Based Rollup empowers the integration of Ethereum, how does Puffer drive the next chapter of Ethereum?

Puffer has evolved into an Ethereum-centric unified solution, expanding from a native liquidity and collateral protocol to a comprehensive integrated and extended ecosystem on Ethereum.

Author: Roland Roventa

Trump’s victory has sparked a revival wave of DeFi, giving Ethereum (which accounts for 63% of the total locked value in global DeFi) the potential to break through on this momentum. Since the announcement of the results of the U.S. presidential election, the Ethereum ecosystem has consistently outperformed expectations.

However, the expansion route of ETH based on rollup is facing a significant challenge: fragmentation. The current rollup ecosystem is in a winner-takes-all state, leading to liquidity, user attention, and user communities being scattered across isolated L2 chains. To fully tap into the potential of the DeFi resurgence, Ethereum must address these divisive dynamics and build a more unified and open network.

Bridge the Gap: Solving the Fragmentation and Liquidity Challenges of Ethereum

Puffer Finance’s innovative solution - UniFi, directly addressing the fragmentation challenge of the Ethereum network. We believe that once the market realizes that Puffer is not just another Liquidity Weighted Token (LRT), but an innovative infrastructure solution, its performance will exceed expectations.

Puffer’s Past: Puffer was initially a leading LRT protocol, focusing on providing decentralized staking solutions.

Puffer’s present: Puffer has now evolved into a unified solution centered around the Ethereum protocol. Puffer has developed from the first native liquid staking protocol to a comprehensive Ethereum-integrated and extended ecosystem, consisting of the following three core components.

1. Decentralized Flow Distribution and Re-Staking Protocol (LRT)

Puffer’s flagship product, with anti-reduction features, offers high yields and security, supporting decentralized heavy staking in the Ethereum ecosystem.

2、UniFi Based Rollup Stack

A serialization solution based on L2, which can achieve seamless interaction between L2<>L2 and L2<>L1, supporting the atomic composability of efficient cross-chain operations.

3. UniFi Pre-Confirmation AVS

The industry’s first pre-confirmed AVS provides near-instant transaction finality for L1 and L2 transactions, significantly improving the speed and reliability of the Ethereum network.

Through UniFi’s rollup-based stack, Puffer Finance transforms the fragmentation of Ethereum into a positive ecosystem.

Part One Puffer UniFi Based Roll-up Stack - What is it? How does it work?

What is based rollups?

Based rollups is an advanced scaling method that integrates directly with the shared sequencer of the Ethereum blockchain, without relying on other L2 commonly used centralized sequencers (such as optimistic or zero-knowledge proof L2). The core idea was first proposed by Justin Drake in a research paper in March 2023:

Based rollup, i.e., rollup sorted by L1, refers to its sorting driven by the underlying L1. Specifically, based rollup means that the next L1 proposer can cooperate with L1 searchers and builders to include the next rollup block in the next L1 block without permission. - Justin Drake

For non-technical people, the above description may seem complicated. In simple terms, the aggregation based on the main chain directly verifies transactions on L1, fully leveraging the efficiency of the existing ETH protocol. In contrast, other common aggregation solutions (such as optimistic & ZK) usually verify transactions on L2 before submitting them to L1.

By sorting based on ETH L1 validators, the following advantages can be obtained:

• Inherits the activity and decentralization features of the Ethereum network: ensuring reliability and immunity to single point of failure.
• Simplified infrastructure: No need to run a separate sorter.
• Faster execution speed: Achieve faster transaction finality through pre-confirmation (will be explained in detail later).
• In line with the economic interests of L1: Creates new revenue opportunities for existing validators through non-extractive MEV (Maximal Extractable Value).
• Reduce operating costs: Because the transaction ordering is handled by L1.

Based Rollups > Optimistic Rollups

tl’dr:

By optimizing the underlying transaction sorting process, costs can be reduced, speed can be increased, while retaining the inherent security and decentralization of the Ethereum network.

Puffer is Based

Puffer UniFi is an ETH-based rollup that enables the creation of application chains through its technology stack.

