FAQ
What is Swirl?
Swirl is a Liquid Staking solution, allowing users to stake IOTA and receive stIOTA in return. These tokens provide instant liquidity, enabling users to trade, use them as collateral in DeFi, or earn additional rewards while their IOTA remains staked. Swirl enhances staking accessibility, flexibility, and capital efficiency, making it a key component of the IOTA DeFi ecosystem.
What is stIOTA?
stIOTA is the liquid staking token issued by Swirl when users stake their IOTA. It represents a redeemable claim on staked IOTA, allowing users to:
Maintain liquidity while earning staking rewards.
Trade stIOTA on secondary markets.
Use it as collateral in DeFi protocols for additional yield opportunities.
As staking rewards accrue, the value of stIOTA increases relative to IOTA, ensuring users benefit from staking while retaining flexibility and composability in the IOTA DeFi ecosystem.
How to Use stIOTA?
stIOTA is a liquid staking token that unlocks multiple opportunities within the IOTA DeFi ecosystem. Users can:
Redeem stIOTA for IOTA when unstaking through Swirl.
Trade stIOTA on decentralized exchanges (DEXs).
Use it as collateral in lending protocols to borrow assets.
Provide liquidity in DeFi pools to earn additional rewards.
Participate in yield farming to maximize returns.
With stIOTA, users can earn staking rewards while maintaining flexibility and liquidity, making it a powerful asset within the IOTA ecosystem.
IOTA Staking Limits
Swirl’s liquid staking offers flexible participation, allowing users to stake and unstake IOTA with the following limits:
Minimum staking amount:
1 IOTAMaximum staking amount in a single deposit:
5 million IOTAMaximum staking amount:
No limitsMinimum unstaking amount:
1 stIOTA
Unstaking Timeframe
Swirl provides an instant unstake mechanism, allowing users to burn stIOTA and immediately receive IOTA. This eliminates traditional lock-up periods, ensuring maximum liquidity while maintaining network stability.
Key details about unstaking with Swirl:
Instant Redemption: Users can unstake at any time by converting stIOTA back to IOTA.
Dynamic Fee Structure: A small fee is applied to instant unstake requests to regulate liquidity and prevent excessive withdrawals.
Efficient Validator Withdrawals: The contract optimally retrieves IOTA from low-priority validators first, ensuring a balanced staking distribution.
Swirl’s smart contract architecture guarantees a secure unstaking process, giving users full control over their assets without the constraints of traditional staking.
Earning Rewards
By staking IOTA with Swirl, users automatically accrue daily staking rewards. These rewards are seamlessly integrated into the protocol, increasing the value of stIOTA over time.
Key points about rewards:
Auto-compounding: Rewards are automatically funneled into the staking pool, eliminating the need for manual claims.
stIOTA Value Appreciation: As rewards accumulate, the stIOTA-to-IOTA ratio gradually increases, reflecting its growing worth.
Initial Conversion Rate: The starting ratio for stIOTA to IOTA is 1:1, but over time, stIOTA appreciates relative to IOTA as staking rewards accrue.
Swirl ensures that users earn rewards passively, while maintaining the flexibility of liquid staking.
Rewards Distribution
Once you stake your IOTA with Swirl, reward accumulation begins immediately. Rewards are automatically distributed and compounded daily, increasing the value of stIOTA relative to IOTA over time.
This seamless distribution ensures that users benefit from staking rewards without needing manual claims, making staking with Swirl both efficient and user-friendly.
Swirl Staking Fees
Swirl charges a 10% fee on the APY, which is redistributed to token holders. This fee is separate from any validator-level staking fees, which may vary depending on the staking infrastructure used.
Key points about Swirl’s fee structure:
The 10% fee is applied only to earned rewards, not the initial stake.
Validator staking fees are factored into the displayed APY, ensuring transparency.
Potential Risks
Staking IOTA through Swirl is designed to be secure and reliable. However, as with any blockchain-based system, some risks exist, particularly in liquid staking scenarios. These include:
Validator Risks: We mitigate slashing and downtime risks by partnering with trusted and high-performance validators.
Centralization Concerns: While Swirl is built on non-custodial smart contracts, certain operational components — such as validator control and backend orchestration — are currently centralized. Plans for future decentralization are in place as the IOTA liquid staking ecosystem evolves.
By prioritizing security and transparency, Swirl minimizes risks while providing a seamless and efficient liquid staking experience.
stIOTA Value Discrepancy
When staking IOTA with Swirl, the amount of stIOTA received may differ from the amount of IOTA staked. This is due to fluctuations in the staking exchange ratio, which adjusts based on the total supply and rewards distribution.
