Overview
EtherFi is a decentralized liquid staking protocol on Ethereum that differentiates itself through non-custodial staking — stakers retain control of their validator keys while delegating operation to node operators. Launched in 2023, the protocol issues eETH, a rebasing liquid staking token, and weETH (wrapped eETH), a non-rebasing variant widely used in DeFi.
EtherFi's growth has been propelled by its deep integration with EigenLayer's restaking ecosystem. By default, staked ETH on EtherFi is natively restaked on EigenLayer, earning both base staking rewards and restaking yields. This made EtherFi the largest Liquid Restaking Token (LRT) provider, with eETH/weETH becoming the most widely used restaking-enabled LSTs.
As of early 2026, EtherFi holds approximately $5-6 billion in TVL, making it the second-largest Ethereum LST behind Lido. The ETHFI governance token launched in March 2024 and governs protocol parameters and treasury allocation.
Smart Contracts
Architecture
EtherFi's architecture includes a staking contract for ETH deposits, a validator management system using Distributed Validator Technology (DVT) via SSV Network and Obol, and integration contracts for EigenLayer restaking. The eETH token contract implements rebasing, while weETH provides a wrapped non-rebasing alternative. The Liquid Vault system allows users to access various yield strategies.
Code Quality
The protocol has been audited by Certik, Omniscia, and other firms. The codebase is open source. However, the rapid pace of development and feature additions (staking, restaking, Liquid Vaults, credit card product) has expanded the attack surface. The protocol is younger than Lido or Rocket Pool, with less time for battle-testing.
Upgradeability
Core contracts use upgradeable proxy patterns controlled by a protocol multisig. Governance through ETHFI token voting is being progressively implemented. The multisig retains significant power over contract upgrades and parameter changes.
Security
Validator Security
EtherFi's key innovation is non-custodial key management — stakers generate validator keys locally and encrypt them using a key management system. Operators receive encrypted keys and cannot unilaterally exit or slash validators without the staker's involvement. DVT integration (SSV, Obol) distributes validator duties across multiple operators, reducing single-point-of-failure risk.
Operational Safety
The protocol uses a multisig for emergency operations and parameter updates. Oracle systems report validator performance. The integration with EigenLayer introduces additional operational complexity — restaked ETH faces both base Ethereum slashing conditions and AVS slashing conditions via EigenLayer. This layered risk is the primary security consideration.
Track Record
EtherFi has operated since 2023 without a critical exploit. The protocol successfully managed the EigenLayer points campaign and ETHFI token launch without technical incidents. However, its relatively short track record and rapid growth mean it has less battle-testing than more established protocols.
Decentralization
Validator Set
EtherFi operates with a growing set of node operators, including both professional operators and a solo staker program called Operation Solo Staker. The DVT integration enables distributed validation, reducing reliance on single operators. The non-custodial key design means operators have limited unilateral power over staked funds.
Market Share Risk
EtherFi has grown to approximately 4-5% of staked ETH, a meaningful but not yet systemic share. Its rapid growth trajectory warrants monitoring. As the largest LRT provider, EtherFi's concentration in the EigenLayer ecosystem creates interdependency risk.
Governance
ETHFI token holders govern the protocol through snapshot and on-chain voting. The protocol is transitioning toward greater decentralization, but significant operational control remains with the core team. Token distribution includes allocations to investors (Bullish Capital, CoinFund, North Island Ventures), team, and community.
Adoption
TVL & Growth
EtherFi has grown to approximately $5-6 billion in TVL, making it the fastest-growing Ethereum LST and the largest restaking-enabled LST. Growth was driven by EigenLayer points accumulation, the ETHFI airdrop, and genuine demand for restaking exposure. Post-airdrop retention has been strong.
DeFi Integrations
weETH is widely integrated across DeFi — accepted as collateral on Aave V3, Morpho, Pendle, and numerous other protocols. It is one of the most traded LSTs/LRTs on DEXs. EtherFi has also launched a Visa credit card backed by staked ETH positions, expanding beyond pure DeFi.
Market Position
EtherFi is the second-largest Ethereum LST and the largest LRT provider. It has positioned itself as the primary on-ramp for retail users seeking restaking exposure, with a more user-friendly interface than direct EigenLayer interaction.
Tokenomics
Token Overview
ETHFI has a total supply of 1 billion tokens. The initial airdrop (Season 1, March 2024) distributed 6% to early stakers and points earners. Additional seasons followed. Allocations include team and advisors (23.26%), investors (32.5%), DAO treasury (27.24%), and protocol guild (1%).
Fee Structure
EtherFi charges a protocol fee on staking and restaking rewards, typically in the range of 5-10% depending on the product. Revenue is distributed between node operators, the protocol treasury, and development funding. The protocol has also introduced revenue from its credit card and cash management products.
Yield Sustainability
eETH yield combines base ETH staking rewards (~3-3.5%) with EigenLayer restaking rewards (variable, based on AVS payments). During the points era, effective yields were boosted by airdrop expectations. Post-airdrop, actual restaking yield from AVS payments is still maturing. Long-term yield sustainability depends on the EigenLayer AVS ecosystem growth.
Risk Factors
- Restaking Risk Layering: eETH is exposed to both Ethereum base slashing and EigenLayer AVS slashing conditions, creating compounded risk.
- Rapid Growth Risk: Fast TVL growth and feature expansion increase the chance of undiscovered bugs or operational errors.
- EigenLayer Dependency: EtherFi's value proposition is tightly coupled to EigenLayer's success. EigenLayer issues directly impact eETH.
- Young Protocol: Less than 3 years of operation provides limited track record for a protocol managing billions in assets.
- Governance Centralization: Significant control remains with the core team and multisig rather than ETHFI token governance.
Conclusion
EtherFi has executed impressively, growing from zero to the second-largest Ethereum LST in under two years. Its non-custodial key management, DVT integration, and native restaking exposure offer a differentiated product. The protocol has expanded ambitiously into adjacent products like credit cards and cash management.
The primary risk factors center on the protocol's youth and its deep coupling with EigenLayer. Restaking adds a layer of smart contract and slashing risk on top of base liquid staking. EtherFi's rapid growth means its systems haven't been stress-tested across market cycles. Governance is still centralizing.
For users seeking restaking exposure with the most liquid and integrated LRT, eETH/weETH is the market leader. Conservative users may prefer the longer track records of Lido or Rocket Pool for base liquid staking without restaking complexity.