[SSV] DAO Grants - Swell Network | Delivering the Next-Generation of ETH Staking

Primer: Swell Network is a permissionless, non-custodial, and liquid ETH staking protocol. Their protocol is built on top of the Secret Shared Validator (SSV) technology, which is a project built by SSV Network. Find out about Swell Network in this AMA hosted by SSV Network to learn how this technology makes Swell Network stand out from the current liquid ETH staking solutions.

Background

Daniel Dizon

• Co-Founder and CEO of Swell Network

• Background in finance, tech, and innovation

Lecky Lao

• CTO and Co-Founder of Swell Network

• Have been a software engineer for more than 10 years

• Started being a serial entrepreneur since 2016

• Working for multiple DeFi DApps like Instadapp, dHEDGE, and Synthetix

Swell Network

• ETH staking protocol that is permissionless, non-custodial, and liquid

• Supported by industry-leading backers

• Have several first-to-market innovations

• Have completed building their smart contracts for Swell V2

Issues That They Are Solving

• Risk of centralization

• Staking is complex. They will be improving the experience for stakers

• There is a lack of competing options on the market for stakers to diversify their stake. They provide another option on the market

How Does It Work

• Stake your ETH in a liquid manner and earn staking rewards

• The liquidity (swETH) is containerized in an NFT

• The NFT marks your position within the validators

• The NFT can be compounded in Vaults

“And the beauty of this, it's all self-contained within one app. So it's a single place for you to stake, set, and forget.”

- Daniel Dizon

• Leverages Secret Shared Validator (SSV) technology to reduce the risk of slashing and penalties

Their Yield

• Stake: 5%

• Stake & Vault: 7%

• Stake & Vault (Post-Merge): 17%

Value Proposition

• First in the market to:

  • Enable node operator validated contribution to as little as 1 ETH

  • Do atomic deposit contract to enable user-directed deposits

  • Containerize liquid staking token within an NFT

Points Of Differentiation

• Node operators will be able to set their own commissions

• Allows stakers to have a choice as to their node operators

• Enables a white label solution — node operators putting a frontend and using their protocol on the backend

Swell Network And SSV DAO

• When both protocols combine, you get:

  • More decentralization

  • Better returns with lower risk

  • Improved composability

Why Did They Structure Their Product Within An NFT?

• When users deposit their ETH, they get back a swNFT

• The swNFT contains swETH

• It’s inspired by Uniswap V3’s NFT positions

• The rewards are calculated at the point of withdrawal

• Rewards are accrued from the point of staking

• They have a lower cost of staking compared to other protocols

• swNFT holders can choose to opt in to the Vault

• Their Vaults work similarly to Yearn vaults

• The swNFT identifies which validator you are staking on

• Withdrawal process: NFT is burnt —> rewards calculated from the beacon chain —> swETH is minted for the user

Cost Of Staking And Unstaking

• Occurs on layer 1 and will be expensive

• Is cautious about cost and is targeting a cost of $100 for minting a swNFT

• Unstaking costs more

Atomic Transactions

• Will have their head of product explain the innovation to the public

• Their testnet will be available soon for people to test and understand it more

• Will be rolling out more talks, videos, documentation, and demos to help people understand

How Does Secret Shared Validator (SSV) Fit Into Swell Network?

• On day 1 of their roadmap, they have already wanted to integrate SSV tech

• They see SSV technology as critical infrastructure for improving the resiliency and risk profile of Swell Network

• See themselves building on top of SSV

• Both projects are helping each other

How Do Users Choose Their Own Node Operators?

• Will help categorize node operators so that users can make an informed decision

• Node operators that are on SSV will have an improved risk/return profile

• Users will be able to tell which node operators return MEV rewards to stakers

Their Timeline

• Developing and shipping Swell V2

• Will launch a comprehensive ecosystem strategy after that

• SSV tech will be in Swell V3, which will be implemented in the 2nd half of the year

• In 2023, they will be moving cross-chain

How Did They Hear About SSV Technology In The Beginning?

• Have been closely following Ethereum research

• SSV technology was proposed by the Ethereum Foundation

• Saw that SSV Network (formerly Blox) became part of the working group and started developing the technology

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