<h1><strong>EigenLayer and Swell Proposal</strong></h1><p></p><h3><strong>1. Proposal</strong></h3><p>Swell proposes that swETH be accepted as a restaking LST asset on EigenLayer.</p><p></p><h3><strong>2. Pearl Rewards for Voting</strong></h3><p>You can earn up to 40 Pearls for every ETH&nbsp; /LST that you use to vote for swETH.<br></p><p>Pearl rewards will fall as votes roll in, so the sooner you vote, the more likely you are to lock in higher rewards:</p><ul><li><p>0-15K ETH: 40 Pearls per vote&nbsp;</p></li><li><p>15K-50K ETH: 30 Pearls per vote</p></li><li><p>50K+ ETH: 20 Pearls per vote</p><p></p></li></ul><p>For example, 1 swETH used to vote for swETH when 2,000 ETH has been voted with, will earn 40 Pearls.<br><br>Alternatively, using 4 swETH to vote for swETH when 55,000 ETH has already been voted with, will earn 80 Pearls.</p><h3><strong>3. References</strong></h3><ul><li><p>Website: <a target="_blank" rel="noopener noreferrer nofollow" href="https://swellnetwork.io/">Swell</a></p></li><li><p>Documentation: <a target="_blank" rel="noopener noreferrer nofollow" href="https://docs.swellnetwork.io/">Swell Docs</a></p></li><li><p>Github: <a target="_blank" rel="noopener noreferrer nofollow" href="https://github.com/SwellNetwork">Swell Github</a></p></li><li><p>Social: <a target="_blank" rel="noopener noreferrer nofollow" href="https://twitter.com/swellnetworkio">Twitter</a> | <a target="_blank" rel="noopener noreferrer nofollow" href="https://discord.com/invite/swellnetworkdao">Discord</a> | <a target="_blank" rel="noopener noreferrer nofollow" href="https://twitter.com/swellnetworkio/status/1717791696707371229">Relevant Tweet</a></p></li><li><p>Blog: <a target="_blank" rel="noopener noreferrer nofollow" href="https://www.swellnetwork.io/post/the-liquid-restaking-revolution">The Restaking Revolution</a></p></li><li><p>Primary Contracts: <a target="_blank" rel="noopener noreferrer nofollow" href="https://etherscan.io/token/0xf951E335afb289353dc249e82926178EaC7DEd78">swETH</a> | <a target="_blank" rel="noopener noreferrer nofollow" href="https://etherscan.io/address/0xb3D9cf8E163bbc840195a97E81F8A34E295B8f39">Deposit Contract</a> | <a target="_blank" rel="noopener noreferrer nofollow" href="https://etherscan.io/address/0x46DdC39E780088B1B146Aba8cBBe15DC321A1A1d">Node Registry</a>&nbsp;</p></li><li><p>Security: <a target="_blank" rel="noopener noreferrer nofollow" href="https://github.com/SwellNetwork/v3-core-public/blob/master/Audit%20Reports/Sigma_Prime_Swell_Network_Security_Assessment_Report_v2_0.pdf">Sigma Prime Audit</a> | <a target="_blank" rel="noopener noreferrer nofollow" href="https://immunefi.com/bounty/swell/">Immunefi Bug Bounty</a></p></li><li><p>Dashboards: <a target="_blank" rel="noopener noreferrer nofollow" href="https://dune.com/swell-network/swell-network">Swell Dune</a> | <a target="_blank" rel="noopener noreferrer nofollow" href="https://dune.com/swell-network/sweth-in-dexes">swETH in DEX Dune</a> | <a target="_blank" rel="noopener noreferrer nofollow" href="https://defillama.com/protocol/swell">Swell DefiLlama</a></p></li></ul><p></p><h3><strong>4. EigenLayer and Swell</strong></h3><h4><strong>About Swell</strong></h4><p>Swell is an up-and-coming Ethereum liquid staking protocol. Swell’s LST (swETH) is one the leading LSTs in the newer class of entrants into the space. swETH launched in late April 2023. In ~6 months on mainnet, Swell TVL has seen material traction, scaling to ~$95M TVL (October 2023).</p><p><br></p><h4><em>TVL Growth&nbsp;</em></h4><img src="https://i.imgur.com/2V4iFln.png"><p>Source: <a target="_blank" rel="noopener noreferrer nofollow" href="https://defillama.com/protocol/swell">DeFiLlama</a> (October 2023)</p><p></p><p>swETH is already one of the most integrated LSTs in the ecosystem with 40+ integrations across the ecosystem. swETH is uniquely supported by Chainlink’s Proof of Reserve (POR) oracle, which provides surety around the ETH backing of swETH.&nbsp;</p><h4><strong>swETH as a Restaking LST Asset</strong></h4><p>Swell has positioned swETH as a strong potential restaking LST asset on EigenLayer.&nbsp;<br></p><p>Swell’s growth, reputation, operational stability, and dedicated roadmap align with EigenLayer’s overall vision and plans for liquid staking protocols within its ecosystem.