The popular gossip in town is that Paradigm approached Sreeram Kannan, co-founder of Eigenlayer, to invest, but Kannan opted for rival venture firm Andreessen Horowitz (a16z) instead. a16z lead the $100m Series B round.

Since then, Eigenlayer has grown to become the 2nd largest DeFi protocol with $18.8b in TVL. Only Lido is larger with $33.5b. EIGEN token, which is not yet transferable, trades at $13.36b FDV.

Considering Eigenlayer’s valuation of $500 million FDV in March 2023, this translates to a 25x increase in paper gains.

It’s no surprise that Paradigm isn’t happy. In response, Paradigm funded Symbiotic, positioning it as a direct competitor to Eigenlayer. Symbiotic raised $5.8m in seed funding from venture giants Paradigm and cyber•Fund.

No idea what the valuation is. If you know, please share in the comments.

The Paradigm vs a16z competition is a common knowledge (and joke) but there’s a second part of the story.

Cyber Fund, the second main investor in Symbiotic, was established by Lido co-founders Konstantin Lomashuk and Vasiliy Shapovalov.

Coindesk reported in May, that “people close to Lido perceive Eigenlayer’s approach to restaking as a potential threat to its own dominance.”

Lido has missed out on the Liquid Restaked Token trend. In fact, stETH’s TVL has stagnated and decreased by 10% in the past three months. All while EtherFi and Renzo inflows skyrocketed, reaching $6.2b and $3b in TVL, respectively.

Restaking with LRTs is notably more appealing because it offers higher yields, although much of it is essentially point farming at this stage.

To strengthen Lido’s position, the Lido DAO launched “Lido Alliance” to grow a permissionless, decentralized restaking ecosystem as its number 1 mission.

“…in light of, among other things, the rapid emergence of the restaking market. To answer part of his call, we propose the below framework as a way of supporting the emergence of an ecosystem around stETH, while keeping the protocol the same.”

Btw, one of the outlined strategic priorities is reaffirming stETH as an LST and not becoming an LRT.

This is great as we get more tokens with more airdrop farming opportunities. Yey!

And just a month after the initial discussions, the key Alliance member (Mellow) has launched the deposits with LRTs on Symbiotic backed by stETH deposits!

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

Symbiotic vs. Eigenlayer

Symbiotic: Permissionless and Modular

Symbiotic distinguishes itself with a permissionless and modular design, offering more flexibility and control. They key stand out features are:

• Multi-Asset Support: Symbiotic allows direct deposits of any ERC-20 token, including Lido’s stETH, cbETH… This makes Symbiotic more versatile compared to Eigenlayer, which primarily focuses on ETH and its derivatives (AFAIK Eigenlayer could support any other asset in the future).
• Customizable Parameters: Networks using Symbiotic can choose their collateral assets, node operators, rewards, and slashing mechanisms. This modularity gives more freedom to networks to adapt their security settings to their specific needs.
• Immutable Core Contracts: Symbiotic’s core contracts are non-upgradeable, (like Uniswap) reducing governance risks and potential points of failure. Even if the team dissapears, Symbiotic can continue functioning.
• Permissionless Design: By allowing any decentralized application to integrate without requiring approval, Symbiotic offers a more open and decentralized ecosystem.

To be “symbiotic” means “to run from competition like [from] fire and to be as selfless as possible, as unopinionated as possible,” - Misha Putiatin, Symbiotic co-founder and CEO told Blockworks.

Misha also told Blockworks that “Symbiotic won’t ​​compete with other market participants — so no native staking, rollup or data availability offering.”

When dApps launch, they typically need to manage their own security model. However, a permissionless, modular, and flexible Symbiotic design allows anyone to secure their network using shared security.

“The goal for our project is to shift the narrative — you don’t have to launch natively — it’s going to be safer and easier for you to launch on top of us, on top of shared security,” - Misha told Blockworks.

In practice it means that crypto protocols could launch native staking for their own native tokens to increase network security. For example, Ethena partnered with Symbiotic for USDe cross-chain securite with staked ENA.

