Swell Network Airdrop Analysis

Introduction

With a TVL of over $1.5b achieved after the launch of its campaigns, Swell Network has quickly established itself as a leading player in the liquid staking landscape. It provides users with an innovative, non-custodial platform to stake and restake Ethereum.

Through strategic campaigns like Voyage and Swell City, Swell has not only driven user engagement but also achieved remarkable growth. Check the rise of Swell Network TVL within 15 months of the campaign launch in the image below.

Following the launch of these campaigns (May 2023), Swell’s total value locked (TVL) soared to over $1.5 billion (image above), with the protocol joining the top 15 Projects by TVL Growth in May 2024 with a combined TVL of ~$2.3B. These campaigns were instrumental in attracting a diverse user base, deepening liquidity, and setting the stage for Swell’s continued expansion.

But how did Swell achieve such impressive results? Let’s break it down.

Explain me Swell like I’m 5

Imagine you have some Ether (ETH), and you want to keep it safe while earning some extra money. Swell lets you lock up your ETH and gives you an asset called swETH in return. This asset grows in value over time, just like how you earn interest on funds locked in a bank.

Not only can you hold onto swETH and watch it grow, but you can also use it to earn even more rewards by playing different games in the DeFi world. The more you play, the more pearls (points) you collect, which you can later trade for valuable prizes like Swell’s own special tokens.

Let’s dive into how Swell made this all possible through their exciting campaigns.

Airdrop Campaign Analysis

• Campaign Names: The Voyage and Swell City
• Campaign Duration:
  The Voyage: May 24, 2023 — July 30, 2024
  Swell City: August 1, 2024 — ongoing
• Campaign Allocation: 8% of the total $SWELL supply

Campaign Summary and Rules

Project Goals

The Voyage campaign was designed with several key objectives in mind:

1. Increase TVL: The primary goal was to significantly raise the total value locked (TVL) in the Swell Network by encouraging users to stake their ETH.
2. Encourage Long-Term Staking and Liquidity: The campaign aimed to encourage users to not only stake their ETH but also provide long-term liquidity in various DeFi protocols.
3. Foster Community Engagement: Building a strong, active community was key, with the campaign designed to reward users for participation and engagement.
4. Expand the Ecosystem: Another goal was to integrate swETH across multiple DeFi platforms and encourage partnerships to expand the Swell ecosystem.

Desired User Actions

To achieve these goals, Swell structured the Voyage campaign to encourage the following user actions:

1. Stake (and restake) ETH or BTC: Users were encouraged to stake their ETH or BTC and receive swETH or swBTC in return. Also, they could restake their ETH to obtain rswETH.
2. Provide Liquidity with staked assets: The campaign promoted the use of swETH in liquidity pools on DeFi platforms like Balancer and Aura, which helped strengthen Swell’s liquidity.
3. Refer New Users: To grow the Swell community, users were incentivised to refer new participants, with both parties earning rewards.
4. Engage with New Integrations: Users were also encouraged to engage with new features and cross-chain integrations, driving further adoption and usage of Swell’s staking solutions.

The Voyage

In May 2023, Swell Network launched the campaign “The Voyage,” inviting users to become citizens of the Swell DAO by acquiring “pearls”. This innovative campaign aimed to revolutionise liquid staking while building a strong, engaged community.

Let’s look at the rules and mechanics of this campaign;

Campaign Rules

Chapter 1

Swell started the voyage with Chapter 1 of the campaign which lasted for 3 months (May 24th 2023 to August 30th 2023);

Pearl Earning Mechanism:

• Minting swETH: Participants could earn 20 pearls for every swETH minted through the Swell app.

• This provided an incentive to users to convert ETH into swETH, Swell’s liquid staking token.
• Holding swETH: Pearls were awarded based on the amount of swETH held by a participant and the duration of the holding. The longer and larger the holding, the more pearls earned but the duration and reward aren’t stated by the protocol.
• Providing Liquidity (LPing): Users who provided liquidity in designated pools, such as Balancer, Aura, Maverick, Bunni, and Pendle, earned pearls at a higher rate compared to just holding swETH. An example of providing liquidity in Aura is in the image below;

Community Milestones:

• 50,000 ETH TVL Milestone: The campaign included a community-wide milestone where, if the total value locked (TVL) across Swell reached 50,000 ETH, the total pearl distribution program would increase by 40%. This rule encouraged collective action and participation from the community to achieve larger rewards. Take a look at this incentive in action (image below);

Analysis of Chapter 1

At the start of the campaign, the TVL of Swell Network was $31k, three months into the campaign, the TVL had risen to $80M

The change was not significant but it was progress. And then they launched Chapter 2 of the campaign.

