Giving back control to ETH stakers - Mike Silagadze, ether.fi

As a launch partner to ether.fi via Finoa Consensus Services and ahead of their highly-anticipated mainnet launch, we sat down with Mike Silagadze, Co-Founder and CEO of ether.fi to discuss their liquid staking protocol that allows ETH stakers to retain control of their keys while delegating validator operations, thus enabling trustless node operation.

In this interview, we discussed Mike’s background and how the idea of ether.fi was born from a problem they were facing running their hedge fund, how their protocol got so much traction, and lastly, what is in store for ether.fi. 

Tell us about your background and how you got into crypto.

My name is Mike and I am one of the co-founders and CEO of ether.fi. I’m an entrepreneur at heart and founded my first company, Top Hat, in 2009 right in the middle of the Great Financial Crisis. I was the Founder/CEO for 12 years before I sold it in 2021 to get into crypto full-time. DeFi was the driving force for my career change. I am a strong believer that what is going on with DeFi will have more impact than any other industry in my lifetime.

I first got into crypto back in 2011 when I bought my first Bitcoin on a shady website that I paid for via Paypal. I, unfortunately, sold it within a few months but continued to participate in the industry.

How did you and ether.fi’s other co-founder meet?

Rok and I worked together at Top Hat. He came on when we raised our Series A and were at $1m in ARR. He grew our sales team for 5+ years to over $30m in ARR. We reunited in 2022 when he joined me at the hedge fund I had started. 

What prompted you to start ether.fi and what problems are you solving?

ether.fi was founded to solve one of our own problems. We were running a hedge fund and one of the strategies was an Ethereum staking strategy. After the FTX debacle, we looked into our counterparty risks and realized there was a market for a non-custodial, decentralized staking option. That’s why we started ether.fi. We still have the hedge fund that we use as an entry point for institutional investors into ether.fi. 

Why are institutional investors weary of liquid staking? What developments are making the space safer for them?

Shapella was a huge milestone for institutional investors as it de-risked their ETH staking investments and allows them to withdraw their funds. The general lack of audits, reporting, etc. makes it tricky for institutional investors to use a liquid staking protocol. On paper liquid staking makes sense in the institutional investors' wheelhouse (who doesn’t love leverage :)) so I expect that going forward many institutional investors will get into the liquid staking space. 

You’ve grown to more than $40M TVL ahead of mainnet launch, what has been attributable to that success?

If we include our hedge fund, we actually have $60m+ TVL. If I am being honest, the biggest thing that this early success can be attributed to is our great partners, investors, and the Ethereum community. People we talk to have been very supportive and have confirmed that we are solving an issue that they have been experiencing in the market. The mantra, not your keys, not your crypto has never rang more true post-FTX. We are capturing that narrative. 

What’s next for ether.fi? Can you give us a glimpse into the next 12 months?

We have a pretty clear roadmap for the next 12 months. We just launched Phase 1 on Mainnet today, May 2. Phase 2 and Phase 3 are detailed below. 

Phase 2: Pool Fiesta

Timeline: Q2 — Q3 2023

The liquid staking pool will go live and users can stake their ETH at any increment, and mint our liquid staking derivative token (eETH) in return. eETH will rebase in tandem with the amount of staking rewards. The liquidity pool will enable the trading of ETH, eETH, and T-NFTs. This will be the simplest way for users to earn ETH staking rewards at an incremental level. A permissionless Oracle employing the beacon state root will also be introduced to power the ether.fi ecosystem including the liquidity pool. Lastly, ether.fi will launch its protocol treasury management contract.

Phase 3: Boost

ether.fi will launch its node operator auction protocol and its services marketplace using ether.fi’s decentralized and distributed networks, creating additional revenue for the protocol, stakers, and node operators. We will release the ether.fi node to clients and also integrate distributed validator technology. At this stage, the protocol will achieve network effects through by aligning goals between stakers, node operators, and the protocol. This will be a speculative phase for the protocol, and many of the technical decisions will still have to be made. The integration with the distributed key generation and distributed validator technics will also follow.