Liquid Staking is the current trend in the crypto space as it gives investors an opportunity to double down on their staking to earn more rewards than regular staking.
The introduction of Liquid Staking Derivatives or LSDs has attracted many investors in the crypto space to get into DeFi, essentially increasing the Total Value Locked or TVL of the whole DeFi ecosystem.
One of the project that is supporting this movement towards a more decentralized financial ecosystem is EtherFi, a new Liquid Staking Protocol on the Ethereum Ecosystem.
What is EtherFi?
EtherFi is a liquid staking protocol in the Ethereum Ecosystem that supports the liquid staking of the ETH itself.
Also read: Looking into Liquid Staking Derivatives Platforms: Rocket Pool, Lido DAO, and StaFi
The liquid staking is done by implementing a Liquid Staking Derivative Token called eETH. eETH is created by the EtherFi team as an LSD Token so that investors who staked ETH on their platform can get a temporirary ETH replacement so that it does not feel like their ETH is being locked.
EtherFi was created with the support of EigenLayer a leading liquid staking infrastructure provider on the Ethereum Ecosystem and the overall EVM or Ethereum Virtaul Machine space.
Most EVM Blockchains have plans on adopting EigenLayer to provide liquid staking to its users which is why the liquidity part of the infrastructure itself is quite safe for now.
EtherFi utilizes EigenLayer to support the liquid staking of users ETH and the restaking of eETH on their platform.
Currently there are around $3 Billion locked in the EtherFi platform as the first batch of staking which amount ot a total of 754,000 ETH.
The current APR or return per year for staking ETH on the platform is around 3.86%, which is arguably fair for ETH staking.
Not only can user stake ETH on EtherFi, but they can also stake other LSDs including the amous stETH from Lido DAO.
How to Maximize Profit with EtherFi
The interest towards EtherFi is currently big as the staking mechanism implements a batching period where the vault is open in batches.
Currently EtherFi is on their first batch which ends today, so if you want to participate, head over to the EtherFi website.
People are interested in EtherFi because the profit of staked ETH is maximized through providing a restaking platform for eETH staking.
To maximize returns on EtherFi, the first thing you need to do is to stake ETH on EtherFi, where you will immediately receive eETH in the same amount.
Currently the exchange rate of ETH to eETH is 1 to 1 which means if you stake 1 ETH you will receive 1eETH.
After staking, the eETH that you receive will automatically be staked natively on the EtherFi platform so you earn more rewards.
But it is not clear yet what the returns are and how they are planning to do this as the eETH itself will act as an LSD that can be used in other protocols as if it is not locked in anything.
They could implement a liquid staking mechanism where the eETH itself is actually a restaked LSD, but to be sure, we just have to wait for the staking to happen, which is today, March 14th, 2024.
Conclusion
Overall, the platform will yield multiple returns for investors staking their ETH on the EtherFi platform.
They will not only get a return of 3.86% per year, but there will be additional return depending on how the native return of staked eETH will be and how the holders of eETH utilizes it on other platforms.
But note that if you are participating in the staking process, in order to unlock your ETH later, you need to have eETH in the same amount as the initial locked ETH as that is the mechanism of liquid staking and restaking.
This is a great way to introduce yourself to liquid staking before getting into more riskier platforms considering ETH is relatively stable compared to other coins.
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