How to Invest in Ether.fi on Notum

Every year the cryptocurrency market grows and develops, offering users new opportunities to earn income from their assets. Already existing types of investments are evolving to bring liquidity providers even more profit. One of them is liquid restaking, which works as staking with improved characteristics and additional rewards.

Traditional staking involves the process of locking user's assets to support various DeFi projects and receive rewards. However, during the lock-up period, they cannot use, transfer or withdraw their crypto until the end of the period. Liquid staking, in turn, solved this problem, as liquidity providers receive additional tokens that can be used in DeFi projects even though the main assets are blocked. Thus, investors can receive double income.

By restaking their assets after the initial staking, users not only receive additional rewards, but also contribute to the network’s security and DeFi world in general. Today with Notum we will discuss Ether.fi, a platform that offers various staking and liquid restaking options, look at its distinctive features, risks and investment strategies that are worth paying attention to.

Ether.fi: the Essentials

• TVL: $3,11b
• Risk Level: Medium
• Blockchains: Ethereum
• Foundation Date: 2023 

Ether.fi is a decentralized, non-custodial delegated staking protocol for ETH staking. At the moment, the platform offers not only staking, but also liquid restaking options for Ethereum owners who want to maximize their rewards.

Interesting fact! EtherFi is the most popular liquid restaking protocol in the entire crypto market with a total value locked of over $3.11 billion, while its closest rival Renzo has a TVL of $1.675 billion.

The main distinguishing features of Ether.fi are the ability for stakers to control their keys and create a node services marketplace. This way, both stakers and node operators get the opportunity to enroll nodes to provide services, while the generated rewards are divided between them.

Restaking on Ether.fi

The benefit of the platform is that by using Ether.fi, users can stake and then restake their ETH for better rewards. Moreover, liquidity providers can stake any amount of ETH they want.

By investing in Ether.fi and staking their ETH assets, users receive an eETH liquid staking token, which can also be used in the DeFi space. This token earns users staking rewards.

In addition, Ether.fi offers the option of native restaking eETH, which can also be used in the DeFi space to receive maximum rewards.

Ether.fi: Introducing Liquid

Ether.fi also offers users an innovative feature called Liquid, or new automated DeFi strategy vault, allowing investors to use their eETH in decentralized finance. Thus, liquidity providers can invest their eETH, weETH, or WETH, after which this liquid vault moves them to various DeFi projects and protocols for profit.

The main advantages of using liquid vault with Ether.fi are:

• Opportunity to use eETH, weETH, or wETH tokens;
• Easy diversification regarding to the integration of Ether.fi with other DeFi protocols, giving access to everything in one place;
• Earning ETHFI Rewards;
• Reduced gas fees thanks to transaction consolidations.

«Liquid will launch with Pendle, Aave, Morpho, Balancer, Aura, Uniswap V3, and Convex and will add additional integrated protocols that the vault can allocate to over time» - EtherFi Gitbook.

Ether.fi: Loyalty Points

Ether.fi users who hold eETH/weETH will earn EigenLayer points in addition to the platform's already existing Loyalty Points. Thus, ether.fi will transfer absolutely all the points and their benefits to users without withholding any amount of them.

«The protocol only grants points based on your eETH/weETH balance, in your wallet or in an LP/vault, and the amount of eETH you have can fluctuate if you're in an LP» - EtherFi Gitbook.

Loyalty Points will be shown on the ether.fi Dapp after connecting the wallet in real time. To earn points, users will only need to stake ETH on ether.fi. However, if you stop holding eETH and weETH, points will stop accumulating, but existing points will not disappear from your account. Loyalty points cannot be transferred to other users and investors.

If you want more information about loyalty points, you can get it here.

Why Invest in Liquid Restaking with Ether.fi?

Ether.fi is an innovative platform that invites users to maximize their staking and restaking rewards and contribute to the development of DeFi and ETH security. It is a good option for providing liquidity for the following reasons:

Pros

Native restaking

EtherFi gives users greater freedom and additional yield since their ETH assets already earn staking and restaking rewards through EigenLayer.