Chapter 2

On Aug 30, 2023, Swell released chapter 2 of the voyage campaign and it came with new ways to earn pearls and an additional rule to curb abuse.

Referral Program (Introduced in Chapter 2):

• Referral Bonuses: Participants could generate a unique referral link and share it with others. Both the referrer and the new participant would earn 10 pearls for each swETH minted through the referral link. This encouraged existing users to bring new stakers into the Swell ecosystem.
• Rules Against Self-Referral: To prevent abuse, Swell implemented rules against self-referrals. Users found referring themselves (staking with their link) or using the same ETH repeatedly to generate multiple rewards (looping) would be excluded from the campaign and lose their entitlement to pearls.

Analysis of Chapter 2

At the start of the campaign, the TVL of Swell Network was $80M and then after almost a year (August 30th 2023 to July 30th 2024), the TVL had skyrocketed to over $1b.

Notice the TVL rise really picked up between December 2023 and January 2024. The rise coincided with the rise of the crypto market (specifically BTC) (image below). Also worth noting is that the rise of BTC was following the U.S. Securities and Exchange Commission (SEC) approval of multiple Bitcoin spot exchange-traded funds (ETFs) (source).

Let’s see how much effect the staking has on the total TVL of Swell Network compared to other activities;

From the chart, you can see swETH staking accounts for 67% of the TVL of Swell Network.

Earning Bonuses Through Discord Roles and Other Means

During the Voyage campaign, there were other ways for users to earn additional bonuses beyond the standard pearl earning mechanisms. These bonuses were designed to reward early supporters, active community members, and those who contributed to the protocol’s growth in various ways.

Discord Role Bonuses:

• Swell OGs, Divers, Navigators, and Submariners: These were special roles in the Swell Discord community that recognised early and active participants. Each role came with specific pearl bonuses:
• Swell OGs: 400 pearls
• Submariners: 200 pearls
• Navigators: 100 pearls
• Divers: 50 pearls
• Gitcoin Donors: Users who contributed to Swell via Gitcoin were rewarded with 300 pearls.
• Swell Diving Club: This was a special group within the Swell community. Members of the Diving Club earned an additional 40 pearls.

These bonuses were credited at specific milestones throughout the campaign, particularly after the end of Chapter 1.

Other Bonus Earning Methods:

• Early Participation and Guarded Launch: Early participants who staked in the previous Guarded Launch or contributed to other pre-launch activities also received bonuses. This was part of Swell’s strategy to incentivise early adoption and build momentum before the campaign officially kicked off.
• Referrals: In Chapter 2 of the Voyage campaign, Swell introduced a referral program where users could earn pearls by bringing in new participants. For every swETH minted through a referral link, both the referrer and the new user received 10 pearls.

Swell City

Now unto the campaign that’s currently ongoing; The Swell City which was launched in August 1, 2024. It is the next phase after the Voyage, designed to maintain user engagement and ensure the continued growth of the Swell Network.

This campaign introduced a new reward structure, focusing on ongoing participation through “Wavedrops” and offering significant bonuses for loyalty and sustained activity. It also introduced the earning of points through restaking of ETH to get rswETH.

Campaign Rules

Restaking ETH:

For Swell City, users could get pearls for restaking ETH. Users were expected to deposit ETH in the Swell app (image below).

After depositing, users receive minted Restaked Swell Ether (rswETH).

According to Swell, users collect Pearls with rswETH in the same way as with swETH. That includes ongoing Pearls for holding rswETH and using it in DeFi, along with a bonus of 30 Pearls for each newly minted rswETH.

Now let’s go into more detail about the rules of the Swell City campaign;

Wavedrops:

• Black Pearls: Unlike the White Pearls from the Voyage campaign, Black Pearls are earned by holding swETH or rswETH or swBTC and using them in supported DeFi integrations. These pearls are redeemable for $SWELL tokens at each Wavedrop.
• Wavedrop Schedule: Wavedrops occur every ten weeks, allowing users to claim $SWELL tokens based on the Black Pearls they have accumulated.
• Boosted Rewards for Consecutive Waves: Users receive increasing bonuses for participating in consecutive Wavedrops. Starting from zero, users can earn up to a 60% boost if they participate in six consecutive Wavedrops. This mechanism rewards consistent participation and discourages users from withdrawing or reducing their activity.

