In recent years, as Ethereum transitions to a PoS (Proof of Stake) mechanism, the staking field has gradually become a hot area in the blockchain sector. Users participate in network consensus and earn rewards by staking ETH; however, the liquidity issue of traditional staking persists: the staked ETH is locked and cannot be used for other DeFi activities, resulting in a loss of capital efficiency.
To solve this problem, liquid staking protocols have emerged, such as Lido, Rocket Pool, etc., providing liquid derivatives that allow users to earn staking rewards while participating in the DeFi ecosystem. However, as competition in the field intensifies, simple liquid derivatives can no longer fully meet users' needs for decentralization, flexibility, and yield optimization, leading to the emergence of restaking protocols.
Swell Network stands out with its innovative decentralized liquid staking mechanism. As an emerging liquid staking protocol, Swell Network offers unique swETH and swNFT products that enhance user autonomy and transparency.
1. What is Swell Network?
Swell Network is a decentralized, non-custodial Ethereum liquid staking protocol dedicated to providing users with convenient staking and restaking services while ensuring the security and decentralization of the Ethereum network. Unlike traditional staking methods, Swell allows users to stake ETH without locking funds and receive liquidity tokens swETH and rswETH, further participating in other DeFi protocols to achieve higher investment returns. The platform employs innovative mechanisms, enabling users to enjoy staking rewards while also restaking on platforms like EigenLayer for additional returns, significantly enhancing capital utilization.
As the first protocol allowing users to freely choose node operators, Swell breaks the high entry barriers of the staking market, lowering technical barriers and promoting the decentralization of staking services. The platform also integrates Chainlink's Proof of Reserve (PoR) feature, supporting automated on-chain audits, providing users with high security and transparency. Swell's mission is to provide the best liquid staking and restaking experience globally, simplifying the path for users to enter the DeFi ecosystem while promoting the sustainable development of the Ethereum ecosystem, providing multiple value support for stakers, node operators, and the entire Ethereum network.
2. Operational logic of Swell Network
As an innovative decentralized, non-custodial Ethereum liquid staking protocol, Swell Network's core goal is to provide users with a flexible, transparent, and high-yield staking and restaking experience. Unlike traditional staking protocols, Swell V2 offers a rich set of features for stakers and node operators through unique mechanisms and a high degree of freedom in node operation.
Swell's operation is completely different from other Ethereum liquid staking protocols. In its final state, Swell V2 will involve:
Node operator mechanism
Swell's node operators are divided into two categories:
Whitelisted node operators (validator nodes): Join after rigorous review, requiring a 1 ETH collateral. The first batch of whitelisted nodes includes well-known operators such as InfStones, RockX, HashQuark, etc.
Independent node operators: Can join without permission but must provide a 16 ETH collateral for each validator.
Node operators can set their own commissions (0-10%), and 5% of the staking rewards will be used as a protocol fee, entering the Swell DAO treasury. In the future, independent nodes will have greater freedom to participate, further promoting the platform's decentralization.
Atomic deposits and flexible staking
Swell supports atomic deposits of a minimum of 1 ETH, allowing users to choose their node operators and stake ETH directly to the Beacon Chain.
Users will receive two types of assets after depositing:
swETH: An ERC-20 liquid staking derivative token that represents the user's staking principal.
swNFT: A unique token containing staking details, recording the node operator, validator address, and staking timestamp.
Unique features of swETH and swNFT
Function of swETH: swETH, as a non-resettable liquidity token, can be used in DeFi protocols to obtain additional yields but does not automatically accumulate staking rewards.
Function of swNFT: swNFT is a container for swETH, storing staking rewards, equity information, etc. Even if users do not hold swETH, swNFT can still continue to accumulate yields.
Staking rewards and redemption mechanism
When users want to withdraw staking rewards or principal, they need to burn swNFT to redeem ETH. After merging, it is expected that the withdrawal function will be opened within 6-12 months, with the liquidity of swETH relying mainly on secondary market trading.
Competition and transparency
Swell provides an open market competition mechanism, where node operators compete on transparency, return rates, and fees to attract more stakers. In the future, a smooth pool similar to Rocket Pool will be introduced to optimize yield distribution and MEV rewards.
Protocol security and multi-stage launch
Swell's secure launch plan is divided into five phases, currently in the first phase, with 242 ETH deposited and 8 whitelisted nodes. The progress of each phase depends on achieving the ETH threshold. The protocol uses Chainlink PoR technology for on-chain audits to ensure the platform's security and transparency.
3. Swell Network team and funding information
The core team members of Swell Network include founder Daniel Dizon, Chief Technology Officer (CTO) Aaron Alderman, Chief Product Officer (CPO) Kevin Chee, and Head of Research Abishek Kannan. Daniel Dizon is responsible for the overall strategy and direction of the project, Aaron Alderman is responsible for technical development and platform architecture, Kevin Chee is responsible for product development and user experience, while Abishek Kannan leads research and innovation work.
Currently, Swell Network is supported by investment funds such as Framework Ventures, IOSG Ventures, Apollo Capital, Maven 11 Capital, and Bixin Ventures. Additionally, individual traders have also invested in standard tasks such as Mark Cuban, David Hoffman, Loong Wang, etc.
4. Swell Network token economics
The native token of Swell Network, $SWELL, has a total supply of 10 billion tokens, designed to facilitate protocol governance, ecological development, and user incentives, with multiple uses:
Governance participation: SWELL token holders can vote on important decisions that impact the development and direction of the protocol. Swell Network and its governance token SWELL represent an exciting evolution in Ethereum staking and DeFi participation. By focusing on accessibility, liquidity, and community engagement, Swell Network not only enhances user interaction with Ethereum but also makes significant contributions to the broader adoption of blockchain technology in finance.
Restaking rewards: Users can restake their SWELL tokens to earn rSWELL tokens, which help protect Swell's layer two infrastructure while earning additional rewards.
Trading opportunities: SWELL tokens can be traded on various exchanges such as KuCoin and Bitget, allowing users to buy and sell based on market conditions.
The distribution method is as follows
Ecosystem and community: 37% (3,700,000,000 SWELL)
Team and advisors: 23.5% (2,350,000,000 SWELL)
Investors: 23.5% (2,350,000,000 SWELL)
Reserve of funds: 16% (1,600,000,000 SWELL)
5. Future value analysis of SWELL
Swell Network, as a non-custodial ETH liquid staking protocol, shows enormous market potential and development space. According to the official website data, the total amount of staked ETH in Swell Network currently reaches 281,553, with a base annual percentage rate (APR) of 2.33% for swETH, while through the SWELL incentive mechanism, the total annual yield reaches 28.85%. The total number of stakers has surpassed 128,538, reflecting the market's recognition of its innovation and high yield.
As Swell Network continues to innovate in the DeFi space, its development prospects are broad. The upcoming layer two solution aims to enhance user experience by providing faster transaction speeds and lower fees. Additionally, partnerships with leading DeFi risk management firms will improve security measures within the protocol.
