The Restaking War has begun. Who will have the last laugh among Symbiotic, Eigenlayer and Karaka?

Original title: "The Restaking Wars: Eigenlayer vs Symbiotic"

Author: IGNAS | DEFI RESEARCH

Compiler: Deep Tide TechFlow

This week, I originally planned to write a blog post about emerging trends in cryptocurrency, but due to the sudden launch of Symbiotic and its deposit cap reaching almost $200 million in one day, I had to focus on restaking instead. Emerging trends can be put on hold for now, but the opportunity for high-yield airdrops cannot be missed.

Currently, with Karak, we already have three restaking protocols. So, what is the difference between these protocols? How should we respond?

Motivation for the launch of Symbiotic

Paradigm is rumored to have approached Eigenlayer co-founder Sreeram Kannan for investment, but Kannan chose to compete. Rival Andreessen Horowitz (a16z), a16z led a $100 million Series B round of financing. Since then, Eigenlayer has grown into the second-largest DeFi protocol with a TVL of $18.8 billion, behind Lido’s $33.5 billion. The FDV of the EIGEN token is $13.36 billion.

Considering that Eigenlayer was valued at $500 million FDV in March 2023, this is equivalent to a 25x increase in paper earnings. Not satisfied with this, Paradigm funded Symbiotic, positioning it as a direct competitor to Eigenlayer. Symbiotic raises $5.8 million in seed funding from Paradigm and cyber•Fund.

Paradigm’s rivalry with a16z is common knowledge (and a joke), but there’s a second part to the story.

Cyber ​​Fund is the second largest investor in Symbiotic, founded by Lido co-founders Konstantin Lomashuk and Vasiliy Shapovalov. Coindesk reported in May that “people close to Lido see Eigenlayer’s approach to restaking as a potential threat to its own dominance.

Lido missed the Liquid Restaked Token trend. In fact. , stETH’s TVL has stagnated and fallen by 10% in the past three months, while EtherFi and Renzo have seen inflows surge, reaching $6.2 billion and $3 billion respectively.

Re-staking with LRT is particularly attractive as it offers higher yields, although at this stage most are actually points.

In order to strengthen Lido’s position, Lido DAO launched the “Lido Alliance”, whose first priority is to develop a permissionless, decentralized re-staking ecosystem.

(Details)

By the way, one of the strategic priorities is to reiterate that stETH is LST, not LRT.

##This is good news for us because we can get more tokens and more farming opportunities

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Just one month after initial discussions, key alliance member Mellow launched LRT deposits on Symbiotic, supporting stETH deposits!

But let’s take a step back and discuss how Symbiotic differs from Eigenlayer before we dive into the unique features and farming opportunities of Mellow LRT.

Symbiotic vs Eigenlayer

Symbiotic: Licenseless and Modular

Symbiotic to Licenseless and features a modular design that provides more flexibility and control. Its key features include:

• Multi-asset support:Symbiotic allows direct deposit of any ERC-20 token, including Lido’s stETH, cbETH, etc. This makes Symbiotic more diverse than Eigenlayer which mainly supports ETH and its derivatives.

• Customizable parameters: Networks using Symbiotic can choose their collateral assets, node operators, reward and reduction mechanisms. This modular design enables networks to tailor their security settings to their specific needs.

• Non-upgradeable core contract: Symbiotic’s core contract is non-upgradeable (similar to Uniswap), reducing governance risks and potential failure points. Even if the team disappears, Symbiotic can continue to operate.

• Permissionless design: Allows any decentralized application to be integrated without approval, providing a more open and decentralized ecosystem.

"Symbiotic" means "running away from competition like a fire, being as selfless as possible, being as unopinionated as possible," Symbiotic co-founder and CEO Misha Putiatin told Blockworks describe.

Misha also told Blockworks that “Symbiotic does not compete with other market players and therefore does not have native staking, rollup or data availability products.” When dApps launch, they typically need to manage their own security models . However, the permissionless, modular, and flexible Symbiotic design allows anyone to use shared security to protect their network.