It solves the problem of ETH fragmentation of liquidity by implementing synchronous composability. Transactions on UniFi can directly interact with other based rollups without bridging, thus creating unified liquidity and application layer. Developers can easily launch their own application chain, capture transaction fees, and leverage shared liquidity.

UniFi’s goal is to bring atomic composability to the Ethereum blockchain - redefining the possibilities of on-chain interactions. Through atomic composability, UniFi will enable smooth, integrated interactions between Layer 1 and Layer 2 within a single Ethereum block. For example, users or protocols can deposit assets from L1 to UniFi, perform complex operations (such as exchange or liquidity mining), and then withdraw the assets back to L1 within the same 12-second Ethereum block. This is not only fast, but also a major breakthrough in blockchain interoperability.

Puffer is not competing with L1, but collaborating with L1 to expand its functionality in an integrated way.

How does it work?

Inspired by research collaboration with Justin Drake, Puffer UniFi has adopted Trusted Execution Environments (TEEs) in its processing stack. To achieve real-time proofs, Puffer plans to use TEEs as a temporary auxiliary tool. The implementation of real-time proofs can significantly enhance interoperability. Once zero-knowledge proof (ZK proof) technology reaches sufficient speed, the prover will be able to transition from relying on trusted hardware to a fully zero-knowledge-based solution.

Puffer UniFi architecture analysis

Architecture Overview - Puffer’s UniFi pre-confirmed AVS provides users with L2 execution confirmation services. When users interact with UniFi, they can experience sub-second transaction speeds. In the UniFi Universal Rollup, native yield tokens can be used as fuel (Gas) tokens.

The consensus layer, data availability layer, and settlement layer are all handled by the base layer (Layer 1, i.e. Ethereum). Rollup focuses on the functionality of the execution layer.

This is precisely what sets Puffer App-Chain apart.

Why is this important?

Puffer is using based rollups to build its own app-chain, achieving seamless integration with the EVM protocol. This provides opportunities for everyone in the ecosystem to participate and benefit, whether individual validators or large dApps, all can benefit from a faster, more efficient, and more decentralized Ethereum network. The fragmentation problem of the Ethereum network has existed for too long, and now it’s time to change this situation.

Ecosystem Overview

Growth will be phased:

Phase One: Puffer will introduce based rollups to users and developers. For protocols that are not yet ready to run their own application chains, they can be deployed directly to UniFi.

Phase 2: UniFi will release an SDK that enables any dApp developer to quickly build and deploy their own application chain in a simplified manner.

Part 2: UniFi Pre-Confirmation AVS

UniFi provides near-instant execution confirmation through preconfirmation (preconf) technology. This is not just an improvement in speed, but a brand new solution for ETH network scalability. Preconfirmation technology solves the fragmentation problem of the ETH network and provides extremely fast transaction confirmation.

How to achieve? Due to the 12-second block time limit of the ETH network, which restricts the finality of fast transactions, preconfirmation (preconf) becomes crucial for improving user experience. To address this issue, Puffer has developed a proprietary preconfirmation AVS technology, which can provide nearly instant (approximately 100 milliseconds) transaction confirmation guarantee, ensuring the transaction will be included in the next block. This innovation greatly enhances the speed and reliability of the based rollup ecosystem.

How does it work?

Pre-confirmations (preconfs) are divided into two types: Execution Pre-confirmations and Inclusion Pre-confirmations. Both can be used to provide users with faster transaction confirmations on L1 or L2: the advantage of Execution Pre-confirmations is to provide users with final and guaranteed commitments, including confirmation of the state after transaction execution. For example, it can confirm the price at which the transaction is executed, significantly improving the user experience.

Implementing the execution pre-confirmation of L1 is challenging; however, the execution pre-confirmation of L2 effectively solves this problem. Puffer UniFi AVS utilizes this capability to provide a more optimized user experience.

Pre-commitment guarantee mechanism: Pre-commitment represents the proposer’s (validator or authorized proposer) commitment to the user. If this commitment cannot be fulfilled, it should be punished, such as slashing. Re-staking protocols like EigenLayer play an important role in providing slashing protection for pre-commitment. It is noteworthy that Puffer UniFi’s pre-commitment AVS is the first similar service to run on EigenLayer.

