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

author:IGNAS | DEFI RESEARCH

Compiled by: Xiaobai Navigation coderworld

This week, I had planned to write aboutcryptocurrencyI have been looking at blog posts on emerging trends, but due to the sudden launch of Symbiotic and its deposit limit reaching almost $200 million in one day, I had to switch my focus to restaking. Emerging trends can be put on hold for now, but the opportunity for high-yield airdrops cannot be missed.

Currently, with Karak, we have three restaking protocols. So, what are the differences between these protocols? How should we respond?

Symbiotic's motivation

Paradigm reportedly approached Eigenlayer co-founder Sreeram Kannan for an investment, but Kannan chose competitor Andreessen Horowitz (a16z), which led a $100 million Series B round. Since then, Eigenlayer has grown to become the second-largest DeFi protocol with a TVL of $18.8 billion, second only to Lido's $33.5 billion.TokenThe FDV is US$13.36 billion.

Considering that Eigenlayer is valued at $500 million FDV in March 2023, this is equivalent to a 25x increase in paper earnings. Paradigm was not satisfied with this and funded Symbiotic, positioning it as a direct competitor to Eigenlayer. Symbiotic raised $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 this story.

Cyber Fund, Symbiotic’s second-largest investor, was founded by Lido co-founders Konstantin Lomashuk and Vasiliy Shapovalov.Coindesk reported in May that, “People close to Lido see Eigenlayer’s re-staking approach as a potential threat to its own dominant position.

Lido missed the trend of Liquid Restaked Tokens. In fact, stETH’s TVL has stagnated and dropped by 10% in the past three months. Meanwhile, EtherFi and Renzo saw a surge in inflows, reaching $6.2 billion and $3 billion, respectively.

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

To strengthen Lido's position,Lido DAO launches the “Lido Alliance”, whose primary mission is to develop a permissionless, decentralized re-staking ecosystem.

(details)

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

This is good news for us because we can get moreTokenAnd more farming opportunities.

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

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

Symbiotic vs Eigenlayer

Symbiotic: Permissionless and Modular

Symbiotic features a permissionless and modular design, providing more flexibility and control. Its main features include:

• Multi-asset support: Symbiotic allows direct deposit of any ERC-20Token, 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, rewards, and slashing mechanisms. This modular design enables networks to tailor theirSafetyset up.

• Non-upgradeable corecontract: Symbiotic's CorecontractIt is non-upgradeable (similar to Uniswap), reducing governance risks and potential points of failure. Symbiotic can continue to operate even if the team disappears.

• Permissionless Design: Allowing any decentralized application to integrate without approval provides a more open and decentralized ecosystem.

Being "symbiotic" means "avoiding competition like fire, being as selfless as possible, and being as non-opinionated as possible," said Misha Putiatin, co-founder and CEO of Symbiotic.Blockworksdescribe.

Misha also told Blockworks that “Symbiotic will not compete with other market participants, so there is no native staking, rollup, or data availability product.” When dApps are launched, they usually need to manage their ownSafetyHowever, the permissionless, modular, and flexible Symbiotic design allows anyone to use the sharedSafetyto protect their network.

Misha said, “The goal of our project is to change the narrative – you don’t have to start locally – on us, on sharingSafetyIt’s safer and easier to start from there.”

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

according toSymbiotic Blog Posts, Ethena is integrating Symbiotic with LayerZero’s Decentralized Validator Network (DVN) framework to bring Ethena assets like $USDe collateralized $ENA protected cross-chain. This is the first of several parts of their infrastructure and systems that will seek to leverage collateralized $ENA.

Other use cases include cross-chain oracles, threshold networks, MEV infrastructure, interoperability, shared sorters, etc. Symbiotic was launched on June 11, and the deposit limit of stETH was reached within 24 hours.

Eigenlayer: Management and integration methods

Eigenlayer adoptsA more managed and integrated approach, focused on leveraging the security of 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 staked ETH, and node operators verify various AVS. This centralized management helps simplify operations, but it can also lead to bundling risks, making it difficult to accurately assess the risks of individual services.

• Dynamic Market: Eigenlayer provides a decentralized trustless marketplace that allows developers to launch new protocols and applications using pooled ETH security. Risk is shared by pool depositors.

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

Honestly, Eigenlayer is an extremely complex protocol, the risks and overall functionality are beyond my comprehension, and I had to compile criticisms from various sources in this section.One is the network fund itselfI don’t take sides, and I believe the comparison between the symbiosis layer and the feature layer will be very popular among DeFi geeks.