</p><p></p><p>The EigenLayer integration is one of the most popular Swell community requests.</p><p></p><p>Swell aims to extend its existing incentives campaign around the Voyage to help bootstrap adoption and help both communities make the most of the collaboration.&nbsp;</p><p></p><h4><strong>Native Restaking</strong></h4><p>Beyond swETH as a restaking LST, Swell intends to expand its staking offering to include native liquid restaking with Restaked Swell ETH (rswETH).</p><p></p><p>Both initiatives will help EigenLayer and its community to achieve its vision of shared security to hyperscale Ethereum.&nbsp;</p><p><br></p><h3><strong>5. Protocol Architecture</strong></h3><h4><strong>swETH Architecture</strong></h4><p>Swell issues its liquid staking token (LST), swETH as a receipt token representing staked ETH on the swETH contract.</p><p></p><p>When a user stakes with Swell, the ETH is transferred to the deposit manager contract. Here, it is pooled until reaching a minimum of 32 ETH.&nbsp;</p><p></p><p>The deposit is then initiated into the Ethereum deposit contract by selecting validator keys based on a systematic round robin process involving Swell node operators.</p><p></p><p>Once selected, the validator enters the Ethereum validator activation queue. Upon activation, the validators can begin processing transactions and proposing blocks.</p><p></p><p>Presently, swETH can be swapped on several decentralized exchanges, including Maverick, Balancer, Uniswap, and more.</p><p></p><p>Full withdrawals are scheduled for enablement in a forthcoming Q1 2024 protocol upgrade,</p><p></p><h4><em>Swell Protocol Architecture</em></h4><img src="https://i.imgur.com/sTm1fiI.png"><p>Source: <a target="_blank" rel="noopener noreferrer nofollow" href="https://docs.swellnetwork.io/swell/system-design/staking-with-sweth">Swell Docs</a> (October 2023)</p><p><br></p><h4><strong>Underlying swETH Collateral</strong></h4><p>swETH is an ERC-20 token. The design is a repricing token, also known as a reward-bearing token, an interest bearing token, or a cToken.</p><p></p><p>As a repricing token, the intrinsic value of swETH grows over time due to accumulation of staking rewards, net of slashing and penalties.</p><p></p><p>Repricing is supported by an integration with Chainlink Proof of Reserves (POR) which enables timely, reliable, and accurate verification of the backing and primary market exchange rate for swETH.</p><h4></h4><h4><em>swETH Proof of Reserves Feed</em></h4><img src="https://i.imgur.com/NADfll8.jpg"><p>Source: <a target="_blank" rel="noopener noreferrer nofollow" href="https://data.chain.link/ethereum/mainnet/reserves/swell-eth-por">Chainlink POR</a> (October 2023)</p><p><br></p><h4><strong>Yield Accrual Mechanism</strong></h4><p>The yield accrual mechanism on swETH is derived from consensus layer and execution layer rewards.</p><p><br></p><p>The repricing is expressed as the swETH:ETH exchange increasing over time. This appreciating exchange rate is the method by which staking rewards are distributed to swETH holders.</p><p><br></p><h4><strong>Protocol Upgrades</strong></h4><p>Swell has scheduled enablement of withdrawals in early 2024 as part of its upcoming Barracuda release.&nbsp;<br></p><p>This upgrade will further support liquidity, arbitrage, and redemption capabilities.&nbsp;</p><p></p><h3><strong>6. swETH Adoption</strong></h3><h4><strong>Key Metrics (October 2023)</strong></h4><ul><li><p>TVL: ~$95M</p></li><li><p>swETH Market Cap: ~49,000 ETH</p></li><li><p>Number of Validators: ~1,530 Validators</p></li><li><p>Number of Operators (Mainnet): 8</p></li></ul><p><br></p><h4><strong>Growth</strong></h4><p>Swell is one of the fastest growing protocols in DeFi. In ~6 months, Swell has become the 37th largest DeFi protocol on Ethereum mainnet. swETH is the 7th largest Ethereum LST by market capitalization.</p><p><br></p><h4><strong>swETH Utilization</strong></h4><p>Swell has a high utilization rate of its LST, swETH across DeFi, at ~53%. This is expected to flow through to EigenLayer adoption also.