The Berlin-based multi-asset decentralised finance (DeFi) platform Swarm is to introduce institutional-grade liquid staking tokens that are capable of integrating into DeFi automated market maker (AMM) pools to generate additional yield in a protected environment.
The offering will begin with liquid staking tokens for Solana Network’s native token SOL, being closely followed by Eth 2.0, DOT and AVAX.
According to Staked’s State of Staking Q1 2022 report, annualised staking rewards have grown to $15billion within the space of the last year. The industry is quickly becoming a popular source of passive income with average staking yields at 15.4 per cent in Q1 2022, which when compared to the previous quarter, were up 11 per cent.
By using the liquid staking token structure on Swarm, an investor is exposed to the value of the underlying asset, can earn yield from validator fees and trade in and out of their position at any time, instead of having assets idling.
It’s then possible to earn additional yield from the tokens by staking them in compliant DeFi pools on Swarm Markets, where liquidity providers receive trading fees proportional to their share of the pool. Additional loyalty rewards are available by holding Swarm’s native payment token, SMT.
“Staking is the new mining as ESG is stimulating investor interest in proof-of-stake networks,” said Swarm co-founder Philipp Pieper.
“We’re making it easier for people to have a tradable position on their staked assets, giving institutions an entry point in the price discovery process for proof-of-stake networks.”
A commitment has been made by private investors and funds managing more than $100million in assets under management (AUM) to support the launch of this new product, including the new crypto fund MetaLink Capital, which aims to help people access cross-chain liquidity.
“We’re interested in liquid staking because we can take a position across a variety of layer one blockchains with 24/7 risk management, giving us the ability to react instantly to market moves,” comments Toby Lewis, director at MetaLink.
“Due to the self-custody nature of DeFi, we will have complete control over our positions and assets at all times. We are keen to use Swarm’s infrastructure to get access to more complex strategies on emerging different layer ones like Solana.”
Liquid staking tokens are issued on a single chain, starting with Polygon, making it simple to invest across a variety of layer one networks using just USD Coin (USDC), which removes the operational complexity.
All users on Swarm must undergo rigorous know your business (KYB), know-your-customer (KYC) and anti-money laundering (AML) checks, to eliminate counterparty risk. In time, it will be possible to package multiple tokens together to generate a staking index product with an international securities identification number (ISIN).
“Our infrastructure hacks trustlessness,” comments Timo Lehes, co-founder of Swarm. “By removing counterparty risk, institutional capital can finally move into these products to earn high yield and loyalty rewards in a low-yield paradigm.”
One of the first liquidity pools available on Swarm will comprise liquid SOL and DAI, the stablecoin generated by the Maker Protocol, which is the largest DeFi protocol by TVL. Swarm is partnering with custodians of staked assets and will add more PoS networks in the near future.
