Decentralized eOracle Securing EtherFi
The Role of Decentralized eOracle in Securing Ether.Fi Stake, Managing Liquidity, Withdrawals, Rebasing and Validator Management.
Introduction
EtherFi embodies Ethereum's ethos of decentralization and trustlessness in how the 2 million+ ETH in its contracts are being secured. Central to securing this TVL is the decentralized eOracle network, which secures EtherFi's operations. These operations are built upon several critical processes: managing liquidity, facilitating user withdrawals, executing rebasing, and overseeing validator management.
Securing the Peg, and why should you care
Rebasing in liquid restaking protocols is a crucial mechanism for distributing rewards and maintaining the peg between staked ETH and the liquid token (eETH in Etherfi's case). As validators accrue staking rewards, the amount of ETH surpasses the eETH supply. To account for this, rewards are calculated over a specific period, and the eETH supply is increased to match the amount of ETH. The newly issued eETH is then distributed proportionally to stakers based on their eETH holdings.
- From a security perspective, it is crucial that the accrued rewards are calculated accurately, as this amount is distributed to all stakers. If the accrued rewards are calculated higher than the actual amount, the protocol risks becoming insolvent since eETH can be swapped for 1 ETH.
- Rebasing the token is an easy and efficient way to distribute rewards to stakers without requiring users to claim their rewards manually.
- After a rebase, the amount of eETH a staker holds increases according to an oracle of chain calculation.
- Rebasing also determines the share price of weETH, which is used across DeFi. Therefore, it is crucial that the oracle is not manipulated, as this could cause liquidations, which should not happen unless all our validators are slashed, which is very unlikely
Reducing trust assumptions - why is it crucial
EtherFi currently has 2M ETH locked in their contracts. The entire management process of this stake is affected by the daily calculation process.
Securing the rebasing process is essential for several reasons:
- Eliminating single points of failure: In a centralized setup, a single node failure could disrupt reward distribution, APR calculations, and validator management. Decentralization ensures continuity of operations.
- Preventing manipulation: Decentralization makes it significantly harder for malicious actors to manipulate the oracle and alter the share price of weETH.
- Enhancing protocol resilience: With nodes in different regions, the likelihood of system-wide downtime is greatly reduced.
EtherFi's approach to decentralized rebasing involves a hash consensus mechanism. Oracles generate report hashes, and when a quorum is reached, the admin can execute the report if it matches the consensus hash.
How the new protocol oracle works on top of eOracle
EtherFi, a protocol built on Ethereum's exacting standards, is eOracle's natural strategic partner in this ambitious endeavor. By leveraging eOracle's infrastructure, EtherFi is pushing the boundaries of liquid staking, demonstrating how minimized trust assumptions can enhance the robustness and efficiency of DeFi protocols. Here's a detailed breakdown:
Data Collection:
eOracle operators individually fetch data from multiple Ethereum sources.
- Beacon chain API for consensus layer data and on chain contracts.
- Collected data includes validator states, block/slot information, TVL, accrued rewards, withdrawal requests, and validator exit/slashing information
Computation and Report Generation:
Operators perform independent calculations and generate a rebasing report that declares the state change.
- Compute total accrued rewards based on validator performance and TVL
- Calculate current Annual Percentage Rate (APR) for EtherFi stakers
- Determine validators ready for approval or exit
- Detect slashed validators
- Analyze withdrawal requests and calculate amounts to process
- Oracle report generated, containing:
- Current consensus version
- Reference Ethereum slots and blocks for the reporting period
- Total accrued rewards
- List of validators to approve or exit
- Exited validator information and timestamps
- Slashed validator information
- Processed withdrawal amounts and request IDs
- Number of new validators to signup
Report Submission and Consensus
Operators submit their reports and corresponding hash functions to the eOracle aggregator contracts on the eOracle chain. When a quorum of matching report hashes is reached, it signifies consensus among the operators
- Operators submit report hashes to eOracle aggregator contracts
- A hash-based consensus mechanism is employed On-Chain
- Quorum achievement signifies operator agreement
- Before submission, multiple integrity checks are performed on chain, including:
- Validating that the APR is within an acceptable range
- Ensuring withdrawal amounts don't exceed safe limits
- Checking for duplicate validator entries
- Verifying minimum balances for exiting validators
Mainnet Execution
Once the report is ready and its content verified, it is executed on Etherfi contracts on the Ethereum mainnet.
- Post-consensus, the eOracle cryptographic broadcaster securely transmits data to Ethereum mainnet
- The Etherfi protocol executes the rebasing action, updating eETH supply and implementing protocol actions
Conclusion
The integration of EtherFi's with eOracle underscores EtherFi's unwavering commitment to security and trustlessness. With 2million ETH secured and a strict focus on user safety, EtherFi ensures that daily updates are executed securely.
We have a packed roadmap and some exciting developments coming up, so head to the links below to stay in the loop and contribute to our community:
