Collateralizing Your swETH in LSDfi | A Twitter Space with Gravita
An exploration of Swell's partnership with Gravita, and everything you can do by collateralizing your swETH.
Jul 26, 2023
To celebrate the swETH Vessel mint cap increasing from $1M to $2M, we were joined by Rhett Shipp from Gravita to discuss our recent partnership and how you can collaterize your swETH.
In case you missed it, here are the top five questions from the event:
1. How will Swell’s recent partnership with Gravita play into LSDfi?
Swell is an up-and-coming Ethereum liquid staking protocol, and currently one of the fastest growing DeFi projects in the ecosystem.
Since our launch we have had nearly 10,000 stakers join us on our pre-token early adopter campaign dubbed The Voyage, where we incentivize users to become eligible for our upcoming airdrop by staking with Swell, holding swETH, LPing swETH and – topically for today – participating in various protocols such as Gravita.
Our recent partnership with Gravita is highly synergistic, enabling anyone to borrow against their swETH interest free to receive a best-in-class LST-backed stablecoin.
What is Gravita’s perspective on the integration with Swell?
Gravita is a decentralized borrowing protocol that provides users with interest-free loans. Users pay a one time borrow fee 0.5% to mint GRAI, and users who close their vessels within 6 months receive a pro rata refund.
The motivation to build Gravita was established several months ago when we saw that LST’s, a high quality collateral asset, were not getting a lot of support in DeFi protocols.
As such, we felt like we needed to create something that would be a good home for all of the high quality LSTs, and our partnership with Swell helped drive this forward.
What is Swell’s approach to liquid staking and what are some of the forces that have driven the protocol's growth?
We’re in a bit of a gold rush with liquid staking at the moment.
We saw Shapella deploy earlier this year, effectively achieving a couple of things: effectively eliminating a lot of the liquidity and redemption risk profile for staking itself, whilst keeping the returns broadly the same.
What has since happened in the past several months is that the risk / return has massively shifted back towards current and prospective stakers.At the same time, the LSTs themselves are close to becoming, if they haven’t already, the preferred form of collateral for DeFi.
At Swell, we have tried to position the protocol to focus on the areas in staking that we thought were lacking. What we found was that there definitely needs to be more diversity and optionality with stakers as there is currently too much concentration with existing providers.
The way that we want to promote this is by creating a community focused approach about how we do things, which is the reason why we have been able to scale up. A lot of our growth has been effectively organic, with nearly 10,000 unique stakers joining us in just over 10 weeks of being live on mainnet.
How does the newly launched swETH/GRAI pool work, and what incentives can users receive for LPing?
There are a couple of things that you can do with swETH in Gravita, one of them being the ability to mint GRAI against your swETH as a form of debt, and the other is LPing into the swETH/GRAI Bunni pool.
What a staker prefers to do with their assets is based on their profile. There is a high and low risk way to utilize GRAI and swETH. The high risk way is to mint GRAI, swap back to swETH, add to your collateral and lever up. The low risk way would be to mint GRAI or swETH and deposit the asset into the swETH/GRAI pool on Bunni to generate yield.
Depositing in the swETH/GRAI pool on Bunni earns several layers of yield i.e. the underlying staking yield from swETH itself as a reward-bearing token, plus the Bunni lever emissions and the transaction fees that you receive anytime swaps are made, and also pearls in the Swell Voyage.
Is a user able to add collateral to improve the health of the vessel without minting more GRAI?
Yes. At Gravita, we never limit the collateral. We only limit the minting.
Users can always repay and add collateral to their vessel, however, if the mint cap is filled you will not be able to mint more against your debt position until either someone repays some of the debt or the mint cap is raised again.
Thank you to everyone for attending this Twitter Space.