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Swell Network is an ETH liquidity staking protocol built for stakers, node operators, and the Ethereum ecosystem. Users can stake ETH and receive swETH and earn DeFi returns. The project was founded in 2011 and completed $3.75 million in financing in March 2022. DefilLama shows that its current TVL is $1.42 billion.
As a restaking yield layer, Swell L2 achieves scalability and decentralization by ensuring the security of its infrastructure through restake.
This mechanism enables the network to overcome key challenges facing existing L2s, including scarce liquidity, centralization, and lack of native returns, thereby driving value creation to new heights.
At the core of the network architecture is a groundbreaking mechanism: Proof of Restake (PoR).
Users can get early access by depositing into the new earnETH vault, in the process earning both DeFi earnings and Swell L2 rewards.
Introducing Proof of Reserve (PoR)
Swell's Proof of Restake is designed to maximize the utility of staked assets within and outside the Swell L2 ecosystem. The mechanism uses liquid restake assets to secure the infrastructure that provides critical services for rollups, thereby ensuring the security of the chain.
This mechanism maximizes the utility and capital efficiency gains of staked assets, makes the user community a direct beneficiary of on-chain value creation, and initiates a flywheel effect that drives network growth, enhances security, and expands liquidity across the ecosystem.
Proof of Restake in action
Swell L2 integrates PoR to create a vertically integrated and secure ecosystem where staked assets can be efficiently reused across multiple layers and chains, and the incentives of all network participants (including validators, node operators, developers, and users) are aligned.
The Flywheel Effect of Proof of Restake
Swell L2 Growth Strengthens Security, Deepens Liquidity, and Rewards Participants
1. Pledgers deposit assets
Assets staked in Swell are tokenized into liquid restake tokens (LRTs). These tokens can be used for infrastructure services, DeFi applications, and cross-chain protocol deployment while accumulating staking rewards. Therefore, stakers can ensure the security of Swell infrastructure while still participating in the ecosystem.
2. On-chain activities generate revenue for network infrastructure and services
Restake assets secure critical infrastructure services within the Swell L2 ecosystem, including validators, relayers, node operators, and sequencers that maintain network integrity and functionality. These services support network operations and receive fees.
3. Profits are accumulated into Swell assets
The income generated by chain-specific AVS infrastructure such as transaction fees and sorter fees is passed down layer by layer and becomes the native restake income for Swell asset holders.
4. Deeper liquidity and enhanced security
As more assets are deposited and network activity increases, dApps benefit from enhanced cryptoeconomic security and deeper liquidity, creating a better DeFi environment that attracts more developers and users.
The structure of the Restaking yield layer
Why choose Proof of Restake?
Integrating PoR gives Swell L2 the features it needs to solve the problems faced by existing L2s, providing the best experience for builders, node operators, and users.
Modularity
By implementing modular and replaceable AVS and networks to perform each network function, Swell L2's core infrastructure can be adjusted and upgraded, allowing the network to remain lean and flexible while gradually achieving more decentralization and performance optimization over time.
Alignment with Ethereum
Restake assets are used to secure key infrastructure components within the network, ensuring they are firmly rooted in the security of Ethereum. This helps avoid many of the issues that come with using centralized infrastructure (such as sorters), including censorship, single points of failure, and downtime.
Maximize asset productivity
Proof of Restake enables Swell L2 users to become direct beneficiaries of the value created by their activities. Revenue generated through network activities (such as transaction fees, sorter fees, etc.) is passed down through layers and becomes the native restake income for Swell asset holders. In this way, PoR enables users to maximize the productivity of their assets while still contributing to the long-term growth and sustainability of the network.
More DeFi Innovation
Building on liquid restake assets gives dApps access to new sources of liquidity locked in traditional staking mechanisms. In addition, dApps on Swell L2 can innovate by accessing infrastructure services, including Zk coprocessors, decentralized automation, and security protocols that make it possible to innovate outside the limitations of the EVM while still being firmly rooted in the security of Ethereum.
Beyond Swell L2
Rollup is being developed in clusters based on a shared technology stack.
Proof of Restake enables a new approach where these interconnected rollups can inherit the security of other chains in the wider network.
Blockspace scales by delegating consensus to Ethereum and parallelizing the creation of block value into a dedicated network secured by a shared set of Swell assets.
This lowers the barrier to entry for new chains, with each new dedicated rollup joining a system of rollups secured by the same set of strong assets, with ordering, validation, and finality requirements handled by shared decentralized infrastructure services, and benefiting from the pooled native restake returns.
In this way, Proof of Restake facilitates the spread of a range of rollups and is at the forefront of Ethereum scalability.
