Dive in to explore the opportunities available for swETH holders on Arbitrum.
Sep 25, 2023
swETH is now live on Arbitrum!
To celebrate, we were joined by Peter Haymond from Offchain Labs, and team members from Arbitrum based DEXs — Ramses, KyberSwap and Trader Joe — for a discussion about the opportunities available for swETH holders on Arbitrum.
In case you missed it, here are the top questions from the event:
Why do you think Arbitrum has risen to the top of the L2 market?
"In general, there are a lot of factors that have played into the success of Arbitrum as a whole. From day one, Arbitrum have had working fraud proofs and pioneering improvements such as BOLD, which is going to enable permissionless validation, and Stylus, which is going to enable support RUST C and C++ to be used to interact natively with solidity based code.
Another factor that plays into Arbitrum’s success is strategy. From the beginning, the team had a period where all developers could build on the protocol making it inclusive and open for all which helped to build out a really strong and vibrant ecosystem."
— Peter Haymond, Partnerships at Offchain Labs
What are some of the opportunities for providing swETH liquidity and what are the swETH liquidity strategies on Arbitrum?
"Swell currently has three swETH pools on Arbitrum, with each of these pools having different APRs based on the amount of TVL and incentives that are flowing towards them.
Our liquidity strategy on Arbitrum has mainly been centered around concentrated liquidity. The reason we have set it up that way is because swETH already has a full range of liquidity on mainnet, and our theory for crosschain liquidity is that any sort of mispricings in swETH that occur crosschain will be closed by arbitrageurs."
– Abishek Kannan, Chief Liquidity Surgeon at Swell Labs
Swell currently has three pools on Arbitrum. What are the benefits of each from the perspective of liquidity providers?
Trader Joe's AMM is called ‘Liquidity Book’.
"Liquidity Book is a unique offering in terms of concentrated liquidity with two important features to highlight.
Liquidity book is built on a discretized bin architecture - Every liquidity pool on Trader Joe is discretized into individual bins with each bin representing fixed price points in a liquidity pool for the underlying assets. All of the bins are aggregated together to form a liquidity pool which enables Liquidity Book to keep liquidity fungible compared to other solutions. As a user this means you are able to build, construct and deploy custom strategies and different shapes so that you can optimize your liquidity on-the-go.
Boosted real yield - Liquidity Book comes with surge pricing built into it. There are dynamic fees and variable fees. The variable fee is dynamic based on the volatility that is happening in the pool. This helps generate extra real yield for liquidity providers when there is volatility happening in the pool.
– Blue, Head of Marketing and Growth at Trader Joe
"One of the key things users are looking for in the Layer 2 and DeFi space is opportunities to earn. KyberSwap has two types of liquidity that we deploy.
Classic Liquidity - Dynamic Market Maker (DMM)
Elastic Liquidity - Concentrated liquidity solution, similar to Uni v3, where users can select the range or ticks where they want to contribute their liquidity to. KyberSwap are on the protocols which has the highest amount of fee tiers in the market, where users can pull a stable asset pair with very low fees, as low as 0.08%, and generate a lot of volume.
KyberSwap also has farming smart contracts which provide extra incentives on top of the trading fees. We are very happy to have partnered with Swell, with KyberSwap’s swETH-ETH pool now live on the Arbitrum chain. This pool is currently sitting at 12% APR, at time of writing, and is a good option for users that are interested in exposure to ETH."
– Imran, Head of Marketing at KyberSwap
"One of the key aspects that differentiates Ramses is the emphasis on the incentives infrastructure. As part of our tokenomics, we have the capability to extend an NFT grant to partners that provides them with voting power. The way our voting works is it directs emissions to a protocols liquidity pool that gives us the ammunition for us to support partners that are in different stages of building, be it a new project that is starting from low liquidity, or a project that is established and extending onto Arbitrum.
For the swETH-ETH pool for example, Swell can capture back some of the incentives and use it again each week, which ends up becoming something that can be sustained over time. On the LP side in general, it translates to better APR that is sustainable for a longer period of time."
What future swETH opportunities or integrations may be coming to Arbitrum?
“Now that Swell has established a base layer of liquidity on L1, it enables swETH to be integrated into more complex DeFi protocols. swETH’s core mission is to be the LST for DeFi, and Arbitrum has some of the best DeFi protocols building on it.
In terms of specific developments, we are looking to open up chats with Gravita on Arbitrum, and once we have that we plan to set up the LP pools and look into vault products. Another protocol we are working with is Ethos Reserve. We also have the swETH-stERN pool on Ramses Exchange which is where both swETH and stERN are appreciating tokens, so on top of the yield you are getting on Ramses, you are also getting the inbuilt yield of the two assets which make up the pool.”
– Abishek Kannan, Chief Liquidity Surgeon at Swell Labs
“In the future, Swell will be focused on continuing our existing collaboration with the protocols we have on today's call, and using that as a launchpad into these interesting use cases for LSTfi on Arbitrum that wouldn’t otherwise be feasible on mainnet for many reasons. These include other areas such as sophisticated lending, borrowing, vaults and CDPs.”
This is something that really plays into Swell’s user base, as according to the onchain data, we have some of the highest utilization rates (>60%) within strategies on mainnet for an LST. As such, swETH holders are often very savvy DeFi users that are quite happy to LP into more complex strategies, and pushing into Arbitrum was something that was formed by a lot of community feedback."