Ethereum LSD solution Puffer Finance moves to base rollups after raising $18M

Puffer Finance, a liquid staking derivatives (LSD) project built on Ethereum restaking protocol Eigenlayer, will partner with the Ethereum Foundation to jointly develop base rollups after previously securing an $18 million Series A funding round to launch its mainnet .

Rollups are scaling solutions that reduce the burden of layer-one blockchains by processing transactions off-chain and then bundling one finalized transaction to the base layer. In an interview with Cointelegraph, Amir Fourouzani, co-founder of Puffer Finance, discussed the ongoing market demand:

"Currently, There's a challenge in the Ethereum ecosystem known as liquidity fragmentation. This issue arises from the fact that projects like Optimism, Arbitrum, and ZKSync are each creating their own 'super chains', leading to isolated pools of liquidity."

"To address this, the industry needs solutions like base-sequencing and base rollups to ensure interoperability and communication between these chains," said Fourouzani, who claims that Puffer Finance had found a way to organize pre-confirmations on Ethereum layers while keeping validators decentralized and in the absence of a need for an overall Ethereum Improvement Proposal (EIP).

"It took us years to architect and come up with this, but now we have it," he said. "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.

The blockchain executive illustrated the power of base rollups in the realm of DeFi:

"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."

To Fourouzani, another positive benefit of an interoperable base app chain ecosystem is that of native yields. "A lot of users would rather have their tokens generating yield with no effort in their wallets rather than just keeping it on the base chain," he commented.

According to data from DefiLlama, shortly after its early test phase in February, Puffer Finance surpassed a total value locked (TVL) of $1.7 billion. To date, the protocol has raised a total of $23.5 million in venture capital funding.

Puffer Finance’s current LSD technology allows Ethereum validators to reduce their capital to just 1 Ether, down from the 32 ETH required for individual stakers. In addition, users who stake Ether via Puffer receive Puffer liquid restaking tokens (nLRTs), which can then be used to farm yields in other decentralized finance protocols simultaneously with their Ethereum staking rewards.

Related: EigenLayer enhances EigenDA security to combat Sybil attacks