Puffer Finance, a liquid staking derivatives (LSD) project leveraging Ethereum’s Eigenlayer protocol, is partnering with the Ethereum Foundation to develop based rollups.
This collaboration follows Puffer Finance’s successful $18 million Series A funding round aimed at launching its mainnet.
Rollups, a key scaling solution, process transactions off-chain and bundle them into a single transaction on the base layer, alleviating the load on layer-1 blockchains.
Amir Fourouzani, co-founder of Puffer Finance, explained the current market challenges to Cointelegraph:
“Currently, there’s a challenge in the Ethereum ecosystem known as liquidity fragmentation.
“This issue arises from the fact that current L2 projects are each creating their own ‘super chains,’ leading to isolated pools of liquidity.”
To address this fragmentation, Fourouzani emphasized the need for based-sequencing and based rollups to ensure interoperability between chains.
Puffer Finance has developed a method for organizing pre-confirmations on Ethereum layers while maintaining decentralized validators, bypassing the need for a comprehensive Ethereum Improvement Proposal.
“It took us years to architect and come up with this, but now we have it,” Fourouzani stated. “This is the current central area of research for the Ethereum Foundation.
“The thought leaders over there are trying to push this forward with leaders such as Justin Drake and others.”
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Fourouzani highlighted the potential of based rollups in decentralized finance:
“In the future, every company is going to have its host AppChain.
“Let’s say Aave has its own AppChain, and liquidation is going to hit Aave; well, it’s going to be represented on Uniswap immediately on Uniswap’s AppChain.
“This is the ultimate dream. Uniswap and Aave don’t have to go through any governance token, nor do they have to rely on any governance process.
“So, we are also getting to a credible neutral layer of rollups.”
He also noted the appeal of native yields in an interoperable app chain ecosystem.
“A lot of users would rather have their tokens generating yield with no effort in their wallets rather than just keeping it on the based chain,” he added.
According to DefiLlama, Puffer Finance surpassed a total value locked (TVL) of $1.7 billion shortly after its early test phase in February.
The protocol has raised a total of $23.5 million in venture capital funding.
Puffer Finance’s LSD technology enables Ethereum validators to reduce their capital requirement to just 1 Ether, compared to the traditional 32 ETH needed for individual stakers.
Additionally, users staking Ether through Puffer receive Puffer liquid restaking tokens (nLRTs), which can be used to farm yields in other decentralized finance protocols while earning Ethereum staking rewards.
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