Introducing Swivel v3
Announcing the Public Launch of Swivel v3 alongside our Lido partnership to offer "Staking Without Slashing" (or Dilution)
Though recent events have left the market uneasy, the Swivel team has been diligently pushing forward with the development of Swivel v3 and all the new features that it brings.
TL;DR:
Swivel v3 is now live on swivel.exchange!
Swivel v3 introduces three key novel integrations:
Lido — With Swivel Lido’s integration users can avoid the risks involved in staking while others speculate on future gas costs
Euler — With Swivel’s Euler integration our lenders get higher APYs than ever while others are finally able to gain leverage on their their Euler gauge strategies
EIP-4626 — With Swivel’s EIP-4626 integration we are futureproofed for any new protocol launches, with the first great example being a new integration of FraxLend
Lido — Staking Without Slashing (Or Dilution)
Described best in our recent content surrounding Devcon —
The design space surrounding ETH2 and “blockspace” has become increasingly interesting as transaction demand accounts for ~50% of ETH2 yields and can now be harnessed directly through liquid integrations such as Lido.
Avoiding Staking Risks & Selling Blockspace
While ETH2 yields have increased to roughly 10% APY as of late due to increased transaction demand, there still exists significant headwinds for any user that would otherwise assume that this yield is sustainable and without risks.
As described in more depth in the article above, staking actually involves:
Potential Dilution
Potential Slashing
Platform Risks
Transaction Demand Volatility
As an easy example, stakers ~one year ago would have expected a roughly ~12% APY. However as the number of stakers has climbed consistently, these yields have been diluted roughly 60%, leaving the APY around ~5-5.5%.
To avoid this future volatility and risk, stakers can sell future blockspace through Swivel to lock in their staking yield.
What is Blockspace?
Blockspace refers to an amount of… space… required to process transactions. All transactions depend on the settlement of blockspace, while Validators and miners supply blockspace and blockspace demand is fueled by the number of transactions processed and the computation required.
Selling Blockspace
As a way to reduce the risks that a validator might have, stakers can sell their future yield (blockspace) and in doing so pass on all risks involved to their counterparty.
This then leaves a staker with an up-front payment of ETH without any exposure to dilution, transaction demand, or slashing.
Buying Blockspace
Each seller must have a counterparty to take on the the excess risk involved in producing blockspace.
These counterparties have varying motivations, however the core incentive to buying blockspace would be the ability to capture future increases in transaction demand.
From degens looking for leverage and profits on increases in demand to established projects that have transaction demand of their own (and need to hedge risks of costs increasing), Swivel’s new Lido integration offers the only sound way to execute their strategies.
Euler Gauge Derivatives
Euler at a glance simply provides our users higher rates than its compatriots, without increased risks.
Through their asset classifications Euler ensures that only high quality assets are accepted as collateral, while still offering lending markets for “low” quality long tail assets — Two qualities that make Euler an ideal integration for Swivel.
However of equal interest, Euler’s governance regularly influences lending rates through the implementation of “Euler Gauges”.
Euler Gauges
As shown above, through a continuous quadratic vote, Euler holders are able to vote (or “gauge”) towards a given asset in order to direct the distribution of Euler tokens.
These votes are calculated every two weeks (each epoch), and based on the results at that point in time tokens are distributed to borrowers of the top 10 markets. (Though a proposal is in governance to expand this number!)
This leads to extremely interesting opportunities for EUL voters to influence not only rates on Euler, but the rate and value of Swivel’s YTs.
Leveraged Gauge Strategies
With significant variability in lending rates as Euler gauges activate / de-activate (e.g. WBTC .2%→.01%, DAI 2.14% → .05%), Euler users executing gauge strategies have profited consistently, however without access to leverage their upside is limited.
Swivel v3’s launch then provides these strategists with the leverage they need to truly activate the power of Euler gauges.
In the example mentioned above, a EUL holder purchasing DAI YTs on Swivel as its gauge de-activated could then re-activate its gauge and capture a ~40x profit as Euler YTs increase in value.
EIP-4626 Integration
Moving towards the next generation of Defi, the industry needed a standard that all yield bearing products could adopt confidently - knowing that all integrators would conform to the same standard.
Early in 2022 EIP-4626 became this standard as developers across most major lending protocols (including Julian our founder) contributed towards its development, resulting in an implementation that all protocols could agree on going forward.
Alongside the standards proliferation, our own integration at Swivel became absolutely integral — Not only are we already integrated with a number of protocols (namely FraxLend), but we are futureproofed and pre-integrated for any further developments!
FraxLend
As the first significant protocol to launch with EIP-4626 tokenized vault, FraxLend, will also be our first EIP-4626 integration at Swivel!
While FraxLend itself may be very similar / identical to the siloed Kashi lending model, the proliferation of crypto-native stablecoins and standards are more important now than ever, and we’re happy to support the FRAX token and team.
What’s Next
Of course first and foremost come on by the exchange, stake some ETH, and as always come hang out in our discord!
In our next blog, we will be continuing our series on all the new potential that comes with Swivel v3, next up — A more in depth discussion of the strategies now possible in tandem with Euler gauges!
Swivilian AMA
Stay tuned for our biweekly Swivilian ama to discuss Swivel v3 and everything we have planned!
As always there is “secret” alpha for all that show up and keep an eye out for some cool new integrations from our friends over at [REDACTED].
Ambassador Program
With the launch of v3 comes the launch of our Swivilian Ambassador Program!
Contact randOver | Swivel#2519 or @Keem#0001 in our discord for more information and stay tuned for an imminent announcement with more details on becoming a Swivilian City Council Member.
Potential Distributions
As we have hinted in most recent discussions, more information may be to come regarding potential future distributions.
These distributions rely on the participation of our wider community and the establishment of a value aligned proposal, and there is no time better than now to spur progress towards further decentralization!
Website | Substack | Discord | Twitter | Github | Gitcoin | Careers