Loyalty Boosts:

• Snapshot Loyalty Bonus: Users who maintained at least 90% of their swETH/rswETH/swBTC balance from the snapshot date (July 30, 2024) receive a 30% boost on their Wavedrops. This bonus is designed to reward users who stay committed to the Swell ecosystem after the end of the Voyage campaign.
• Base Boost for Swell Citizens: New Swell Citizens, those who were part of the snapshot, start with a base boost and can earn higher boosts with each consecutive Wavedrop, provided they maintain their balance.

rswETH L2 Bonus:

• L2 Staking Bonus: As Swell expands to Layer 2 solutions, holders of Swell tokens (including swETH, rswETH, swBTC, and derivatives) who deposit in Swell L2 are eligible for a 1.5x multiplier on Swell L2 airdrops. This rule encourages users to transition to and support Swell’s Layer 2 initiatives.

Wavedrop Strategy and Multipliers:

• Ride the Waves: Users can increase their $SWELL rewards by riding consecutive Waves. For each consecutive Wavedrop in which a user participates, their Black Pearl count will be boosted by an additional 10%, up to a maximum of 60% after six consecutive Waves. This strategy incentivises continuous engagement and discourages intermittent participation.
• Wavedrop Frequency: Wavedrops are scheduled every ten weeks, providing a consistent reward cadence for users who remain active in the ecosystem.

Analysis of Swell City

The Swell City campaign is barely a month old now and so far, the TVL of Swell Network dipped a little following the decline of the crypto market.

This is the chart of BTC following the launch of Swell City. Notice the correlation in decline between the TVL of Swell Network and the decline in the price of BTC.

We will still be observing the effect it will have on the TVL of Swell Network as users ride the waves.

Airdrop Pre-market ROI

The Voyage (White Pearls)

Cost of ETH needed to mint and hold

Since it’s staking, the amount of ETH used isn’t exactly spent but just locked up

Assumptions

• Price of ETH: Let’s assume $2,000 per ETH for calculation simplicity, which is a rough average in recent times.
• Transaction Fees: Including gas fees for transactions on Ethereum. Assuming an average gas fee of $10 per transaction (minting and providing liquidity).

Scenario 1: Minimal Engagement

• Mints 1 swETH:
• ETH Cost: $2,000 (1 ETH at $2,000)
• Transaction Fees: $10

Minimal amount needed: $2,010

• Scenario 2: Moderate Engagement
• Mints 10 swETH:
• ETH Cost: $20,000 (10 ETH at $2,000 each)
• Transaction Fees: $10 for minting + assumed additional $50 for multiple liquidity provisions = $60

Moderate amount needed: $20,060

• Scenario 3: Highly Active User
• Mints 100 swETH:
• ETH Cost: $200,000 (100 ETH at $2,000 each)
• Transaction Fees: $10 for minting + assumed additional $250 for extensive liquidity provisions = $260

Maximum amount needed: $200,260

Points estimate for each activity on Voyage

• Basic Participation (Minting and Holding swETH)

Minimum scenario:

• Mint 1 swETH: 20 pearls
• Hold for a short period: Let’s assume 10 pearls

Minimum total: 30 pearls

Maximum scenario:

• Mint 100 swETH: 2,000 pearls
• Hold for the entire campaign (assume 1 year): Let’s estimate 1,000 pearls

Maximum total: 3,000 pearls

• Liquidity Provision (LPing)

Assuming LPing earns 2x the rate of holding:

• Minimum (small amount, short period): 20 pearls
• Maximum (large amount, full year): 2,000 pearls
• Referral Program (Chapter 2)
• Minimum: 1 referral (10 pearls)
• Maximum: Let’s assume 50 successful referrals: 500 pearls
• Discord Role Bonuses
• Minimum (Diver): 50 pearls
• Maximum (OG + Diving Club): 400 + 40 = 440 pearls
• Other Bonuses
• Gitcoin Donor: 300 pearls
• Early participation bonus: Let’s estimate 100–500 pearls

Total Range Estimation

• Minimum participation:

Basic participation (30) + Minimum Discord role (50) = 80 pearls

• Maximum participation:

Basic (3,000) + LPing (2,000) + Referrals (500) + Discord (440) + Gitcoin (300) + Early bonus (500) = 6,740 pearls

• Typical active participant:
• Mint and hold 10 swETH: 200 + 100 = 300 pearls
• Some LPing: 200 pearls
• 5 referrals: 50 pearls
• Navigator Discord role: 100 pearls

Total for typical active participant: 650 pearls

Additional Considerations

1. 50,000 ETH TVL Milestone: If reached, all pearl earnings would increase by 40%.
2. Duration of participation: Those who joined early and stayed throughout the campaign had more opportunities to earn pearls.

