Swim is a multi-chain AMM for native assets, designed to make bridging as easy as possible. The protocol eliminates the need for wrapped assets by allowing users to swap from a native asset on one chain to a native asset on any other supported chain. Swim’s solution reduces the barriers faced by users when performing cross-chain transactions, allowing for true interoperability between various blockchain networks. Through integrations, Swim also aims to help other protocols enable multi-chain composability.
On March 9th, Swim will have its Alpha Launch, enabling users to interact with the product’s initial features. Shortly after, Swim will be launching additional pools, more supported assets for cross-chain bridging, and the $SWIM governance token.
Table of Contents
I. Swim Protocol – A Super Convenient Cross-Chain Solution for Solana Users
As the Solana ecosystem has grown exponentially, with TVL (Тotal value locked) on the network hitting a recent peak of $2.0 billion, a large number of new users have begun to desire the high quality experience of Solana TPS with the advantage of low fees.
While many pieces of the underlying infrastructure (Defi “blocks” of Defi) on Solana are slowly emerging, one pillar that is still missing is the cross-chain infrastructure that allows users to easily transfer assets from one blockchain to another, such as Ethereum and BNB Chain to Solana, and vice versa. Wormhole-wrapped assets have the major limitation that they are not sourced from Solana. For example, USDT transferred through Wormhole will become Wormhole-wrapped USDT, which is not interchangeable with Solana native USDT (USDT SPL). This creates an undesirable two-tier system of assets, fragmenting liquidity and creating a suboptimal user experience.
Seems a bit inconvenient, doesn’t it? Don’t worry, Swim Protocol will take care of this for you.
Swim eliminates the need for wrapped assets by allowing users to swap from native assets on one chain to native assets on any other supported chain, by combining the ideas established by the asset AMM existing stable assets with Wormhole’s bridging technology to create a new type of cross-chain liquidity platform.
Currently, users who want to move an asset into the Solana ecosystem must first deposit the asset on an exchange (most commonly FTX) and then withdraw it back to Solana. This process is relatively cumbersome, slow, and not fully decentralized. With Swim, however, users will be able to do this quickly and seamlessly, with no management required.
Swim offers a super-convenient solution to the existing inefficiencies with cross-chain asset swaps, in the form of wrapped assets, centralized exchanges, and platform-specific native tokens used in several on-chain AMMs. This new solution is much more capital-efficient than existing approaches and paves the way for a paradigm shift in how we approach cross-chain interoperability.
3. How it actually works
Users will be able to interact with Swim’s liquidity pool with native assets on multiple chains. Initially, only stable asset pools will be created on Ethereum, BSC, and Solana to facilitate trading between these chains. The pools on either chain are connected via Wormhole, which helps to relay transaction requests across chains. When a transaction is received by the Swim smart contract, an algorithm will determine the slippage based on the size of the trade and the pool’s composition, providing an execution price.
Let’s go through an example to demonstrate how Swim works when a user wants to swap ERC20 USDT for SPL USDC.
➢ User connects both Ethereum and Solana wallets to Swim
➢ User selects the desired amount of USDT (ERC-20) to swap and USDC (SPL on Solana) to swap
➢ USDT ERC-20 locked on Ethereum
➢ Swim accomplishes this via wormhole, determines the correct execution price, and sends the correct amount of USDC (SPL on Solana) to the user
II. Cross-chain Interoperability
1. Current stableswap situation in DeFi
Curve gained popularity during the summer of 2020 as it provided a way for users to swap stablecoins with a stableswap ratio near 1:1. This allows users to convert between other stablecoins when participating in different DeFi Protocols, ultimately bringing the DeFi ecosystem closer together.
In general, users usually don’t mind trading stablecoins to stablecoins with a few basis points different from the typical 1:1 as they typically earn more through a few hours of productive farming than they would have otherwise lost due to price slippage and fees. Stablecoin rates rarely deviate 10 basis points from fair market value. This demonstrates that market makers are willing to deploy large amounts of capital to earn just a few basis points on stablecoins, eventually balancing these liquidity pools closer to equilibrium.
2. Current bridge landscape
Connectivity in the DeFi ecosystem will rely heavily on cross-chain interoperability. Bridges are typically designed to lock and unlock on the source chain and mint wrapped assets on the destination chain.
Currently, platforms have launched DeFi bridges with bridge-wrapped assets, centralized solutions, throttled transaction limits, and third-party wallet and tokens. However, no single player is truly offering users a seamless way to connect liquidity across chains.
Why? For the most part, these existing platforms are not user-friendly and difficult to use. Many current solutions require multiple steps across different platforms, which can lead to severe performance and/or usability limitations.
3. Swim Protocol’s Solution
Swim approached the bridge solution by extending the pedal design. As mentioned above, Swim is a multi-chain AMM for original content, designed to make bridging as easy as possible. Its protocol eliminates the need for wrapped assets by allowing users to swap from native assets on one chain to native assets on any other supported chain.
Swim’s solution reduces the barriers users face when conducting cross-chain transactions, enabling true interoperability between different blockchain networks. In the hope of creating an easy-to-use bridging platform, the Swim team is working extremely hard with the Wormhole team to bridge the multi-chain universe for you.
4. How is using the Swim Protocol ” a pleasure”?
For starters, Swim allows users to simultaneously connect multiple wallets across chains, such as Ethereum, Solana, and BNB Chain. Once a user’s wallet is connected, they will be able to swap native stablecoins at a fixed swap rate – a capability powered by Swim’s AMM technology and Wormhole’s cross-chain communication technology. As a result adding, removing, and swapping between chains becomes more seamless and efficient.
