Ethereum staking inflows spiked during November 2024 as network users put their Ether assets to work earning passive gains. With Ethereum staking rewards a big draw for crypto users, any developments that make the process simpler will likely be welcomed. Swell is one project aiming to achieve just that. The technology addresses Ethereum staking challenges such as the 32 ETH minimum and the complexity of running a node.
With Swell, you can stake, restake, and even use your Bitcoin for decentralized finance (DeFi). Whether it’s through liquid staking, restaking, or using Bitcoin staking, Swell provides crypto users with new opportunities for their assets.Let's take a closer look. In this article, we'll explore what Swell is, how Swell's liquid staking function works, spotlight the tokenomics of the SWELL asset, and look into Swell's L2 solution.
TL;DR
Swell is designed to strengthen Ethereum’s security and decentralization by lowering barriers to staking.
Anyone can stake Ether tokens with Swell, without the usual 32 ETH minimum.
Users can stake ETH and receive swETH, a liquid token that grows with rewards and can be used for various DeFi applications.
Users can restake their ETH with rswETH to earn extra rewards through protocols like EigenLayer. No technical setup is needed to do so.
With swBTC, a liquid token for WBTC, Bitcoin holders can also participate in DeFi and staking.
SWELL is the native token of the Swell project.
What is Swell?
Swell is a non-custodial staking protocol designed to make Ethereum staking more accessible and flexible. Staking Ethereum usually requires at least 32 Ether, alongside the necessary technical knowledge to run a validator node. Many believe these technical requirements can create a barrier to those who want to stake their ETH.Swell addresses these challenges by offering liquid staking solutions that allow users to stake any amount of ETH without the need to manage complex infrastructure.
Key features of Swell
Liquid staking: You can stake ETH and receive swETH, a liquid staking token that represents your staked ETH plus accrued rewards. This approach maintains liquidity, allowing you to participate in DeFi activities while earning staking rewards.
Non-custodial protocol: Swell gives you control over your assets, reducing risks associated with centralized custodians.
Decentralization: By lowering barriers to staking, Swell promotes a more decentralized Ethereum network, improving its security and resilience.
Swell’s approach democratizes access to Ethereum staking, allowing a broader range of participants to contribute to the network’s security and earn rewards. This is helpful for those who may not have the resources or technical expertise to run their validator nodes.
How does Swell’s liquid staking work?
Swell aims to make liquid staking easy and accessible, allowing users to stake their ETH without getting too technical. You can stake any amount of ETH and receive swETH, a token that represents your staked ETH and the rewards it accrues over time. This token proves ownership of staked assets and remains useful in DeFi.How does Swell’s liquid staking work?
Stake your ETH
You deposit ETH into Swell’s staking protocol. This ETH is then pooled and delegated to professional node operators who run validators on the Ethereum network.
Receive swETH
In return, users get swETH, a liquid token that represents their staked ETH and rewards. swETH’s value increases over time as staking rewards are earned, eliminating the need to claim rewards manually.
Use swETH in DeFi
Since swETH is a liquid asset, it can be used across DeFi platforms for other opportunities, such as lending, borrowing, or providing liquidity.Swell goes a step further with restaking. Through rswETH, a liquid restaking token, users can restake their ETH into protocols like EigenLayer without needing to meet the 32 ETH requirement.
For Bitcoin holders, Swell offers swBTC, a liquid staking token for WBTC. This token allows Bitcoin holders to participate in DeFi opportunities like lending and restaking while earning native yield, providing similar benefits to ETH staking.
How does Swell Earn work?
Swell’s Earn vaults offer a way to gain rewards on your digital assets through automated, risk-adjusted strategies.
Here’s how it works.
Deposit your assets
You can deposit various assets into Swell’s Earn vaults, including swETH, rswETH, and swBTC. These tokens represent staked Ether and Bitcoin, and are a part of Swell’s liquid staking platform.
Automated yield optimization
Once deposited, your assets are deployed across multiple DeFi protocols. Swell’s system automatically allocates funds to strategies that aim to improve returns while managing risk.
Earning risk-adjusted returns
The Earn vaults are designed to provide risk-adjusted returns by diversifying how funds are used and employing strategies that balance potential gains with associated risks. This means your assets are working to generate gains in a way that considers market volatility and other factors.
ERC-4626 tokens: earnETH and earnBTC
When you deposit assets into the Earn vaults, you receive ERC-4626 tokens like earnETH or earnBTC. These tokens represent your share of the vault and accrue value as the underlying assets make gains. This standardization simplifies the process of tracking and redeeming your rewards.
