Hemi will leverage Swell’s BTC LRT Vault on Symbiotic to source economic security for Hemi’s Bitcoin asset tunneling system.

Swell Vault Operators will securely manage custodianship and process withdrawals from Hemi’s Bitcoin Tunnel Vaults, ensuring robust security of Bitcoin assets tunneled to Hemi’s network. This collaboration addresses the need for capital-efficient over-collateralized custodianship in the early stages before Hemi’s BitVM-based tunneling system goes live. 

But the collaboration doesn’t end there. Hemi is also exploring ways to leverage economic security from Swell’s Symbiotic Vaults to make our upcoming BitVM-based tunnel system even more robust through off-Bitcoin economic incentives enforced by the Hemi Virtual Machine (hVM).

Hemi’s unique position as an L2 between Bitcoin and Ethereum also means assets can also be tunneled between these networks through Hemi, creating a highly secure channel for onboarding Bitcoin-based assets into the broader Ethereum ecosystem.

This collaboration marks a significant step in fortifying Hemi as a robust ecosystem for BTC+ETH DeFi applications.

How Everything Works

Here are the key components of this collaboration:

• Symbiotic: Provides a flexible framework for staking assets to provide economic security to AVSes.

• Swell: Manages the staking of users’ BTC  into a Symbiotic vault, the delegation of this Vault’s assets to Operators, and the coordination between Operators and AVSes that want to leverage Swell’s economic security.

• Vault Operators: Operators from Swell’s Symbiotic Vault who opt-in to participate in securing Hemi’s Bitcoin tunnel. 

• Hemi BTC Tunnel System: The mechanism for transferring BTC to the Hemi Network.

• Users: Users on the Hemi Network who are depositing and withdrawing Bitcoin assets from the Hemi network, and using tunneled Bitcoin assets in the Hemi ecosystem.

1. Swell BTC Staking: Users deposit BTC into Swell and receive an LRT representing their deposit position which will accrue restaking revenue.

2. Swell BTC Vault Deposit and Delegation: Swell deposits the BTC into Swell’s Symbiotic Vault and delegates the BTC to Vault Operators.

3. Operators Secure Hemi BTC Tunnel: Vault Operators provide economic security to Hemi’s Bitcoin Tunnel System by opting-in to manage BTC Vaults on Hemi.

4. Tunneling BTC Assets to Hemi: Hemi Users can deposit native BTC to one of the Hemi BTC vaults and receive representative tokens, and later redeem these representative tokens to withdraw the underlying assets back to the Bitcoin network.

5. Using Tunneled BTC Assets: Hemi Users can use these representative tokens across the Hemi ecosystem (trading, lending, etc.), or move these tokens onto the Ethereum network to use them in dApps in the broader Ethereum ecosystem.

6. Operator Rewards and Slashing: The Hemi Bitcoin Tunnel System monitors Vault Operator behavior, rewarding them for correctly processing withdrawals or slashing them for misbehavior such as executing unauthorized transactions from the BTC vaults. The majority of rewards to Operators for their participation in Hemi’s BTC Tunnel will be passed on to the users staking BTC in Swell.

Be sure to follow Swell and Symbiotic on X.