Initially, Swim will launch with a stablecoin hexa-pool for asset swaps connecting Ethereum, BNB Chain, and Solana to facilitate transactions between these chains. With the broader DeFi ecosystem transitioning to a multi-chain model, DeFi applications and liquidity are becoming increasingly distributed across private and private networks. As Swim grows, so will its composability – and the Swim LP token will be able to integrate into a number of different chains for multiple use cases like borrowing, lending, collateral, and more.
Swim’s LP token has advantages over the existing LP token in the following ways:
➢ Interoperability: ability to traverse all chains that the Swim protocol is connected to
➢ Compatibility: the ability to integrate with any protocol connected by Swim’s multi-chain network
III. Eliminating the Need for Wrapped Assets
1. First thing, what are wrapped assets?
Let’s say you are holding Bitcoin and your friend has Ethereum, the two of you cannot transact directly with each other because the protocols behind these things cannot communicate with each other. In particular, Bitcoin does not combine with more advanced developments in cryptocurrencies, like smart contracts that have made Ethereum essential to the broader ecosystem.
The solution is to create Wrapped Bitcoin, or wBTC, that functions as a bridge between Bitcoin and Ethereum-based applications, especially dApps developed for DeFi contexts. wBTC is an ERC-20 token, which means it works on the Ethereum network. Each wBTC is backed by 1 BTC and always holds an equivalent value.
With wBTC in your wallet, you will be able to transfer value to your friends, who can then burn those wBTC tokens to extract BTC for themselves. This is an example of wrapped assets – there are many more and they are all created as bridges between protocols. In addition, wrapped assets can enhance liquidity; in the wBTC example we can see that the deep liquidity of BTC can be transferred to the Ethereum network.
That is all to say that wrapped assets are all about developing inter-protocol compatibility, which in turn opens up new applications and opportunities.
2. What are the limitations of using wrapped assets?
To create wrapped assets, a supervisor is required. In the wBTC example, the custodian holding BTC is being used to support wBTC.
This raises the question of trust. What prerequisites must a custodian have in order for them to be able to hold multiple tokens – possibly worth billions of dollars or cryptocurrencies – used to create wrapped assets? Also, does this centralization of power go against the decentralization ethos that stakeholders in the blockchain space hold as principle?
From a retail user perspective, handling wrapped assets is also not intuitive and can be a barrier to entry for amateur DeFi users looking to bridge chains. How does a new crypto enthusiast really learn methods of connecting to wrapped assets when there are many different chains?
These are the questions posed by skeptics of wrapped assets. Swim has the answer – with their new native asset route solution.
3. How does Swim eliminate the need of wrapped assets?
With Swim, their team realized that we live in an increasingly multi-chain world. With Ethereum, BNB Chain, and Solana that have emerged as important ecosystems for decentralized finance, or DeFi, Swim is there to create paths between these networks so that capital can flow freely and swim across chains.
Swim is doing this by combining automated market-making mechanisms (AMMs) with Solana Wormhole’s bridging functionality. This connotes Wormhole’s status as a proof-of-stake token bridge, which means that they will use a trusted validator (authority) to ensure that tokens are locked on-chain and the origin matches the bridging assets minted on the destination chain. Wormhole is expected to be the fastest token bridge in the Solana ecosystem while keeping security in mind.
One great thing about Wormhole is that it will likely grow beyond Ethereum and Solana networking to connect to other blockchains. Swim will in turn grow with each new iteration of Wormhole, increasing our functionality. Also, Swim is not limited to Wormhole’s network; Its protocol can also be built on top of other EVM cross-chain communication technologies.
Furthermore, Swim will establish Solana, BNB Chain, and Ethereum liquidity pools, providing users with a way to efficiently swap between SPL, BEP20, and ERC20 stablecoins. There is strong potential to take this one step further to facilitate even more exchanges between tokens on these chains, such as SOL/ETH and other trading pairs not normally offered on the DeFi platform.
Swim’s starting point is already more diverse than existing options for transferring assets across-chain, including wrapped assets. Its trajectory points to rapid expansion to key areas in the blockchain space, providing you with a highly flexible tool to move your assets to your desired destination with ease.
Swim’s tokenomics model is broken down into these few major components:
➢ Mining reserve: 30%
➢ Ecosystem/partnership: 35%
➢ Team tokens: 20%
➢ Seed: 5%
➢ Liquidity provision: 10%
Team & seed tokens are locked for 1 year and released linearly for 3 years afterwards.
Swim Protocol will launch with pools for native stablecoins on Ethereum, BNB Chain, and Solana along with an attractive liquidity mining program, which will allow early participants to become owners of the protocol.
It will also add support for additional networks such as Avalanche, Polygon (Matic), Terra, along with others in the near future. In due time, the protocol will be improved upon to enable cross-chain swapping between any assets, such as SPELL on Ethereum to ORCA on Solana, by plugging in between different DEXs.
The Alpha Launch is scheduled to launch on March 9th. The SWIM token launch will be shortly after. In addition, Swim will launch with staking features for users to participate in the Swim ecosystem + a Special NFT launch with utility for yield farmers/users.
With Swim, the team’s goal is to create a fast, seamless experience that links between chains of smart contracts, ultimately creating a network of pools of native assets across multiple chains through which users can be seamlessly swapped from one chain to another without the need to use wrapped assets or CEXs .
With the broader cryptocurrency ecosystem rapidly transitioning to a new multi-chain model, DeFi applications and liquidity are becoming increasingly distributed across separate and private networks. Swim is well positioned to help tackle this growing fragmentation and establish itself as a vital part of the infrastructure in the months and years to come. With the rise of the multi-chain world, the community needed a seamless way to connect native assets.
Hope the above article has fully equipped you to explore Swim Protocol with us. Get ready!