Euler on Swellchain | Space Recap

In our latest Space, we were joined by Antoine from Euler and Soufia from Kelp to explore the potential of LRT lending on Swellchain. 

In case you missed it, here are the top questions from the event.

What is Swellchain?

“With Swellchain, we are bringing to market a concept we call Proof of Restake. Proof of Restake, is essentially where you use restake to secure, scale, and decentralize various aspects of the chain – such as sequencing, data availability – as well as to host a set of dApps on the chain that are able to do things that are simply not possible within the constraints of the EVM. Swellchain is an Optimistic rollup, built on the Superchain. 

One of the major problems that we wanted to fix with Swellchain is “can we build an ecosystem and a chain that is going to be a true home, not only for the LRT assets to sit on, but also for users to consume the different AVS’s and networks that are made possible through restaking?”. This is where the Proof of Restake concept comes in.

Going off what we saw last year, there were a lot of different restaking layers that popped up such as, EigenLayer, Symbiotic and also Kernel, where we saw a lot of assets that were sitting in restaking. One of the beautiful things about restaking is that it allows services that fall back to a decentralized consensus of Ethereum, while being able to go beyond the constraints of the EVM. What this means is that you can build whatever you want and it's able to be secured by ETH. 

We’re excited to be working with a lot of different builders, and you'll be seeing a lot more on this Proof of Restake concept on Swellchain over the next year.”

– Abi, Swell 

Lending is a big part of the vision of Swellchain. Where does Euler fit in?

“Euler is a protocol that was founded a couple of years ago, coming out of a hackathon and has since grown to become one of the biggest and fastest protocols from the previous bear market. Euler is well positioned to capture a lot of market share, and help existing protocols but also to be ready for the future where we will see changes in trades, assets evolving, and more and more institutions, and because we are modular we can accommodate for that.

Lending is an essential component of every ecosystem and every chain, because it helps liquidity flow, use cases to flourish, and brings utility to a lot of the dApps and tokens that  are present there. Euler fits in particularly well with Swellchain, because on top of the specificities and advantages of Swell that Abi described, Euler is a flexible lending protocol, and the infrastructure that we've built allows anyone to create the lending market that fits their use cases. 

If you look at the Euler market that has been deployed on Swell, you will see it is a market focused on the use case of ETH and ETH derivative assets. This market has been designed for the particular use case of people using yield bearing ETH derivatives, putting it as collateral and borrowing ETH, therefore having a more leveraged position. We let builders who can build projects, be risk managers, or just anyone who wants to deploy a market, to use their knowledge of risk markets and their creativity, to build custom markets for the expansion of each chain. 

Swell have attracted amazing projects to come and build on Swellchain, and on top of the market already live, you will see a lot of great curators and projects on there very soon. Our flexibility, the quality of the projects on Swellchain, and the need for custom markets is really what made it obvious for Euler to deploy there on Day 1, and we’re super grateful for that.” 

– Antoine, Euler 

What role does lending play in the rsETH ecosystem?  

“The interesting thing that Kelp has been working on, is trying to rely less on retail and instead focus on more activity on LPs from whales via our vaults. If we take the example of Aave for instance, 90% of the activity is from Kelp vaults, and from that perspective these markets rely on us to supply rsETH to be able to borrow from assets. 

This is all to say that we try to hedge ourselves via multiple markets given that rates do fluctuate a lot which we see on a daily basis. In the future, we are looking to add more up and coming lending markets, as well as work with these markets in order to optimize rates so that we can allow for looping.” 

– Soufia, Kelp 

What strategies can people take advantage of on Swellchain?

“We can see that the biggest thing users are doing right now is leveraged restaking, which is the main use case that we want to enable on Swellchain, and is the primary use case of the market that is set up on Euler right now.” 

There are currently two ways to earn rewards on Euler:

1. Provide ETH to Euler 
2. Take any asset, go to Euler, and borrow ETH against it

Rewards are distributed via Merkl as Swell’s reward token wSWELL, the 1:1 wrapper for SWELL. Looking forward, we see lending as something that is much bigger than just leveraged restaking, and we think that much more can be done then simply putting in an LRT and borrowing ETH. We see Euler as the perfect platform to fulfill this, where Euler is simply not a lending platform, but a platform that builders can use to build variations of what lending can look like. What we hope to see on Swellchain is other builders using Euler as a base platform to build new lending use cases, because ultimately in a way, lending is very similar to restaking.” 

– Abi, Swell

Thanks to everyone who attended the event!
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