Swivel Finance: A Capital-Efficient Protocol for Tokenized Cash Flows

What is Swivel Finance

Friends, imagine when we deposit money in a bank, we usually have two options: one is a demand deposit, where the interest rate fluctuates with the market and is quite uncertain; the other is a fixed-term deposit, where the interest rate is fixed and you get a guaranteed return at maturity. In the blockchain world, many decentralized finance (DeFi) projects offer lending services similar to demand deposits, with floating yields—sometimes high, sometimes low—leaving users feeling uncertain.

Swivel Finance (abbreviated as SWIV) is a blockchain project designed to solve this problem. It acts as the "fixed-term deposit" provider in the DeFi world, allowing users to lock in a fixed yield or flexibly trade future returns.

Its core concept is "yield tokenization." You can take interest-bearing assets you've earned from other DeFi protocols (such as Aave, Compound, Lido, etc.) and deposit them into Swivel Finance. Swivel will split your assets into two parts, like dividing a fruit into "flesh" and "pit":

• Principal Tokens (PTs, also called zcTokens): This part represents your initial principal deposit, which you can redeem 1:1 for your original asset at maturity.
• Yield Tokens (YTs, also called nTokens): This part represents the interest your principal may generate over a specific future period.

With this mechanism, if you want a fixed return, you can sell your yield tokens (YTs) in advance and immediately lock in a guaranteed yield. If you expect future yields to be high, you can buy more yield tokens to amplify your potential returns.

Typical usage flow:

1. The user deposits crypto assets (such as USDC) into Swivel Finance, which then deposits these assets into other yield-generating protocols (like Compound).
2. Swivel splits the user's deposit into principal tokens (PTs/zcTokens) and yield tokens (YTs/nTokens).
3. The user can choose to:
   • Lock in fixed yield: Sell YTs to immediately receive a fixed return.
   • Amplify floating yield: Buy more YTs to increase exposure to future returns.
4. At maturity, the user can redeem their original principal with PTs.

Project Vision and Value Proposition

Swivel Finance's vision is to make the DeFi market more mature and predictable. Currently, DeFi yields are highly volatile, deterring risk-averse investors and making it difficult for professional institutions to manage risk effectively.

Swivel aims to solve this by providing a "tokenized cash flow" capital-efficient infrastructure and a professional trading interface. Its value proposition is mainly reflected in:

• Offering fixed yield options: Like fixed-rate products in traditional finance, users can lock in returns in advance and avoid uncertainty from market fluctuations.
• Improving capital efficiency: By separating principal and yield, users can flexibly manage and trade these tokenized cash flows, increasing capital utilization.
• Lowering risk management barriers: For investors looking to hedge risk or employ more complex strategies, Swivel provides tools to better manage interest rate risk in DeFi.
• Avoiding "toxic liquidity": Unlike similar projects using automated market makers (AMMs), Swivel adopts an orderbook model. The orderbook acts as a public trading list where buyers and sellers post orders directly, reducing losses for liquidity providers caused by market rate fluctuations (known in DeFi as "impermanent loss" or "toxic liquidity").

Technical Features

Swivel Finance's technology mainly has the following features, which together build a flexible and efficient fixed yield market:

Yield Tokenization

This is Swivel's core mechanism. It splits an interest-bearing asset (such as USDC deposited in Compound) into two independent ERC-20 tokens:

• zcTokens (zero-coupon tokens): Represent principal that can be redeemed 1:1 at maturity. You can think of it as a "zero-coupon bond"—you buy it now, redeem the principal at maturity, but it doesn't generate interest itself, as the interest has been separated.
• nTokens (nominal tokens): Represent the interest the principal may generate over a future period. You can think of it as an "interest coupon"—holding it entitles you to the corresponding interest.

This separation allows principal and yield to be traded independently, greatly increasing DeFi's flexibility.

Orderbook Exchange Model

Unlike many DeFi projects that use automated market maker (AMM) models, Swivel Finance uses an orderbook for trading. The orderbook model is more similar to traditional financial stock exchanges, where buyers and sellers submit limit orders and wait for matching.

The benefits of this approach are:

• Low slippage trading: On the orderbook, trades can be matched at precise prices, reducing price slippage, especially for large trades.
• Avoiding "toxic liquidity": In interest rate derivatives markets, AMM liquidity providers (LPs) may suffer losses due to sharp market rate fluctuations. The orderbook model helps liquidity providers avoid this risk.