The formula used to determine the amount of stIOTA received:
Where the exchange ratio is calculated as:
This dynamic ratio ensures that staking rewards are fairly distributed, meaning that as staking rewards accrue, the value of stIOTA relative to IOTA increases over time.
What's the Validator Selection Process in Swirl?
Swirl uses a transparent and automated validator selection process to ensure that staked IOTA is allocated to high-performing infrastructure while maintaining a dynamic and adaptable system.
Key aspects of the selection process include:
Top 80% Selection: Swirl selects validators from the top 80% of active IOTA validators, based on performance and reliability.
Biweekly Rotation: The validator set is re-evaluated and updated every two weeks, ensuring responsiveness to changes in validator performance.
Stake Allocation Strategy: Swirl’s contract prioritizes staking with the highest-ranked validator and begins unstaking from the lowest-ranked validator, based on internally assigned priority scores.
This approach helps maintain a high level of staking performance, ensures fair validator participation, and positions Swirl to adapt to the evolving state of the network.
What's the Validator Priority System in Swirl?
Swirl uses a priority-based system to manage how IOTA is staked and unstaked across the selected validators. This system ensures efficient fund allocation and supports the performance and stability of the protocol.
How it works:
Highest Priority Validator: When staking, the contract allocates IOTA to the validator with the highest assigned priority.
Lowest Priority Unstaking: When users initiate unstaking, the contract starts unstaking from the validator with the lowest priority in the set.
Dynamic Adjustments: Validator priorities are assigned and updated by the operator based on performance criteria such as APY, reliability, and balance distribution.
Efficient Fund Management: This model helps optimize the use of validator capacity while maintaining system responsiveness and reducing fragmentation of staked funds.
The priority system is an important part of Swirl’s smart contract logic, ensuring that validator selection remains both adaptive and efficient.
What's the Stake Distribution Process in Swirl?
Swirl follows a priority-based, threshold-driven distribution process to allocate staked IOTA across the selected validator set. This mechanism ensures that stake is efficiently concentrated among the most preferred validators while maintaining balance and predictability.
How the distribution works:
Priority Order: Validators are ranked by assigned priority (example: Priority 1, Priority 2, etc.).
Threshold-Based Allocation: During each epoch, the contract begins by staking IOTA with the highest-priority validator until it reaches a predefined stake threshold.
Sequential Distribution: Once the top-priority validator reaches its cap, the system moves to the next one in the list and continues allocating stake until the available amount is fully distributed.
Epoch-Based Rebalancing: This process repeats each epoch, ensuring that stake flows toward the most trusted and performant validators, while maintaining flexibility for future performance changes.
This structured approach ensures predictable distribution, operational efficiency, and supports a healthy staking environment within Swirl.
What Actions can the Swirl Operator Perform?
While Swirl’s staking logic is governed by smart contracts, certain validator management tasks require manual input from the operator to ensure the system remains secure, efficient, and up to date with network changes. These actions include:
Removing Inactive Validators: Validators that become inactive or unresponsive can be manually set to priority 0, effectively excluding them from future stake allocation.
Removing Slashed Validators: Validators that have been slashed due to misbehavior or failure are promptly removed from the active set to protect user funds.
Rotating the Validator Set: The operator can update the active validator set, typically on a biweekly basis, to reflect changes in validator performance and network conditions.
Expanding the Validator Set: The operator may increase the number of participating validators, allowing Swirl to scale as the ecosystem grows.
These manual controls are essential for maintaining validator quality, ensuring protocol safety, and supporting adaptive staking operations as the IOTA liquid staking ecosystem evolves.
Swirl's Phased Roadmap
Swirl is evolving toward a more decentralized and community-driven protocol. The roadmap includes several major enhancements aimed at increasing transparency, reducing trust assumptions, and giving users a voice in protocol development:
Decentralization of the Backend: Transitioning critical infrastructure away from centralized services to trust-minimized, decentralized components.
On-Chain Protocol Logic: Migrating key processes — such as validator selection, stake distribution, and unstaking mechanisms — to smart contracts to ensure full on-chain execution.
Governance Token Launch: Introducing a governance token, allowing holders to vote on protocol parameters, validator policies, fee structures, and future upgrades.
These developments will transform Swirl into a fully decentralized liquid staking protocol, aligned with IOTA’s vision of open, transparent, and user-governed infrastructure.
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