The Next Generation of Liquid Staking

This post will go over the first-to-market innovations that will allow Swell to bring higher yields, a better user experience, and more transparency for stakers - In addition to providing white label infrastructure for all types of node operators to secure the Ethereum network.

The next generation of liquid staking
Swell represents a new breed of ETH staking. 

Welcome to the next part of our Swell Network Explainer Series.

If you haven’t already, start with our previous piece of this educational series to get a high-level understanding of the protocol and the different types of users that can harness the power of Swell.

By incorporating best practices from DeFi 1.0 and leaning into the innovation from DeFi 2.0, we are heralding a new and improved era of ETH staking: Staking 2.0. This means higher yields, better user experience, and full atomic transaction-level transparency.

First to Market Innovations

Swell is excited to bring new features that improve upon the existing liquid staking landscape. Some of these first to market features include...

For Stakers

  • The ability for stakers to choose their node operator based on rates, reputation, and history of sharing MEV rewards
  • Atomic deposit transactions that enable the staker to be the direct depositor into the ETH deposit contracts
  • The Swell Network Financial NFT

For Node Operators

  • Set commission rate to be competitive with other validators on the market
  • Option to be either a Verified or Independent Operator.
  • DVT technology to bring the validator requirement down to as little as 1 ETH

Choose Your Node Operator

Swell gives stakers full choice of the node operator they choose to stake their ETH with. Stakers are able to browse Swell’s marketplace of validators easily through the platform. Stakers can choose their preferred validator based on commission rates, history, and reputation.

Before a user stakes, they are presented with the option to select which validator they would like to stake their ETH in. After staking, the staker will be able to track their ETH with their selected node operator on the beacon chain the entire time. This brings more choice and transparency to the liquid staking landscape.

Atomic Deposits - Security & Transparency

Swell is the first protocol to utilize atomic deposit transactions that enable stakers to be the direct depositor in ETH deposit contracts. As a result, there is technically no deposit pool with Swell — everything is completed in one self-contained transaction.

From a security standpoint, this improves upon existing solutions where a “deposit pool” exists, creating an attack vector for potential exploits. With Swell, because the staker is the direct depositor into the ETH staking contract, there is no pool of funds that are at risk as they wait to be added to nodes. The ETH belonging to the staker is never held by Swell.

From an architectural standpoint, this means stakers are able to directly track and see where their ETH deposit goes, which is fully live and on-chain. This is also one of the pillars for Swell being fully non-custodial meaning that stakers have full control over their keys and their ETH.

Atomic deposits with Swell Network
Atomic Deposit Workflow

Distributed Validator Technology (DVT)

Swell operates at the protocol and infrastructure layer of the Ethereum staking ecosystem.

It is fully interoperable with various related infrastructure, including distributed validator technology (DVT), which enables trustless and distributed operation of Ethereum validators across node operators.

This enables enhanced risk mitigation, increased uptime, and improved node operator performance for ETH staked with Swell.

In summary, DVT allows distributed control and operation of an Ethereum validator, bringing about greater decentralization, fault tolerance, and improved security for Ethereum staking.

DVT works by enabling a secure and robust way to split a validator key for ETH staking between non-trusting node operators on a shared validator network.

In practical terms, the key is split in such a way that node operators must trust each other to operate. In the event that some of the operators were to go offline, rewards would not be affected.

This reduces financial overhead for permissionless and trustless node operators on the Swell Network.

Swell’s advantages can be narrowed down in the following fashion.

  • To begin with, Swell is fully permissionless by design which means the protocol will feature relevant best practice incentive / disincentive mechanics coupled with comprehensive risk mitigations to ensure health, alignment, and value creation for each and every user of the protocol.
  • Furthermore, as a fully trustworthy platform, Swell provides node operators with the ability to easily stake and run nodes less with than the 32 ETH requirement. The initial requirement is set to be 16 ETH.
  • Swell is the first permissionless staking protocol to integrate DVT, which will help to reduce node operator requirements from 16 ETH to as little as 1 ETH. It is important to note that this has already been demonstrated in Swell’s Proof of Concept as early as in Dec 2020.
  • Lastly, functioning at the protocol layer, Swell will serve as an enabling back-end infrastructure for node operators to be leveraged. This will be fully white-labelled, with Swell operating behind-the-scenes as an infrastructure layer, simultaneously safeguarding Ethereum whilst delivering powerful technology for node operators.

By doing all of the above, Swell will achieve maximum transparency and security.


Join the Squad

Thanks for reading! If you have any questions, or just want to hang out with other staking enthusiasts, join our public Discord server and say hello! You can stay up to date on the protocol by following Swell on Twitter as well.