Conclusion

The estimated range for pearl earnings is approximately:

• Minimum: 80 pearls
• Typical active participant: 650 pearls
• Maximum: 6,740 pearls (potentially up to 9,436 if the 40% TVL milestone bonus is applied)

Using the points market value of White Pearls from the Whales Market, we can estimate how much each category earned on average. Currently, White Pearls are trading at approximately $0.1 but got to a high of $0.5 in April.

With The Voyage running from May 24, 2023 to July 30, 2024, which is approximately 433 days, we can calculate the APY for different scenarios of pearl holders;

If 1 pearl is $0.1:

Minimum: $8 (with $2,010 locked up)

• ROI = ($8 / $2,010) x 100% = 0.398%
• APY = (1 + 0.00398)^(365/433) — 1 = 0.335%

Typical active participant: $65 (with $20,060 locked up)

• ROI = ($65 / $20,060) x 100% = 0.324%
• APY = (1 + 0.00324)^(365/433) — 1 = 0.273%

Maximum: $674 (or $943.6 with the bonus) (with $200,260 locked up)

• ROI (without bonus) = ($674 / $200,260) x 100% = 0.337% and APY = 0.283%
• ROI (with bonus) = ($943.6 / $200,260) x 100% = 0.471% and APY = 0.396%

If 1 pearl is $0.5:

Minimum: $40 (with $2,010 locked up)

• ROI = ($40 / $2,010) x 100% = 1.990%
• APY = (1 + 0.01990)^(365/433) — 1 = 1.672%

Typical active participant: $325 (with $20,060 locked up)

• ROI = ($325 / $20,060) x 100% = 1.620%
• APY = (1 + 0.01620)^(365/433) — 1 = 1.362%

Maximum: $3370 (or $4754 with the bonus) (with $200,260 locked up)

• ROI (without bonus) = ($3,370 / $200,260) x 100% = 1.683% and APY = 1.414%
• ROI (with bonus) = ($4,718 / $200,260) x 100% = 2.356% and APY = 1.977%

Airdrop Anticipation

Users who participated in the Voyage and held onto their stacked assets or provided liquidity are anxiously awaiting the airdrop with some even getting impatient. Some are already checking the premarket sales and making deals.

Let’s look at some screenshots from X (Twitter) and Discord about the presale of the token;

In anticipation of the airdrop, some members of the community are losing their patience;

Community Feedback

At the end of The Voyage, Swell introduced the Swell City campaign. Overall, the community was split in two, some were happy with the continuation and potential while others were not particularly welcoming about it;

Conclusion

Swell Network’s seem to have cracked liquid staking, by making special use of its Voyage and Swell City campaigns. It has increased its TVL and its user base as it continues to be a major player in the DeFi ecosystem.

Looking ahead, with the Swell City ongoing, Swell Network is preparing to release a Layer 2 for Restaking. Users will deposit swETH, rswETH, and other supported assets in the pre-launch to get airdrops from projects building in this new restaking ecosystem. As of two months ago, they had recorded 50,000+ depositors

As the current Swell City campaign keeps on running and the Layer 2 launch coming soon, we will see how much more TVL it can garner and how it’ll ensure it retains its community with most of them growing impatient with the long overdue token launch. We will see if the anticipation for the $SWELL launch would be worth the wait.

References

1. https://dune.com/queries/2426388/5266531
2. https://app.swellnetwork.io/stake
3. https://app.aura.finance/#/1/pool/152
4. https://coinmarketcap.com/currencies/bitcoin/
5. https://x.com/CAVEHOLDER/status/1769531605968724468
6. https://x.com/aibra/status/1671829435836669954
7. https://x.com/BragionEduardo/status/1828478628868362386
8. https://x.com/cryptoroman4/status/1828685084955644293
9. https://x.com/roybond_/status/1677521927446077440
10. https://x.com/crypto_sickz/status/1672071206768623616
11. https://dune.com/swell-network/swell-l2

Disclaimer:
The information provided in this article is for informational purposes only and reflects the research and opinions of One Click Labs. It should not be considered financial, legal, or investment advice. Airdrop participation involves risks, including potential loss of funds, and readers are encouraged to conduct their own due diligence. One Click Labs does not endorse or guarantee the success of any project mentioned and is not liable for any losses incurred due to airdrop participation or reliance on the information provided.