Swell Network – decentralized alternative to Lido Finance
3 min readDespite the dominance of Lido and Co: Anyone who thinks that Ethereum‘s staking market is already fully developed is wrong. Not even 15 percent of the possible ETH coins are currently being staked. So much of the growth is yet to come for the second largest crypto coin in this regard. A new breed of staking protocols wants to capitalize on this growth. Below that, and armed with an arsenal of innovations, is this Swell Network.
The problem with liquid staking
Liquid staking providers like Lido or Swell aim to make Ethereum’s proof-of-stake process easier and more accessible. At Lido, users delegate their coins to large validators, so-called node operators. These are equipped with the necessary technology and the appropriate seed capital to ensure a smooth staking process. Because even if basically anyone can become an Ethereum Node Operator, at least 32 ETH must be used as a stake. A big hurdle for small investors.
Swell Network offers a decentralized alternative to Lido Finance. Although Lido makes the staking process much easier for small Ethereum hodlers, the project has often been criticized for the strong centralization in the protocol. After all, stakers do not decide themselves to whom they delegate their coins, but Lido themselves. Only a few designated node operators are approved in advance. The increasing concentration of ETH in Lido thus represents a weak point for Ethereum.
Swell Network: More decentralization please!
Swell Network not only wants to simplify the staking process, but also make it more decentralized. For this, stakers are given direct access to various node operators. These are both designated by Swell and independent, making the staking market more diverse (and decentralized). In addition, stakers retain full control of their coins at all times via Swell. According to its own statements, the project is “100 percent” based on the values of Ethereum.
In the next step, the protocol then wants to bring Distributed Validator Technology (DVT) into play – one of the most exciting functions of the application. It basically works like a staking carpool, where several small users join together to act as a node operator. This further decentralizes Swell’s staking network and lowers a major barrier to entry for users.
Staking – easy and for everyone
Even without the aspect of decentralization, the protocol tries to bring itself into a market-leading position. Swell is said to have zero to few fees and the highest staking returns on the market. At first, however, only the former seems to be correct, while the current 4.5 percent yield is just below Lido’s 4.8 percent return. It remains to be seen how the numbers will evolve as adoption increases and whether it remains attractive to users. Shortly after the start, at least 3,300 ETH have already been invested in Swell in just a few days.
The “vaults” will soon follow the mainnet launch and will also allow stakers to invest their ETH derivative (swETH) directly in the application in order to earn additional returns. This could then be paid out in the form of the upcoming Swell token.
If the overall concept works, it is quite possible that one of the leading staking providers will emerge here. The greater decentralization of the protocol alone will not convince all users. But with added incentive, offer them a single protocol for everything staking possible on Ethereum.