Misha said "The goal of our project is to change the narrative - you don't have to boot locally - it's safer and easier to boot on top of us, on top of shared security."

In practice, this means that cryptographic protocols can initiate native staking for their own native tokens to increase network security. For example, Ethena has partnered with Symbiotic to offer USDe cross-chain securities using staked ENA.

According to a Symbiotic blog post, Ethena is integrating Symbiotic with LayerZero’s Decentralized Validator Network (DVN) framework to bring Ethena assets such as $USDe pledged to $ENA-protected cross-chains. . This is the first of several parts of their infrastructure and systems that will look to take advantage of staking $ENA.

Other use cases include cross-chain oracles, threshold networks, MEV infrastructure, interoperability, shared orderers, and more. Symbiotic launched on June 11, with the deposit cap for stETH being reached within 24 hours.

Eigenlayer: Management and integration approach

Eigenlayer adopts a more management and integration approach, focusing on utilization Security for Ethereum ETH stakers to support various dApps (AVS):

• Single Asset Focus: Eigenlayer mainly supports ETH and its derivatives. This focus may limit its flexibility.

• Centralized management: Eigenlayer manages the delegation of pledged ETH, and node operators verify various AVS. This centralized management can help streamline operations, but can also result in bundling risks, making it difficult to accurately assess risk to individual services.

• Dynamic Marketplace: Eigenlayer provides a decentralized trust marketplace that allows developers to launch new protocols and applications using the security of pooled ETH. Risk is shared among pool depositors.

• Cuts and Governance: The way Eigenlayer is managed includes specific governance mechanisms for handling cuts and rewards, which may provide less flexibility.

To be honest, Eigenlayer is an extremely complex protocol, the risks and overall functionality are beyond my comprehension, and I had to compile criticism from various sources in this section. One is the Internet Fund itself. I’m not taking sides and I believe the Symbiosis Layer vs. Feature Layer comparison will be very popular among DeFi geeks.

Mellow Protocol: Modular LRT

The most eye-catching aspect of Symbiotic’s launch is its upper-layer LRT protocol Mellow. As a member of the Lido Alliance, Mellow benefits from Lido’s marketing, integration support, and liquidity guidance.

As part of the deal, Mellow will reward Lido with 100,000,000 MLW tokens (10% of the total supply), which will be locked in the Lido Alliance legal entity after the TGE . These tokens will be subject to the same vesting and cliff terms as Team Tokens: a 12-month cliff following the TGE, and a 30-month vesting period beginning after the cliff (edited as revised based on feedback received).

There are two other benefits mentioned in the alliance proposal:

• Mellow will help spread Lido in Ethereum Geographical and technical decentralization work done outside of workshop verification.

• Lido node operators can launch their own composable LRT and control the risk management process by choosing the AVS that suits their needs, rather than facing LRT or AV S imposed by the re-pledge protocol.

The impact of the partnership will take time to become apparent, but LDO grew 9% in '24. Interestingly, one of the four LRT caps of $42 million had already been reached prior to the Lido collaboration tweet below.

Anyway, if you are familiar with Eigenlayer LRT (like Etherfi and Renzo), you know that depositing into Mellow is twice as fun: You can earn both Symbiotic and Mellow points. But Mellow is different from Eigenlayer LRT.

What problems does Mellow solve for LRT?

The Mellow protocol allows anyone to deploy LRT, including hedge funds, staking providers (such as Lido). This means that the amount of LRT will increase significantly, potentially harming its liquidity and making its integration in DeFi protocols more complicated.

Mellow’s advantages include:

• Diversified risk allocation: Current LRT often forces users to accept a unified risk allocation. Mellow allows for multiple risk adjustment models, allowing users to choose their preferred risk exposure.

• Modular Infrastructure: Mellow’s modular design allows shared secure networks to request specific assets and configurations. Venture curators can create highly modified LRTs for their needs.

