Already, liquid staking represents the largest DeFi category on DefiLlama, valued at ~$23B (November 2023). This burgeoning sector also underpins many of the other major DeFi categories, including lending, DEXs, bridges, CDPs, and more.
Now, we are beginning to see a new category quickly emerge: liquid restaking.
Whilst restaking introduces potential uncertainties, it is undoubtedly an attractive blue ocean opportunity that the Swell community is excited to explore as we approach the final stages of the Voyage.
In fact, as laid out in the Swell City Charter, our shared vision of providing the best possible Ethereum staking experience in DeFi extends equally to not only liquid staking, but also the rising tide of liquid restaking.
EigenLayer and the LST contest
En route to Swell City, we are pleased to inform you that swETH is now whitelisted on EigenLayer. This comes off the back of overwhelming community support, with Swell being the first LST to qualify by hitting 15K votes within an hour of the LST contest opening!
EigenLayer is a protocol built on Ethereum. The protocol introduces the new cryptoeconomic primitive of restaking, which extends Ethereum security and will enable EigenLayer to create a marketplace of decentralized trust.
As a whitelisted LST on EigenLayer, swETH holders will be able to restake their tokens through EigenLayer to earn additional rewards and secure multiple Actively Validated Services (AVSs). AVSs are systems on EigenLayer, which require distributed validation. This includes: oracles, bridges, sidechains, virtual machines, and other systems that need to bootstrap decentralized security in an efficient and effective way.
But wait, there’s more!
While leveraging the security made possible by Ethereum is a marvel, reusing staked ETH from existing POS validators, including LSTs is but one example of the synergy between liquid staking and restaking. What we are also are seeing is the rise of an entirely new primitive — liquid restaking — which Swell is also set to explore.
That’s right, the rumors on Twitter — “Wen Restaked Swell ETH (rswETH)?” — are true! A new liquid restaking token (LRT) is approaching...
Restaked Swell ETH (rswETH) is a LRT that unlocks liquidity for restaked LSTs.
It is the LRT for LSTs, and will enable liquidity and DeFi opportunities on restaked LST positions. rswETH will accept restaking LSTs and optimize restaking rewards for holders.
For liquid restakers, rswETH enables: simplicity, liquidity, and flexibility to use your LRT in DeFi. The DAO is looking forward to driving liquidity, adoption, and integrations of this new and exciting primitive, which will complement Swell’s LST, swETH.
Liquid restaking is an exciting and experimental area of decentralized finance, and Swell will advocate a risk-managed approach as the protocol rapidly extends its capabilities to realize the most crypto-native liquid restaking experience for DeFi.
The introduction of rswETH will unlock new opportunities to secure both Ethereum and EigenLayer for more rewards, coupled with multi-faceted risks. These include technology risk, slashing risk, centralization risk, rehypothecation risk, and more. We will be diving deeper into both the risks and opportunities of restaking with Swell and EigenLayer in future posts over the coming weeks.
Finally, thanks to you all for showing up and supporting Swell's fast-growing range of staking products!
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