Smart Contract Architecture

Swivel Finance operates through a series of smart contracts deployed on the blockchain. These contracts handle fund custody, token minting and burning, order matching and settlement, and other core functions.

• Swivel.sol: Mainly responsible for fund custody and user-protocol interaction methods, such as initiating, exiting, splitting, and merging tokens.
• Marketplace.sol: Maintains the market and handles token transfers.

These contracts interact with underlying yield protocols (such as Compound) to ensure that user-deposited assets continue to generate returns.

Tokenomics

The Swivel Finance project has a token with the symbol SWIV. According to CoinMarketCap, SWIV's self-reported circulating supply is 4,073,117, but its market value has not been verified. Unfortunately, there is currently no publicly available detailed tokenomics model for SWIV, such as total supply, specific allocation mechanisms, inflation/burn models, or the token's specific utility within the protocol (other than as the project abbreviation).

Generally, DeFi project tokens may be used for:

• Governance: Token holders can participate in project decisions, voting on protocol parameters, upgrades, etc.
• Staking: Users stake tokens to earn rewards or participate in network security.
• Fee discounts: Holding or using tokens may grant trading fee discounts.
• Liquidity mining: Rewards for providing liquidity.

Due to the lack of an official whitepaper or detailed tokenomics documentation, we cannot provide more specific information about the SWIV token. If you are interested in the token, be sure to consult the latest official project materials for the most accurate and comprehensive information. Please note that any cryptocurrency investment carries high risk; this introduction does not constitute investment advice.

Team, Governance, and Funding

Team

Swivel Finance (referring to the blockchain project) was co-founded by Julian Traversa and William Hsieh. Julian Traversa also serves as Swivel's CEO. Their company was founded in 2020.

Note that search results also show another traditional financial services company named "SWIVEL" or "Swivel Finance," with team members such as Amanda Crocker (President), Joshua Luke (CTO), etc., who are different from the blockchain project Swivel Finance team. Here we are discussing the blockchain project Swivel Finance team.

Governance

Currently, public information does not detail Swivel Finance's decentralized governance mechanism. Many DeFi projects implement community governance through governance tokens (such as the SWIV token), allowing token holders to vote on the protocol's future direction, parameter adjustments, etc. If Swivel Finance adopts this model in the future, the SWIV token will likely play an important governance role.

Funding

Swivel Finance has successfully completed two funding rounds, raising a total of $4.65 million. The latest round was a Series A completed on October 26, 2021, raising $3.5 million. Participating investors include:

• Multicoin Capital
• CMT Digital
• Sirius Crypto Capital
• IOSG Ventures
• Amber Group

The involvement of these well-known investment institutions indicates market recognition of Swivel Finance's potential.

Roadmap

Currently, there is no clear, timeline-style roadmap for Swivel Finance in public materials. Typically, blockchain projects use roadmaps to show past milestones and future plans, including new feature releases, ecosystem expansion, partnerships, etc.

Based on its documentation and GitHub activity, we can infer some historical technical developments:

• Project founded in 2020.
• Smart contract codebase updates and audit reports in September 2021 and July 2022.
• Mainnet is live, and a testnet is available for developers.
• Litepaper updated in September 2023.

For future plans, although there is no explicit roadmap, its vision suggests possible development directions:

• Expand supported yield protocols: Integrate more mainstream DeFi lending protocols to offer users more choices.
• Enrich product features: Potentially develop more financial derivatives based on yield tokenization and orderbooks, such as options, futures, etc.
• Cross-chain deployment: Expand the protocol to other high-performance or low-cost blockchains to attract a broader user base.
• Improve community governance: Gradually achieve a more decentralized governance model.

Interested parties are advised to follow Swivel Finance's official announcements, social media, and developer community for the latest project progress and roadmap information.