Key benefits of Swell Earn
Automated management: Swell handles the complexities of DeFi investments, allowing you to make gains without active management.
Risk mitigation: By diversifying across multiple strategies, vaults aim to balance potential returns with associated risks.
Liquidity: The ERC-4626 tokens you receive can be redeemed, providing flexibility and access to your funds when needed.
What are SWELL tokenomics?
The SWELL token is a governance token for Swell's decentralized autonomous organization (DAO). The token supports decentralized governance and allows users to have a say in the protocol’s direction. SWELL can be used to vote on proposed changes, manage protocol improvements, or influence the choice of node operators.
Decentralized governance
SWELL token holders can participate in key decision-making processes, from modifying incentive structures to deciding on treasury allocations. This democratic model aligns the protocol’s direction with the community’s collective vision.
Voting power
Each SWELL token represents a voting influence on the ecosystem's Snapshot platform. Holders can vote on proposals that impact areas such as staking fees, reward structures, and ecosystem partnerships.
Restaking for security
Beyond governance, SWELL can be restaked on platforms like EigenLayer, enhancing the security of Swell’s infrastructure while earning additional rewards.
Token distribution breakdown
The SWELL token has a maximum supply of 10 billion and is allocated as follows:
Community (35%): Supports decentralization through airdrops like the Voyage (8.5%) and Wavedrop campaigns.
Team (25%): Reserved for contributors and advisors, with a 36-month vesting schedule.
Fundraising (25%): Allocated to private investors, subject to a 30-month vesting period.
Foundation (15%): Funds strategic initiatives, such as product development, Layer 2 expansion, and ecosystem growth.
What is Swell L2?
Swell L2 is a restaked rollup built on Ethereum that's designed to use the Proof of Restake (PoR) mechanism. Swell L2 reuses staked assets to secure more infrastructure and services. This allows you to earn rewards while improving Ethereum’s scalability and security.
How does Swell L2 work?
Swell L2 improves capital efficiency by allowing staked assets like swETH, rswETH, and swBTC to be restaked for additional uses. This is achieved through PoR, which supports multiple decentralized applications and services without compromising the security of the underlying Ethereum network.
Proof of Restake (PoR)
PoR enables staked assets to serve dual purposes: securing Ethereum and validating additional decentralized services. It enhances reward potential and maximizes the utility of staked assets.
Actively Validated Services (AVSs)
Swell L2 serves as an incubator for AVSs, which include decentralized services like oracles and bridges. By supporting AVSs, Swell L2 fosters innovation while ensuring secure and reliable services for the DeFi space.
Enhanced rewards and liquidity
Through PoR and AVS, you can restake your assets to earn additional rewards without sacrificing liquidity. This creates a dynamic system where staked assets remain productive and accessible.
Recent developments to Swell L2
Devnet launch: The Swell L2 Devnet provides a secure testing environment for developers to experiment with restaking agreements and AVSs.
Platform growth: Multiple projects are already building on Swell L2, with early depositors eligible for airdrops from Swell and their protocol partners. This incentive program aims to attract active participation and grow the community
How does this benefit you?
Higher rewards: Restaking assets through Swell L2 allows users to access additional gains from AVSs.
Scalability and security: By offloading some activities to L2, Swell improves Ethereum’s scalability without compromising security.
Active participation in DeFi projects: You contribute to the growth of decentralized protocols by supporting AVSs.
The final word
Swell is an example of what staking and DeFi can achieve together. From enabling Ethereum and Bitcoin staking without the usual roadblocks to tools like Swell L2, the project is designed to simplify staking on Ethereum and guide more users to interact with DeFi protocols.
Interested in learning more about your staking opportunities with Ethereum? If so, our guide to EtherFi may be of interest. You can also learn more about Lido, a liquid staking solution for Ethereum.
FAQs
Swell is a non-custodial staking protocol. Anyone can stake any amount of Ethereum without needing to meet the 32 ETH limit. Swell also helps participants to stake their Ether without requiring deep technical expertise.
You can Stake ETH to gain swETH, a token that represents your staked ETH and rewards. The swETH token can then be used in various ways across DeFi while it earns you gains through staking.
With rswETH, you can restake ETH into protocols like EigenLayer for extra rewards.
Yes. With swBTC, Bitcoin holders can stake WBTC and participate in DeFi to earn rewards.
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