Introducing ZeroSwap

ZeroLiquid
4 min readJan 10, 2024

Now you can buy crypto using instant upfront yield from the future!

UPDATE: ZeroSwap is now live! In this article you can learn about the protocol and promotions we are running.

Gas Refund Scheme

High gas fees on Ethereum are a feature not a bug, but to offer a helping hand and to drive adoption of the protocol at launch, we are running a Gas Refund Scheme.

All wallets are eligible for a refund, but those with >5,000 $ZERO tokens staked are offered a more generous deal.

Refunds will be distributed as $ZERO tokens every fortnight.

Early Adopter Prizes

To further incentivize early adoption of the protocol, we will be running the following prize scheme during week 1.

Each day (UTC time zone), the following prize is up for grabs. Simply make a completed transaction using ZeroSwap to be eligible for that day’s reward. You can enter on as many of the days as you like and can win more than once, plus the prizes increase in size each day.

The bonus prize will be awarded to one lucky wallet that participated at any point during the week.

To better understand the power of ZeroSwap, let’s first take a look at a principle known as the Time Value of Money.

Time Value of Money

The Time Value of Money states that a sum of money today is worth more than the same sum will be in the future due to 1) its investment potential in the interim and 2) the impact of inflation which means that the value of a dollar declines over time as prices rise.

Enter ZeroSwap

ZeroSwap has been created to allow you to take advantage of the Time Value of Money principle by enabling you to buy crypto today using your future yield. Read on to learn how ZeroSwap works and to see examples of a ZeroSwap trade.

How ZeroSwap Works

At its core, ZeroSwap is powered by ZeroLiquid, which enables users to access instant upfront Ethereum staking yield from the future.

  • The user selects their input and output tokens on ZeroSwap (for example swap ETH for LINK, although any input/output token can be used)
  • The input token is swapped on the 1inch DEX aggregator for wstETH — Lido’s Liquid Staking Derivative (LSD) token — and deposited as collateral on ZeroLiquid.
  • Instant upfront yield is obtained on ZeroLiquid in the form of zETH — ZeroLiquid’s synthetic ETH token. Depending on the user’s preference, up to 50% of the deposited amount can be received in the form of upfront yield.
  • This upfront yield is then swapped for the user’s chosen output token via the 1inch DEX aggregator.
  • The user has now obtained their chosen token without selling their ETH.
  • The wstETH deposited on ZeroLiquid earns Ethereum network staking rewards which repays the instant upfront yield over time. At maturity, it unlocks fully and can be claimed by the user.

Example of a ZeroSwap trade

  • Sam has $10,000 of Ethereum.
  • Sam wants to buy altcoin XYZ but does not want to risk losing his Ethereum, especially as Sam views altcoin XYZ as highly speculative and risky and expects the price of Ethereum to rise significantly over the coming years.
  • Instead of selling any or all of his Ethereum to buy altcoin XYZ, Sam uses ZeroSwap.
  • Using ZeroSwap, Sams $10,000 of Ethereum allows him to receive $5,000 of altcoin XYZ today without having to sell any of his Ethereum.
  • Sam now owns $5,000 of Altcoin XYZ and his original $10,000 of Ethereum, which will unlock fully at maturity (or any time Sam decides to repay or liquidate his position).
  • If the price of XYZ increases, Sam might decide to repay his position to unlock his Ether. If the price of XYZ performs badly, Sam will not lose his Ether.

Additional info

  • Users’ collateral will never be liquidated as both their collateral (LSD token) and debt (zETH) are denominated in Ether.
  • Users can unlock their collateral at any time by repaying or liquidating their position.
  • There is a 5% protocol fee on the upfront yield element, and no interest is charged on the collateral. This fee goes to the ZeroLiquid protocol.
  • The default LSD used by ZeroSwap is wstETH from Lido.
  • If a user chooses to deposit any of the other LSD tokens supported by ZeroLiquid (currently rETH, swETH, sfrxETH and unshETH), it will automatically use those LSD tokens as the repayment strategy instead of wstETH.
  • ZeroSwap was created by ZeroLiquid and operates within ZeroLiquid’s $ZERO ecosystem.

Key Links

Twitter / Telegram

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ZeroLiquid

Use your LSD tokens to get self-repaying, 0% interest loans without the risk of liquidation.