Common Risk Reminders

Investing in any blockchain project carries risks, and Swivel Finance is no exception. It's important to understand these potential risks before participating:

Technical and Security Risks

• Smart contract risk: Swivel Finance's core functions rely on smart contracts. Even if the project is audited, smart contracts may still have undiscovered vulnerabilities that could lead to fund loss.
• Oracle risk: If the protocol relies on external data sources (oracles) for rates and other information, inaccurate or manipulated oracle data may affect protocol operation and user asset safety.
• Underlying protocol risk: Swivel Finance deposits user assets into other DeFi yield protocols (such as Aave, Compound). If these underlying protocols have security flaws or operational issues, Swivel Finance users' assets may also be affected.
• Code complexity risk: DeFi protocols often involve complex logic and multiple contract interactions, increasing the likelihood of unexpected behavior or vulnerabilities.

Economic Risks

• Market volatility risk: Cryptocurrency markets are highly volatile; even fixed yield products may have underlying asset value fluctuations affecting overall returns.
• Liquidity risk: Although Swivel uses an orderbook, if a particular asset pair lacks liquidity, users may have difficulty quickly buying or selling yield or principal tokens at desired prices.
• Interest rate risk: While Swivel offers fixed yields, if the overall market rate environment changes dramatically, the attractiveness of fixed yields may decrease, or users may face price volatility when trading yield tokens on the secondary market.
• Depegging risk: If supported stablecoins lose their peg, asset value losses may occur.

Compliance and Operational Risks

• Regulatory risk: Global regulation of cryptocurrencies and DeFi is still evolving; future policy changes may impact Swivel Finance's operations and legality.
• Centralization risk: Although a decentralized protocol, if key decision-making or upgrade rights are too concentrated, centralization risk may exist.
• Team execution risk: The team's ability to deliver roadmap features on time and continuously maintain and upgrade the protocol is key to project success.

Remember, the above risks are not exhaustive. Always conduct thorough due diligence and consult professional financial advisors before making any decisions. This content does not constitute investment advice.

Verification Checklist

To help you better understand the Swivel Finance project, here are some important verification links and information for your own research:

• Official website: swivel.finance
• Litepaper/Documentation:
  • Swivel Finance Litepaper: docs.swivel.finance/litepaper
  • Swivel Finance Documentation: docs.swivel.finance
• GitHub Repository:
  • Main repo: github.com/Swivel-Finance/swivel
  • Smart contracts: github.com/Swivel-Finance/swivel/tree/main/contracts

  GitHub activity can be assessed by checking commit history, issues, pull requests, etc.

• Block Explorer Contract Addresses (Ethereum Mainnet):
  • Swivel.sol (v4):
    0xca3b125529a6b19cb5c65e485efbc942b337a64a
  • MarketPlace.sol (v4):
    0x3b61ec0556a9e6fe371bc38a74debc3686bd1561
  • zcEUSDC-MAR23 (example zcToken): etherscan.io/token/0x3476303e9038833aec9cccd12747bd0e0d026a8b

  Note that contract addresses may change with version updates; refer to the latest official documentation.

• Audit Reports:
  • Code4rena September 2021 audit report: code423n4.com/reports/2021-09-swivel/
  • Certik audit (mentioned): certik.com/projects/swivel-finance
• CoinMarketCap: coinmarketcap.com/currencies/swivel-finance/ (for token price, market cap, etc.)

Project Summary

Swivel Finance is a protocol in the decentralized finance (DeFi) space that offers fixed yield and yield trading. Through its unique "yield tokenization" mechanism, it splits interest-bearing assets into principal and future yield tokens (zcTokens and nTokens), allowing users to lock in fixed returns or amplify floating yields.

The project aims to address the issue of volatile yields in DeFi markets, providing investors with more predictable and capital-efficient tools. Its use of an orderbook rather than an automated market maker (AMM) trading model helps reduce slippage and avoid "toxic liquidity" for liquidity providers.

Swivel Finance was founded by Julian Traversa and William Hsieh in 2020 and has raised $4.65 million from well-known institutions including Multicoin Capital. Although details on its tokenomics and future roadmap are not fully disclosed in public materials, its core technology and approach to solving DeFi pain points are innovative.

Overall, Swivel Finance offers DeFi users a more refined way to manage and trade future yields, providing new options for those seeking fixed returns or more flexible risk exposure. However, like all crypto projects, it faces risks such as smart contract vulnerabilities, market volatility, and regulatory uncertainty. Always conduct thorough research and fully understand all potential risks before participating in any investment. This introduction is for educational purposes only and does not constitute investment advice.