Mellow Protocol: Modular LRT

The most eye-catching part 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 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 the team tokens: a 12-month cliff after the TGE, and a 30-month vesting period starting after the cliff (edited based on feedback received).

Two other benefits are mentioned in the alliance proposal:

• Mellow will help spread the geographic and technical decentralization work Lido is doing beyond Ethereum validation.

• Lido node operators can launch their own composable LRTs and take control of the risk management process by choosing the AVS that suits their needs, rather than facing AVS imposed by LRTs or re-staking protocols.

The impact of partnerships takes time to show, but LDO grew by 9% in 24 years. Interestingly, one of the four LRT caps at $42 million was reached before the Lido partnership tweet below.

Anyway, if you are familiar with Eigenlayer LRTs like Etherfi and Renzo, you will know that depositing Mellow is double the fun: you get both Symbiotic and Mellow points. But Mellow is not the same as Eigenlayer LRT.

What problems does Mellow solve for LRT?

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

Mellow's advantages include:

• Diversified risk profile: Current LRTs typically force users to accept a uniform risk profile. Mellow allows for multiple risk adjustment models, allowing users to choose their preferred risk exposure.

• Modular Infrastructure: Mellow’s modular design allows a shared security network to request specific assets and configurations. Risk curators can create highly modified LRTs for their needs.

• 智能合约风险： By allowing modular risk management, Mellow reduces the risk of vulnerabilities in smart contracts and shared security network logic, providing a safer environment for re-stakeholders.

• Operator Centralization: Mellow decentralizes the decision-making of operator selection, preventing centralization and ensuring a balanced and decentralized operator ecosystem.

• LRT Cycle Risks: Mellow’s design addresses the risk of a liquidity crunch due to withdrawal closures. Currently, withdrawals take 24 hours.

Interestingly, Mellow Special MentionThey can launch LRT on top of any staking protocol like Symbiotic, Eigenlayer, Karak or Nektar. However, I would be very surprised to see Mellow working directly with Eigenlayer.

However, I would not be surprised to see the current Eigenlayer LRT protocol partnered with Symbiotic or Mellow.Coindesk reported thatA source close to Renzo and Symbiotic mentioned that Renzo had been discussing integration with Symbiotic a month ago.

Finally, the cool thing about the permissionless Mellow vault is that we could very well have DeFi Think of the ENA LRT token, which is the liquid ENA on Symbiotic, which ensures USDe bridging.

There has been little innovation in token economics during this cycle, but Symbiotic mayXiaobai NavigationHolding DeFi governance tokens is attractive again.

DeFi Degen’s Restaking Wars Script

As of this writing, there are four LRT vaults on Mellow, managed by four unique curators, and the deposit limit is about to be reached.

The timing of the Symbiotic and Mellow LRT launches is perfect: EtherFi S2 credits end on June 30, Renzo S2 is also in progress, and the Swell 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 pretty simple: deposit into Symbiotic to earn points, or take a bigger risk and farm directly on Mellow. Note that since Symbiotic's stETH deposit is full, you will not earn Symbiotic points, but will earn 1.5x Mellow points.

The airdrop game will probably be similar to the Eigenlayer playbook: Mellow LRT will be integrated into DeFi, and we will see leverage farming on Pendle and multiple lending protocols. But I believe Symbiotic tokens will probably be launched before EIGEN is tradable.

In an interview with Blockworks, Putiatin said, the mainnet may "go live with some networks in late summer." Does this mean that the token will also be launched?

Stealing the restaking limelight from Eigenlayer could be a smart move, especially if the market turns bullish soon and considering Symbiotic’s aggressive partnership strategy.

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

Maybe Symbiotic is promising more support and token distribution? I need more answers!

Regardless, these re-staking wars are good for those of us speculative airdrop players because it provides more opportunities and may prompt Eigenlayer to launch a token faster.

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

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

Last: 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 real one.L2.

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

1. Karak supports Eigenlayer's LRT, so farmoors can earn points from Eigenlayer, LRT, and Karak at the same time.

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

(More information for reference)

That said, Karak has yet to announce any significant partnerships, LRT protocols launched on Karak, or any exclusive DSS/AVS partners since the April announcement. Hopefully Karak can pick up the pace as Symbiotic is racing to catch up with Eigenlayer.

The article comes from the Internet:The Restaking War has begun. Who will have the last laugh among Symbiotic, Eigenlayer and Karaka?

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