• Smart Contract Risk: By allowing modular risk management, Mellow reduces the risk of vulnerabilities in smart contracts and shared security network logic for re-stakers. A safer environment.

• Carrier Centralization: Mellow decentralizes operator selection decisions, preventing centralization and ensuring a balanced and decentralized operator ecosystem.

• LRT Cycle Risk: Mellow’s design addresses the risk of liquidity crunch due to withdrawal closures. Withdrawals currently take 24 hours.

Interestingly, Mellow specifically mentioned that they can launch LRT on top of any staking protocol such as Symbiotic, Eigenlayer, Karak or Nektar. However, I would be very surprised to see Mellow work directly with Eigenlayer.

However, I wouldn’t be surprised to see the current Eigenlayer LRT protocol partnered with Symbiotic or Mellow. In fact, Coindesk reported that a source close to Renzo and Symbiotic mentioned that Renzo had been discussing integrating with Symbiotic a month ago.

Finally, the cool thing about the permissionless Mellow Vault is that we will likely have LRT for DeFi tokens. Consider the ENA LRT token, a liquid ENA on Symbiotic that ensures USDe bridging.

There has been little innovation in token economics during this cycle, but Symbiotic may make holding DeFi governance tokens attractive again.

DeFi Degen’s Restaking Wars Playbook

As of this writing, there are four LRT vaults on Mellow, curated by four unique Managed by people, the deposit limit is about to be reached.

The timing of Symbiotic and Mellow LRT launches is perfect: EtherFi S2 credits end on June 30, Renzo S2 is also in the works, and Swell The airdrop will come soon after the withdrawal function is enabled.

I am almost worried about what to do with my ETH after the LRT airdrop expires. Thanks to venture capital and Whale Games, airdrop players will also gain a lot.

At this stage, the game is very simple: deposit Symbiotic to gain points, or take a bigger risk and farm directly on Mellow. Please note that since Symbiotic's stETH deposit is full, you will not receive Symbiotic Points, but will receive 1.5x Mellow Points.

The airdrop game will likely be similar to Eigenlayer’s playbook: Mellow LRT will be integrated into DeFi and we will see leverage farms on Pendle and multiple lending protocols. But I believe the Symbiotic token may launch before EIGEN becomes tradable.

In an interview with Blockworks, Putiatin said that the mainnet may “have some networks online by the end of the summer.” Does this mean the token will launch as well?

Stealing the re-hyping thunder away from Eigenlayer might be a smart move, especially if the market turns bullish soon and given Symbiotic's aggressive partnership strategy.

There are two collaborations that shocked me the most: The Blockless and Hyperlane. Both protocols initially partnered with Eigenlayer as AVS for shared security, but are they changing alliances?

Perhaps Symbiotic promised more support and token distribution? I need more answers!

Regardless, these restaking wars are good for us speculative airdrop players, as it provides more opportunities and may prompt Eigenlayer to launch tokens faster.

It’s still early days for Symbiotic, but early deposit inflows are very bullish. I'm currently farming on Symbiotic and Mellow, but plan to move to Pendle YTs when the strategy opens up.

I believe Pendle’s Symbiotic YT token expiration date will give us more insight into the Symbiotic TGE timeline.

Finally: Karak

Karak is a hybrid, similar to Eigenlayer, but it calls AVS a Distributed Security Service (DSS) . Karak also launched its own Layer 2 (called K2) for risk management and sandbox testing of DSS. However, it is more like a testnet than a true L2.

Karak has attracted over $1 billion in TVL for two main reasons:

1. Karak supports Eigenlayer LRT, so farmers can earn points for Eigenlayer, LRT and Karak at the same time.

2. Karak has raised more than $48 million from Coinbase Ventures, Pantera Capital, and Lightspeed Ventures, among others.

(More information for reference)

Despite this, Karak has not announced any significant partners since its announcement in April , LRT protocol launched on Karak or any exclusive DSS/AVS partner. Hopefully Karak will pick up the pace as Symbiotic is chasing Eigenlayer hard.

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