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Exit staking early and boost your yield with DeFi
sETH2 (staking ETH) and rETH2 (reward ETH) are tokens that are issued to stakers in StakeWise Pool. Built on the ERC-20 standard, these tokens represent the growth of one's stake when they're held and can be transferred or exchanged for other tokens to exit from staking or utilize yield opportunities in DeFi protocols.
One of the main advantages of StakeWise tokens is that they reflect deposits and rewards separately, which allows users to separate their holdings into different risk classes, avoid impermanent loss when providing liquidity and potentially compound their returns.

Minting

sETH2 (staking ETH) is a token that represents users' deposits in StakeWise Pool in a 1:1 ratio. Hence, sETH2 is always backed by ETH that has entered our Pool contract. With every new ETH deposit into the Pool, StakedETHToken contract updates totalSupply and mints an equal amount of sETH2 to the depositor.
rETH2 (reward ETH) is a token that represents users' ETH rewards in StakeWise Pool in a 1:1 ratio. These rewards do not physically exist, but their record is stored in the Beacon Chain, so they can be measured and used to back rETH2 in a 1:1 ratio. The record about the Pool's rewards specifically is calculated from the balances of StakeWise validators. The balances are measured from the Beacon Chain and submitted to the RewardETHToken contract using Oracles.

Oracle nodes

The Beacon Chain exists separately from Eth1, so information about the rewards is not accessible on-chain. Hence, communication about the amount of rewards between the Beacon Chain and the RewardETHToken contract is done using Oracles. totalSupply in the contract is updated every 24 hours. This should pose no problems to stakers who utilize their rETH2 in DeFi protocols since even during periods of high yield in Ethereum 2.0 rewards earned in a single 24-hour period are minuscule (6/10^4 %). This makes potentially missing out on them inconsequential for one's long-term earnings.
The Oracle nodes are distributed geographically and they read balances of all the Pool validators from the Beacon Chain and submit them on-chain simultaneously but independently. As soon as 3 out of 4 Oracle nodes submit the same data about the rewards, the total supply of RewardETHToken contract is updated. The update happens every 24 hours.

Withdrawal

Upon Phase 2, holders of sETH2 and rETH2 will be able to exchange their tokens for ETH from the StakeWise Pool by burning their tokens. The exchange will happen at a 1:1 ratio, where sETH2 and rETH2 can be exchanged for 1 ETH each.