Ethena is integrating Symbiotic with LayerZero’s Decentralized Verifier Network (DVN) framework to bring Ethena assets such as $USDe cross-chain secured by staked $ENA. This is the first of several pieces within their infrastructure and system that will look to leverage staked $ENA, - Symbiotic blog post.

Other use cases include cross-chain oracles, threshold networks, MEV infrastructure, interoperability, shared sequencers, etc.

Symbiotic launched on June 11 and deposit caps for stETH was reached within 24 hours. Oh, and did I mention points for depositors?!

More on the airdrop farming just in a moment.

Eigenlayer: Managed and Consolidated Approach

Eigenlayer uses a more managed and consolidated approach, focusing on leveraging the security of Ethereum’s ETH stakers to support various dApps (AVSs):

• Single Asset Focus: Eigenlayer primarily supports ETH and its derivatives. This focus can limit flexibility compared to Symbiotic’s broader multi-asset support. Although more assets can be added.
• Centralized Management*: Eigenlayer manages the delegation of staked ETH to node operators, who then validate various AVSes. This centralized management helps streamline operations but can lead to bundled risks, making it harder to assess individual service risks accurately.

*Note: Eigenlayer team clarified that Eigenlayer does not “manage delegations” but users delegate at their discretion. For more info check here.

You can read how it works in my previous blog post:

Navigating Restaking: Your Guide to Eigenlayer’s Actively Validated Services

IGNAS | DEFI RESEARCH

• Dynamic Marketplace: Eigenlayer provides a marketplace for decentralized trust, allowing developers to use pooled ETH security to launch new protocols and applications. Risks are shared among pool depositors.
• Slashing and Governance: Eigenlayer’s managed approach includes specific governance mechanisms for handling slashing and rewards, which may offer less flexibility.

To be honest, Eigenlayer is an extremely complicated protocol, and the risks and total functioning is beyond my comprehension lol. I had to aggregate the criticisms from various sources for this section. One is the Cyber Fund itself here.

I’m not taking sides, and I am sure that the Symbiotic vs Eigenlayer comparisons will be quite hot among DeFi geeks.

Say Hi to Mellow Protocol: Modular LRTs

What strikes me the most about the Symbiotic launch, is the immediate launch of LRTs on top of Symbiotic on Mellow protocol. As a Lido Alliance member, Mellow benefits from Lido’s marketing, integration support, as well as bootstrapping liquidity.

As part of the deal Mellow is rewarding Lido with 100,000,000 MLW tokens (10% of the total supply) that will be locked in a Lido Alliance legal entity after TGE.

These tokens will be subject to the same vesting and cliff terms as the team tokens: a 12-month cliff following the TGE, and a 30-month vesting period beginning after the cliff (amending the edit following the received feedback).”

Two other benefits were mentioned in the Alliance proposal:

• “Mellow would help to spread the geographical and technical decentralization efforts Lido does outside Ethereum validation.”
• “Lido node operators could launch their own composable LRT and take control of the risk management process by selecting AVS’ suitable for their needs rather than face their imposition by LRTs or restaking protocols”

Implications of the partnership will take time to appear, but LDO is up by 9% in 24. That’s something!

Funny that before the Lido partnership tweet below was posted, one of the four LRT pool caps of $42 million had already been reached.

In any case, if you are familiar with Eigenlayer LRTs like Etherfi, and Renzo, you’ll know that depositing to Mellow is double the fun: you get Symbiotic and Mellow points at the same time.

But Mellow is different from Eigenlayer LRTs….

What Problems Does Mellow Solve for LRTs?

Mellow Protocol allows anyone to deploy an LRT. Hedge funds, staking providers (Lido!). Even I could (theoretically) do it.

This also means that the number of LRTs increases dramatically, which damages their liquidity and complicates their integration in DeFi protocols.