Loyalty points

The protocol allows investors to earn points for staking ETH on the platform, which appear on the ether.fi Dapp in real time.

Decentralization

The protocol is decentralized, which guarantees users the safety and security of their assets. In addition, ether.fi runs Operation Solo Staker, which additionally decentralizes Ethereum.

Liquid Vault

With this automated DeFi strategy vault, users can invest their eETH, weETH and wETH tokens and receive maximum profits due to the protocol's automatic asset rebalancing.

Control over keys

At the moment, ether.fi is the only protocol that allows stakers to independently control the keys, which significantly reduces the counterparty risk.

Integrated ecosystem

Ether.fi partners with a large number of DeFi protocols such as Balancer and Pendle, as well as collaborates with EigenLayer, which increases the utility of eETH.

In addition, Ether.fi shows a fairly good level of security. The protocol uses its own contracts and has passed several major audits (such as Certik Audit and Zellic) to protect user’s funds. In addition, Ether.fi plans to launch a bug bounties program to identify errors and vulnerabilities on the platform.

Ether.fi: Investment Strategies

As already mentioned, Ether.fi offers users staking and liquid restaking options on the platform. Let's look at what features the protocol offers.

1. With the staking tab, users can stake their ETH tokens and receive eETH tokens in return with the exchange rate 1ETH = 1eETH. The APR for staking ETH on the platform is 3.30%. In the same tab, users can wrap their eETH and get weETH with the exchange rate 1eETH = 0.97weETH.
2. The Liquid tab offers users the best yields on their ether.fi assets. Investors can deposit their wETH, eETH or weETH into Liquid, after which the protocol will automatically rebalance them into various DeFi projects to optimize profitability. After this, users receive auto-compounded yields and additional ETHFI rewards.Besides, liquidity providers are rewarded with ether.fi loyalty points and EigenLayer points.

Thus, liquid restaking with ether.fi is a good opportunity to maximize profits from ETH assets and receive double loyalty points for providing liquidity. More detailed information can be obtained here.

Source: Ether.fi 

Ether.fi: Risks and Disadvantages

Despite the popularity and demand for Ether.fi, the protocol is still subject to some risks that you should pay attention to before investing your assets:

Cons

Smart Contract Risks

Ether.fi carefully develops and tests its smart contracts and has passed several audits to make sure it’s safe to use. However, the platform still cannot guarantee complete security of smart contract interactions on Ethereum.

Regulatory risks

Despite the active crypto development and Ethereum in particular, there is always a risk of government control. Thus, government actions can partially or completely derail the protocol.

Market volatility

The cryptocurrency market is known for its rapid volatility and price fluctuations, which means the price of ETH and the rewards received as a result of staking and restaking may also change.

Management Risks

Ether.fi strives to use the latest and most secure encryption and key protection methods. However, the protocol still cannot provide a 100% security guarantee. Moreover, stakers independently control the keys, which means they must also take care of their security.

Notum’s Verdict

Ether.fi is a popular platform with a good reputation and medium level of risk, which is the undoubted market leader in liquid restaking in germs of a total value locked (more than $3 billion). The platform offers convenient staking and restaking options on Ethereum, allowing users to receive fairly large rewards for providing liquidity.

The protocol also provides users with the Liquid, or automated DeFi strategy vault feature, allowing investors to deposit their eETH, weETH, or WETH assets. The vault automatically relocates them to where they can bring the maximum profit to the user. Moreover, users will also receive loyalty points for providing liquidity on the platform.

Despite the proper level of security and passed audits, Ether.fi still faces some problems such as the risks of smart contracts, regulatory uncertainties and market volatility, which are important to pay attention to before depositing assets. However, if you are looking for a liquid restaking platform that has a user friendly interface and allows you to maximize your income - Ether.fi is a great option in 2024.

Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.