Swell is a non-custodial staking protocol with a mission to deliver the world’s best liquid staking and restaking experience and simplify access to DeFi while securing the future of Ethereum and restaking services.
With Swell, users can earn passive income by staking or restaking ETH to earn both blockchain rewards and restaked AVS rewards and in return be provided with a yield-bearing liquid token (LST or LRT) to hold or participate in the wider DeFi ecosystem to earn additional yield.
Swell Labs was formed to build a liquid staking protocol to provide the holders of Ethereum (ETH) the means to earn yield through staking without the constraint of locking up capital.
Swell’s mission is to create a more secure, decentralized and transparent financial future for the world that does not discriminate or censor economic freedom.
The beginning of that journey for Swell starts with continuing to advance liquid staking as one of the fundamental building blocks of modern-day decentralized finance (DeFi) that is composable and fully integrated with the Ethereum ecosystem.
Swell Network was formed because they wanted to solve the problem of illiquid staking on Ethereum, which cannot be used for DeFi (Decentralized Finance) purposes when users stake on the Ethereum protocol. If users stake on Swell Network, they will receive liquid tokens from Ethereum that they have staked on Swell Network and can immediately use them for DeFi purposes.
In September 2022, after years of research and development, Ethereum transitioned to the long awaited proof-of-stake consensus algorithm by performing a hard fork known as “The Merge”. This upgrade significantly lowered the energy consumption of securing the network via the economic participation of users validating the blockchain.
This participation comes in the form of staking whereby users lock up a discrete amount of Ethereum (32 ETH) in order to participate in validating transactions and producing blocks. In return that user receives block rewards for participating in consensus, priority fees and maximum extractible value (MEV).
swETH Liquid Staking
Liquid staking solves the problem by separating and delegating the responsibilities of ‘staking’ to users who are willing to economically participate (stakers) and to users willing to technically participate (node operators). Stakers deposit ETH to validators run by node operators who in return manage them with the engineering precision required to scale and maximize returns for both parties.
Stakers are now able to stake any nominal amount under 32 ETH and in return for capital get a liquid transferrable token that represents their staked ETH and accrued staking rewards. This token can be used with the same utility as ETH in DeFi to be transferred, held as collateral to borrow and to provide liquidity while earning staking rewards.
The reduction in the 32 ETH requirement dramatically increases the number and distribution of users who are able to participate in securing the Ethereum blockchain.
rswETH Liquid Restaking?
The concept of “Restaking” refers to the practice of reinvesting or redeploying staked assets or tokens into the same or different staking protocols to earn additional rewards or benefits. Instead of withdrawing the staked assets, users choose to restake them, thereby compounding their returns over time.
EigenLayer envisions being a marketplace of essential services (AVSs) that serve decentralised applications. The protocol allows the modularisation and delegation of the same consensus security that secures Ethereum to AVSs to enable the decentralised trust to exist between an AVS and a decentralised application.
However, currently, native restaking is only available for users with 32 ETH and infrastructure expertise to run validators. Furthermore, restaked ETH is locked in EigenLayer and that capital remains illiquid for the user.
Swell Network aims to address the issue of illiquid staking on Ethereum, where assets staked on the Ethereum protocol cannot be easily accessed or utilized for decentralized finance (DeFi) purposes. By providing a solution to this problem, Swell Network seeks to enable users to stake their Ethereum assets and receive liquid tokens in return.
These liquid tokens can then be immediately utilized within the DeFi ecosystem, allowing users to participate in various DeFi protocols, such as lending, borrowing, trading, and yield farming, while still earning staking rewards. Overall, Swell Network aims to enhance the liquidity and utility of staked assets, providing users with greater flexibility and accessibility in managing their crypto investments.
rswETH is an ERC-20 Liquid Restaking Token that provides liquidity for users who want to “restake” their ETH into restaking protocols such as EigenLayer without requiring a 32 ETH minimum, operating a node or having their restaked ETH locked.
Users who restake, pool their ETH into a restaking pool that is then designated to a set of professional node operators who run validators on their behalf for Beacon Chain rewards and in future, rewards for validating services of AVSs. With the Liquid Restaking system on Swell Network, users will find it easier to navigate the limitless world of decentralization freely
Conclusion
Overall, Swell is a new DeFi protocol that makes it easy to stake and restake tokens in the Ethereum Ecosystem. It will become a part of the liquid staking ecosystem which is one of the most significant ecosystems on Ethereum.
It will be interesting to see the growth of this platform, especially heading into the predicted bull market of 2025, where it might potential receive an influx of total value locked.
