Opinion: Do we really need so many Restaking platforms?

Translation: Vernacular Blockchain

The re-staking war is heating up. Challenging EigenLayer’s monopoly is Symbiotic, another new protocol supported by Lido. This latest entrant brings competitive advantages in protocol design and business development collaboration. Before we deeply understand the new competitive situation in the restaking field, we need to first understand the key risks in the existing system.

1. Current Problems with Restaking

Here’s how restaking works today: Bob deposits ETH/stETH into a liquidity restaking protocol like Ether.Fi, Renzo or Swell, and they delegate it To the node operators of EigenLayer, these node operators are then used to protect one or more AVS, thereby bringing some benefits to Bob.

There is a compounding risk in the current system, which lies in its one-size-fits-all nature. EigenLayer's node operators manage thousands of assets that are used to validate multiple AVS. This means that Bob cannot have any say in the risk management of the AVS chosen by the node operator.

To be sure, Bob could try to choose a "safer" node operator, but these operators are in fierce competition with hundreds of other operators, all hoping to get your re-staking collateral, And are incentivized to verify as many AVS as possible to maximize your profits.

This race condition can lead to a bad outcome that no one wants to see: every node operator will protect what they think is a foolproof AVS. When that AVS is compromised and a slashing event occurs, no matter which operator Bob chooses, he will be affected.

2. The introduction of Mellow Finance

Mellow partially solves this problem. Dubbed a “modular LRT,” Mellow is a middleware layer in the recollateralization stack that provides customizable liquid recollateralization vaults. With Mellow, anyone can become their own Ether.Fi or Renzo and launch their own LRT vault. These third-party “curators” on Mellow will have full control over which Restaking assets are accepted, and users can choose and pay fees based on their risk appetite.

Here’s a ridiculous example: Alice is an avid DOGE enthusiast who is looking for income on her DOGE assets. She saw a vault called DOGE4LYFE on Mellow. She deposits her DOGE into the DOGE4LYFE vault, earns restaking earnings, pays a small fee to the operator, and gets an LRT Token called rstDOGE, which she can use as collateral in DeFi. Currently this is not possible because EigenLayer does not allow DOGE to be whitelisted. Even if Sreeram eventually accepts DOGE, the above incentive imbalance problem faced by node operators will still exist.

If this sounds familiar, that’s because similar services are already provided in DeFi lending by protocols like Morpho, Gearbox, or Rari’s now-deprecated Fuse as DeFi veterans from previous cycles may remember protocol. For example, Morpho allows the creation of borrowing vaults with customized risk parameters. This allows users to borrow assets from vaults with unique risk characteristics, rather than borrowing from a single risk pool on Aave. In the upcoming V4 upgrade, Aave also plans to upgrade the protocol with an isolated borrowing pool.

Since Mellow is just a middleware Restaking protocol, the assets in its vault must be Restaking somewhere. Interestingly, Mellow chose to strategically partner with upcoming restaking protocol Symbiotic rather than EigenLayer. Symbiotic is backed by Lido’s venture capital arm cyber•Fund and Paradigm (the latter is also a Lido backer).

Unlike EigenLayer or Karak, Symbiotic allows multi-asset deposits of any ERC-20 Token, making it the most permissionless protocol to date. Anything from ETH to the most extreme memecoins can be used as restaking collateral to secure AVS. This could open the floodgates to excessive speculation in cryptocurrencies: imagine a Mellow Vault consisting of Restaking DOGE collateral to secure Symbiotic’s AVS.

3. Mellow x Symbiotic x Lido Strategy

While this is all technically possible, this misses the point of the modular nature of Mellow’s products, which allows for designs by third-party vault curators Unlimited re-pledge income portfolio. Here, the rationale for Mellow integrating with Symbiotic becomes clear, as on other restaking protocols such as EigenLayer or Karak, assets are still restricted.

So far, a large number of curators have joined Mellow and opened their own LRT vaults. Unsurprisingly, most curators use stETH as staking collateral due to Lido’s deep partnership with Mellow (more on that later).

The exceptions are the two Ethena vaults, which accept sUSDe and ENA. Yes, Mellow managed to attract Ethena – its first sUSDe vault is already full.

The final part of Mellow’s strategy lies in its participation in the recently announced “Lido Alliance,” an official guild aligned with the Lido project. Mellow benefits from direct access to stETH deposits from Lido, which explains why it committed 10% of its MLW Token supply (100B total) to the partnership. Lido, on the other hand, also benefits as it looks to recapture stETH capital from its liquid restaking rivals. Since exploding in Restaking’s first year in 2024, Lido’s growth has stalled as liquidity has been sucked away from LRT competitors.

4. Market transaction volume

Symbiotic’s competitive advantage over EigenLayer or Karak comes from its tight integration with Lido. The idea is that Lido’s node operators can issue their own LRT via Mellow/Symbiotic and internalize an additional layer of wstETH revenue within the Lido ecosystem, thereby creating value returns for the Lido DAO.