</p><p><br></p><h4><em>swETH DeFi Utilization</em></h4><img src="https://i.imgur.com/Nfs2xPt.png"><p>Source: <a target="_blank" rel="noopener noreferrer nofollow" href="https://dune.com/swell-network/swell-network">Swell Dune</a> (October 2023)</p><p><br></p><h4><strong>Integrations</strong></h4><p>Swell has multiple DeFi integrations across the ecosystem. This includes Pendle, Balancer, Aura, Curve, Maverick, Yearn, and more. The full list of available swETH integrations is available at the ecosystem page: <a target="_blank" rel="noopener noreferrer nofollow" href="https://www.swellnetwork.io/ecosystem">https://www.swellnetwork.io/ecosystem</a>&nbsp;</p><h4><em>swETH utilization in DeFi</em></h4><img src="https://i.imgur.com/fgAfs2G.png"><p>Source: <a target="_blank" rel="noopener noreferrer nofollow" href="https://dune.com/swell-network/swell-network">Swell Dune</a> (October 2023)</p><p><br></p><h4><strong>Ecosystem Backing</strong></h4><p>Swell has a positive reputation in the Ethereum space. Swell is supported by Ethereum-aligned backers.</p><p></p><p><em>Swell Backers</em></p><img src="https://i.imgur.com/knf4l3S.png"><p>Source: <a target="_blank" rel="noopener noreferrer nofollow" href="https://www.swellnetwork.io/">Swell Website</a> (October 2023)</p><p><br></p><h4><strong>Security</strong></h4><p>Swell has been audited by Sigma Prime, a leading smart contract audit firm with a specialty in Ethereum liquid staking smart contracts. Swell has a bug bounty program in collaboration with Immunefi.</p><p><br></p><h4><strong>Active Collaboration with EigenLayer and ecosystem projects</strong></h4><p>Swell has been actively collaborating with EigenLayer as well as EigenLayer ecosystem projects for the past several months as part of Swell’s commitment to providing restaking opportunities to swETH holders.</p><p><br></p><h3><strong>7. Operations</strong></h3><h4><strong>swETH Node Operators</strong></h4><p>Swell launched with a genesis set of 8 professional node operators: DSRV, Blockscape, Stakely, HashQuark, Kiln, RockX, InfStones, SNC. Swell has ~1,500 validators across operators. In aggregate, the node operators span multiple geographies across Asia, Europe, and the Americas.&nbsp;</p><p></p><p>The selection criteria was based on several key factors, including:</p><ul><li><p>Demonstrated technical expertise and commercial experience</p></li><li><p>Consistent record of security, stability, and onchain performance</p></li><li><p>Contribution to diversity and decentralization individually and in aggregate</p></li><li><p>Evaluation of geography, jurisdiction, sever type, and client categories</p></li></ul><p></p><p>Swell consensus client mix is ~51.7% Lighthouse, ~30.5% Prysm, ~14.5% Teku, and ~3.3% Nimbus. Swell intends to expand into a permissionless node operator set over time.</p><h4></h4><h4><em>Swell Rated Analytics</em></h4><img src="https://i.imgur.com/LB5NBrF.jpg"><p><br>Source: <a target="_blank" rel="noopener noreferrer nofollow" href="https://www.rated.network/o/Swell?network=mainnet&amp;timeWindow=30d&amp;idType=pool&amp;viewBy=operator&amp;page=1">Swell on Rated</a> (October 2023)</p><p><br></p><h4><strong>swETH Staking Yield</strong></h4><p>swETH staking yield is currently ~3.15% APY, reaching a local high of 4.37% in mid-October.</p><p><br></p><h4><strong>swETH Slashing</strong></h4><p>Swell has not recorded any slashing events to date.</p><p><br></p><h3><strong>8. Roadmap</strong></h3><h4><strong>Timeline</strong></h4><p>Swell is committed to supporting swETH as a restaking LST on EigenLayer. In addition to this proposal, Swell intends to launch native restaking next year. This will include development, audit, testing, guarded mainnet launch and into full launch.</p><h4><br><strong>Native Liquid Restaking</strong></h4><p>Swell’s native liquid restaking integration would allow users to natively restake ETH in a liquid manner. This is done by enabling automatic restaking into EigenLayer. Swell is currently in the design phase for this integration.&nbsp;</p><p></p><p>Once implemented, Swell users will have the option to natively restake ETH. As part of this process, liquid restakers will receive Restaked Swell ETH (rswETH). The launch of rswETH is expected next year. The Swell team will drive liquidity, adoption, and integration of this new and exciting primitive, which will complement Swell’s swETH LST.</p>