It has a few advantages, though:

• Diverse Risk Profiles: Current LRTs often force users into a one-size-fits-all risk profile. Mellow allows for multiple risk-adjusted models, enabling users to choose their preferred risk exposure.
• Modular Infrastructure: Mellow’s modular design lets Shared Security Networks request specific assets and configurations. Risk curators can then create highly modified LRTs for their needs.
• Smart Contract Risk: By allowing modular risk management, Mellow reduces the risk of bugs in smart contracts and logic of Shared Security Networks, providing a safer environment for restakers.
• Operator Centralization: Mellow diversifies the decision making of operator selection, preventing centralization and ensuring a balanced and decentralized operator ecosystem.
• LRT Looping Risk: Mellow’s design addresses the risk of liquidity crunches due to withdrawal closure. Withdrawals currently take 24h.

The interesting part is that Mellow specifically mentioned that they can launch LRTs on top of any staking protocol like Symbiotic, Eigenlayer, Karak, or Nektar. But I would be very surprised to see Mellow direct partnership with Eigenlayer.

Yet I wouldn’t be surprised to see current Eigenlayer LRT protocols partnering with Symbiotic or Mellow. In fact, Coindesk reported that a source close to Renzo and Symbiotic mentioned Renzo was already in discussions to integrate with Symbiotic a month ago.

Finally, the cool thing about permissionless Mellow vault is that we are likely to have LRTs of DeFi tokens. Think ENA LRT token which is liquid restaked ENA on Symbiotic which secures USDe bridging.

This cycle saw little innovation in tokenomics, but Symbiotic might make holding DeFi governance tokens attractive again.

The DeFi Degen’s Playbook to the Restaking Wars

As of writing, there are four LRT vaults on Mellow with 4 unique curators. Deposit caps are about to be reached.

The timing for Symbiotic + Mellow LRT launch is perfect: EtherFi S2 points end on June 30, Renzo S2 is underway too, while Swell airdrop should arrive soon when withdrawals are enabled.

I was almost worried thinking what to do with my ETH after the LRT farm airdrops expire. Thanks to VC and whale games airdrop farmoooors also going to eat well.

At this stage the game is very simple: deposit to Symbiotic to get their points or take the risk one level up and farm straight on Mellow.

Note that because Symbiotic stETH deposits are already reached, you won’t earn Symbiotic points but will get 1.5x more Mellow points.

The airdrop farming game will likely play out similarly to Eigenlayer playbook: Mellow LRTs will get integrated into DeFi, we’ll see leveraged farms on Pendle, and on multiple lending protocols.

But I believe Symbiotic token might launch even before EIGEN becomes tradeable.

In the interview to Blockworks, Putiatin said that the mainnet might be up and running “for some networks as soon as the end of the summer.” Does this mean the token too?

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

Two partnerships shocked me the most: The Blockless and Hyperlane. Both protocols were initially partnering with Eigenlayer as AVSs for shared security but are they changing alliances?

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

In any case, these restaking wars are good for us, degen airdrop farmoooors, as it provides more opportunities and might push Eigenlayer to launch token sooner.

It’s still early days for Symbiotic but early deposit inflows are very bullish. I’m currently farming on Symbiotic and Mellow but planning to migrate to Pendle YTs when the strategies are open.

I believe that Pendle’s Symbiotic YT token expiration dates will give us further insight into Symbiotic TGE timeline.

On a Final Note: Karak

You thought I forgot about it, right?

Karak is a mixed one. It’s similar to Eigenlayer but instead of AVSs Karak termed them Distributed Secure Services (DSS).

Karak is also launching its own Layer 2 (named K2) for risk management and sandbox for DSSes. Yet it’s more like a testnet than a real L2.

But Karak managed to attract over $1b in TVL! Why? Largely due to two reasons:

• Karak supports Eigenlayer LRTs, so farmooors deposit LRTs to earn Eigenlayer + LRT+Karak points at the same time
• Karak managed to raise over $48M from Coinbase Ventures, Pantera Capital, Lightspeed Ventures. Good names hopefully lead to high airdrop

Check more on Karak in my thread below:

Yet since April’s announcement, Karak is yet to announce any important partners, notable LRT protocols launching on Karak or any exclusive DSS/AVS partners.

I really want to see more active development from Karak because Symbiotic is going hard after Eigenlayer. Karak needs to step up.

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