Now deposit stETH into the Mellow vault to get the following four levels of income:

• stETH annualized rate of return
• Mellow points
• Symbiotic points
• Re-staking annualized rate of return when AVS is online on Symbiotic

Symbiotic has been open for deposits for just two weeks and has already attracted $316 million in total locked value.

Mellow, on the other hand, has attracted a cumulative total value locked (TVL) of $374. It's still early days for both of these, but it's a positive sign that Lido is on its way to success.

As of June 20, four Mellow pools have been launched on Pendle:

Currently, these pools only accept Mellow points until the Symbiotic cap is raised. To compensate, Mellow is rewarding deposits with triple the points (compared to 1.5x for depositing directly with Mellow). Given the very short expiration date, the liquidity in these pools is also quite low, so if you try to buy YT, the slippage will be quite high. The optimal strategy at the moment may be to choose PT fixed income, where annualized returns range from 17% to 19% (sorted by highest fixed income).

5. Overview of the Restaking field

The competition in the Restaking market has become complicated, let us quickly summarize it. As of today, there are three main Restaking platforms. Arranged by total locked value (TVL), they are EigenLayer, Karak and Symbiotic.

All three Restaking platforms offer services to sell security to AVS. Due to Ethereum’s dominance and deep liquidity, stETH became the obvious staking choice for EigenLayer. Karak, which we previously reported on, has expanded its restaking collateral collection beyond ETH LSTs to stablecoins and WBTC collateral. Now, Symbiotic is pushing the envelope by allowing the use of any ERC-20 collateral.

Meanwhile, LRT protocols such as Ether.Fi, Swell, and Renzo spotted the opportunity and began competing with Lido for collateral through their respective points campaigns.

Lido enjoys stETH dominance in DeFi but has started losing market share to LRT protocols for the first time. For Lido, the easy response might have been to convert stETH from LST to an LRT asset, but it chose to keep stETH as LST and cultivate its own restaking ecosystem within itself. To this end, Lido is supporting Symbiotic and Mellow as part of the “Lido Alliance” to provide a permissionless, modular restaking product. Summarizing the sales philosophy:

Dear project parties, don’t wait for EigenLayer to whitelist your Token, come to Symbiotic and launch your own LRT without permission.

Dear users, stop depositing your wstETH with LRT competitors, give it to Mellow and get better risk-adjusted returns.

6. Summary

As competition in the re-staking field intensifies, the following are some points worth considering:

1) AVS demand and the necessity of a re-staking platform

AVS demand: Currently, only EigenLayer has active Avs. Of the total locked value (TVL) of approximately 5.33 million ETH, approximately 22.6 million ETH are re-pledged in 13 AVS, with an assumed collateralization rate of approximately 4.24x.

Is the number of re-pledge platforms necessary: ​​The main trend of re-pledge platforms is to integrate as many re-pledge assets as possible. Late-stage competitors to EigenLayer such as Karak differentiate by using WBTC collateral, stablecoins, and Pendle PT assets. Symbiotic goes a step further and allows the use of any ERC-20 token, but leaves the curation of assets to third-party Mellow vault creators. Even though EigenLayer is the most stringent, it still maintains a huge lead in TVL. Whether non-ETH assets should be allowed for chain security is still up for debate.

2) Prospects of LRT Protocol

Integration with Symbiotic: Nothing prevents them from also integrating with Symbiotic, in fact Renzo has already done so. Symbiotic is as permissionless as possible by design and the LRT protocol has no reason to be loyal to EigenLayer, they will want to capture some market share in the Lido restaking ecosystem, especially until Mellow gains a monopoly in this secondary market.

Competition: Lido aims to reassert stETH’s dominance, while Symbiotic and Mellow are both projects backed by the liquid staking giant. This goal is fundamentally contradictory to the strategy of introducing eETH, ezETH, swETH, etc. to Symbiotic. It will be interesting to see how Lido balances this.

3) Impact on Developers

Starting your own chain with financial security made easier: EigenLayer makes this process convenient, but permissionless vaults on the Mellow x Symbiotic stack make it even easier. Major players like Ethena have announced plans to allow sUSDe and ENA to be re-staking in Symbiotic to secure their upcoming Ethena chain, rather than expecting EigenLayer or Karak to whitelist ENA as re-staking collateral.

4) Impact on LidoDAO and LDO Token holders

DAO Earnings: The DAO charges a 5% fee from all stETH staking rewards, which will be distributed between the node operator, the DAO and the insurance fund. Therefore, the more ETH that is staked in Lido (as opposed to in the LRT protocol), the more revenue the DAO earns. However, Lido’s efforts to build its own re-hypothecation ecosystem did not bring a clear value accumulation path for LDO Token, and LDO is still just a governance token.

The above is the detailed content of Opinion: Do we really need so many Restaking platforms?. For more information, please follow other related articles on the PHP Chinese website!