Upcoming Shapella upgrade brings growth in floating stakes – AMA with Swell
The liquid stake sector, with $16.68 billion in TVL, now surpasses DeFi lending and bridges as the second largest crypto sector according to Defillama data. The upcoming Ethereum Shapella upgrade, scheduled for April 12, has fueled existing interest: Liquid staking tokens, along with Ether (ETH) itself, are seeing an increase in value as the upgrade date nears.
The Shapella upgrade technically combines two major modifications: Shanghai, which brings changes to the execution layer, and Capella to the consensus layer. Among other improvements, both updates will allow ETH holders to retrieve their ETH and stake additional amounts of ETH without being tied to an indefinite lock-up period, as is the case now.
As one of the consequences, experts expect mass adoption of stake and that Ethereum will remain the largest proof-of-stake network in terms of stake capitalization, although a possible ETH price increase is debatable.
What is floating staking?
Liquid staking gives crypto users a wide range of flexibility. It allows them to stake tokens on a blockchain network to earn rewards while maintaining the liquidity of their assets. By using liquid staking, token holders can participate in various DeFi activities – lending, borrowing or raising liquidity – without having to unlock or stake their tokens, as they receive a “receipt” token (liquid staking tokens or LSTs) which represents their staked assets. This provides greater adaptability and maximizes both staking and DeFi activities.
In addition to asset mobility and yield farming, floating stakes provide quick access to funds, inter-chain security and stability of the underlying network, as it increases the amount of capital staked, which is important for proof-of-stake networks to validate transactions.
New heights in liquid staking on Ethereum
Liquid staking platforms on Ethereum, mainly developed to mitigate the network’s restrictive locking and staking conditions, are expected to remain in the spotlight due to providing ETH staking with risk reduction. This can increase competition between such platforms and force them to innovate and add new useful features for the public.
Such innovations include the reward-bearing token model used by Swell – a non-custodial ETH liquid staking protocol – which is different from the rebasing tokens used by other liquid staking platforms.
Swell’s token, swETH, represents the ETH staked on Ethereum, including stake rewards. Without changing the number of tokens, the value increases as rewards are earned. It keeps track of the value of the staked ETH and the rewards compared to the original staked ETH.
Swell also plans to contribute to DeFi adoption with vaults. Vaults will allow users to stake ETH and get swETH to easily access different DeFi strategies with a single click. Vault rewards will be collected in different tokens and can be sold back to the deposit item and compounded. Similar to an App Store, the Swell DApp will act as a gateway to multiple revenue strategies.
AMA with Swell on April 12, 2023
Follow along on April 12 at 10am EST for the latest Cointelegraph AMA session with Daniel Dizon, founder of Swell. Find out what the impact of the Shapella upgrade will be on the overall DeFi space, what the future of liquid staking holds, and how Swell benefits from liquid staking mechanics.
Join the conversation, share your thoughts and ask questions.
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