Puffer UniFi: Catalyst for the next chapter of Ethereum - Unification

UniFi’s synchronizable composability is a disruptive innovation. Interactions across Rollups are like operating on a unified chain, without the use of L2 bridges (which nobody likes), reducing costs and mitigating security risks associated with asset transfers. UniFi’s approach achieves liquidity unification, enabling seamless interaction between developers and users across chains, unprecedentedly enhancing liquidity and user experience on the Ethereum blockchain.

The significance for developers: UniFi provides developers with a unique opportunity to expand their applications in a unified and low-friction environment. By eliminating centralized sequencers, UniFi significantly reduces operational costs, allowing developers to focus on the product itself without worrying about the complexity of isolating L2 applications. In addition, UniFi’s architecture makes the deployment of based rollups almost as simple as deploying smart contracts, greatly reducing the entry barriers for developers and encouraging innovation.

Income Gain: How Puffer’s Based Rollups and Pre-Confirmation are Driving the Value of Ethereum’s Ecosystem

All sources of income will be converted into the income of the capital reserve, and governed by the $PUFFER token.

The upgraded version of Puffer’s revenue model (please note that it is not just an LRT) fully leverages based rollups and pre-confirmation technology to create sustainable value within the Ethereum ecosystem. Through based rollups, Puffer generates sorting fees, which benefit from the mechanism that allows Ethereum validators to manage transaction ordering. UniFi not only supports seamless interoperability between Ethereum L1 and L2, but also supports interoperability between L2, achieving unity in liquidity and composability. By integrating sorting fees into the Ethereum validator network, Puffer captures transaction-based revenue while reinforcing the value of the Ethereum native economy.

Users can also pay preconfirmation tips to prioritize their transactions. This provides Puffer with an additional source of income, diversifying its revenue along with transaction inclusion fees. These fees and tips will be reinvested into Puffer’s ecosystem, further enriching the value of its native tokens pufETH and unifiETH, while providing additional income for token holders.

As explained by Puffer’s core contributor, Amir:

If each user pays additional fees for these pre-confirmed payments to ensure faster and more reliable transactions on the Ethereum blockchain, AVS will be closely associated with each transaction on the Ethereum blockchain. This creates a very powerful and efficient revenue-generating AVS that can consistently produce organic income.

About vePuffer

One of the key factors in making the protocol achieve sustainable long-term price growth is token economics. An excellent protocol must have a well-designed token model, focusing on creating value for long-term holders. At Mechanism Capital, we focus on the design of token economics, supporting teams that can innovate and maximize token value capture.

Puffer Finance is launching vePuffer as an update to the token economy. Its goal is to deliver value to token holders and align incentive mechanisms throughout the ecosystem. To achieve this, they have introduced the following innovations:

• Decentralized Governance: vePUFFER enables the community to participate in the voting for the allocation of PUFFER points, in line with Puffer’s decentralized goal.
• Tradable Points: The ERC20 PUFFER Points of the second quarter are tradable, and users can obtain early returns or make additional purchases through trading, thereby increasing flexibility and arbitrage potential.
• Flexible strategy: Tradable points allow users to decide to hold, sell, or buy based on personal strategies and market sentiment, enhancing risk management capabilities.
• Bribery market: protocol can provide incentives to vePUFFER holders to increase the number of votes in their pools, thereby boosting APR and liquidity.
• Competitive protocol: Bribery mechanism allows protocol to attract votes to improve APR, promote user participation, and create a consistent incentive mechanism.
• Community-driven reward mechanism: The vePUFFER model supports governance, speculation, and diversified strategies, empowering users to shape the incentive mechanism of the ecosystem.

Why Puffer’s UniFi stands out: Reshaping the Rollup landscape of Ethereum

By launching UniFi, Puffer creates an opportunity for Ethereum to transition from a fragmented Rollup environment to a unified and positive ecosystem. This ecosystem brings together developers, users, and liquidity in unprecedented ways. The end result? A more powerful, resilient Ethereum that can meet the needs of billions of users.

Disclaimer: This content does not constitute any investment advice.