysis will be provided by Risk Service Providers and ARFC will be updated accordingly.
If consensus is reached on this TEMP CHECK, escalate this proposal to the Snapshot stage.
If the Snapshot outcome is YAE, escalate to ARFC stage.
Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage.
If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal.
Disclaimer
Current proposal has been created ACI, as this proposal is powered by Skyward from TEMP CHECK stage. ACI did not received payment for proposal edition and is not affiliated with Puffer Finance.
Is there a way to list this asset with cautious parameter and if it improves overtime these will be changed?
I do think that Aave as a protocol has a big impact on liquidity and may has the chance to improve it by a lot and making it a good asset to list and generate revenue from.
Disclaimer: I am not a holder of PufETH nor have I been in the past.
Hello, I’m sharing the same concerns as on TEMP CHECK for this onboarding.
Current wETH borrow demand is very strong with our basket of onboarded LST/LRTs and there’s likely little business potential for the Aave DAO on this one while each onboarding especially in the ETH-correlated assets collaterals is increasing risk surface for the Aave protocol.
Unless there’s strong commitment to make Aave the lending centerpiece of the pufETH ecosystem, while I have nothing against puffer ecosystem, we will be staying on the conservative side.
Hello, I just wanted to voice my support for pufETH as both a long time Aave user (currently holding both lending/borrowing a positions in Aave since 2020) and an active contributor to the Puffer founders and Puffer DAO since early 2023. I saw Marc’s mention of “making Aave the lending centerpiece of pufETH” and I do believe that’s a possibility for Puffer.
I also understand the overlap of demand with other LST/LRTs supported in Aave already and so if Marc or anyone else had suggestions for how to better align this for the business potential of Aave DAO, please do let us know. Puffer Unifi’s upcoming launch as a based rollup is a potential place for Puffer to provide future value to Aave DAO.
Thank you for the feedback @EzR3aL@MarcZeller We at Puffer recognize Aave as a robust and proven lending protocol, particularly of its performance during recent and past market fluctuations.
Commitment to Aave: We are dedicated to making AAVE the centerpiece for lending within the pufETH ecosystem. To underline our commitment, we have allocated up to 10% of our airdrop specifically to support this initiative (this can be further improved with the support of our community)
Incentives for Users: Our current campaigns are offering high APRs, which we plan to further enhance by combining rewards in both PUFFER and CARROT tokens. This approach is designed to attract more users and liquidity to Aave.
Technical Advantages:
Instant Withdrawal Capability: Puffer is uniquely equipped with a mechanism that allows for instant withdrawal with a nominal slippage of approximately 1%. This is a key feature that supports liquidity.
High Liquidity Availability: We currently maintain about 17k ETH (25% of our pool) readily available for instant withdrawals. This liquidity assurance is critical for managing volatility.
Partnership with Risk Analysts: We are open to and look forward to discussions with risk management experts like @LlamaRisk and others to further validate our liquidity mechanisms.
Addressing Liquidation Challenges: Our technical design is specifically tailored to mitigate the liquidation risks associated with LSTs and LRTs, enhancing the overall safety and efficiency of the AAVE ecosystem.
We believe these measures will significantly benefit both AAVE and our users, creating a resilient lending experience.
Listing pufETH on Aave brings a secure, permissionless LRT backed by a team deeply aligned with Ethereum’s values. As UniFi expands, pufETH’s role in DeFi will only grow.
Also, $6.7M in CARROT & PUFFER incentives are allocated to support liquidity, driving adoption and enhancing capital efficiency for Aave users.
Listing pufETH on Aave enhances capital efficiency, bringing Ethereum staking and restaking yields to both lenders and borrowers. Puffer has over $279M in TVL, deep DeFi integrations, and $6.7M in incentives! Let’s make Aave the primary lending hub for pufETH. It’s a win-win for DeFi and will surely delight DeFi users!