Macauley Peterson

Restaking pioneer EigenLayer has demonstrated remarkable success in attracting capital — effectively acting as a &#8220;black hole&#8221; for ether — and has become one of the largest DeFi protocols in the process.



But Symbiotic’s entrance into the shared security space with a “stake anything” design is poised to shake things up.



Since <a href="https://blockworks.co/news/eigenlayer-deploys-on-ethereum-mainnet">launching</a> on Ethereum mainnet just over a year ago, <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a> had sucked in about 5.4 million ETH, worth $20 billion <a href="https://defillama.com/protocol/eigenlayer?denomination=ETH">at its peak</a> in early June. The protocol began raising deposit caps aggressively in early 2024, and accepting more flavors of ether.



By March, deposits had increased from under 1 million ETH to approximately 3 million. This growth rate continued even after the launch of Karak, an alternative multi-asset restaking model designed to enhance staking yields.



Read more: <a href="https://blockworks.co/news/universal-restaking-layer-andalusia-labs">Karak wants to introduce ‘universal restaking’ for everyone</a>



Taking the concept further, newcomer Symbiotic supports any <a href="https://app.blockworksresearch.com/glossary/#erc-20-token">ERC-20</a> asset as collateral for restaking. This level of customization options, and a flexible restaking model, enables developers to use a wide variety of assets to secure their applications.



Ethena’s native token ENA, along with the staked version of its synthetic dollar, sUSDe, which earns yield through ether staking and the futures basis trade, yesterday became the first non-ETH-based assets to be restaked on Symbiotic.



The new sUSDe vault on Mellow Finance, which provides infrastructure to Symbiotic risk curators, rapidly hit its $40 million cap, and the ENA vault is about half full after the first day of deposits.



Both Mellow and Symbiotic were supported by <a href="https://blockworks.co/podcast/empire/6cc9a6fa-dfcb-11ee-a5dd-4f9a9a4a49ad">Cyber Fund</a> and are part of the <a href="https://research.lido.fi/t/lido-alliance-an-ethereum-aligned-ecosystem/7475">Lido Alliance</a>, and other Mellow vaults only accept Lido staked ether (<a href="https://blockworks.co/price/steth">stETH</a>), for now.&nbsp;



The Ethena vaults have three curators: MEV Capital, Re7 Labs and K3. Laurent Bourquin, a general partner at MEV Capital, says he expects liquid restaking tokens (LRTs) to be accepted as deposits in Symbiotic vaults as well.



“The main big difference is the [agnosticism] of Symbiotic in the sense that you can also let EigenLayer LRTs to come to Symbiotic,” Bourquin told Blockworks, “so you will have double slashing, hence a double yield tranche.”



Other liquid staking and restaking providers are eager to jump in the pool too, agrees Sunand Raghupathi, co-founder of both Veda Protocol and <a href="https://blockworks.co/news/sommelier-defi-strategy-vaults-now-live-on-arbitrum">Seven Seas Capital</a>, though not necessarily as Bourquin sees it.



“Two days after Symbiotic announced their launch —&nbsp;and, behind the scenes, they were clearly working with Mellow to build restaking infrastructure — through Veda we were actually able to launch a LRT on Symbiotic,” Raghupathi told Blockworks.



Read more: <a href="https://blockworks.co/news/symbiotic-seed-round-shared-security">Symbiotic aims to be the Uniswap of shared security</a>



Veda partnered with EtherFi on its “<a href="https://etherfi.gitbook.io/etherfi/liquid/super-symbiotic-lrt-vault">Super Symbiotic</a>” vault, which accepts a variety of ether derivatives — including EtherFi’s eETH — and converts them to stETH for use in Symbiotic.



Technically, Symbiotic could accept eETH itself, which would effectively be double-restaked — first in EigenLayer and then in Symbiotic — but that’s not what EtherFi does. If a user supplies eETH, it is first removed from EigenLayer.



As Misha Putiatin, co-founder of Symbiotic has noted, double restaking would be inherently risky.



“We can&#8217;t stop people from double restaking, if networks accept that, we can&#8217;t do anything about that,” Putiatin said, adding they have no plans to incentivize such behavior, however.



MEV Capital’s Bourquin thinks double restaking is inevitable.



“I think now it&#8217;s first of all FOMO — fear of missing out — from the LRTs to still being there first,” Bourquin said. “So let&#8217;s say the risk is put a bit aside for now for the simple reason that slashing doesn&#8217;t even exist yet on EigenLayer — we are talking about risk that will be there at the end of the summer.”



Although EigenLayer accepts deposits which can be delegated to Actively Validated Services (AVSes), none of these are yet live with slashing conditions in place, which will eventually put depositors’ capital at greater risk.



Ultimately, Bourquin sees the flexibility of Symbiotic as a clear plus.



“We are really bullish on Symbiotic because it avoids the hyper-centralization of LRTs into one or two or three names,” Bourquin said.



EtherFi <a href="https://blockworks.co/news/etherfi-eigenlayer-liquid-restaked-token">started as an EigenLayer restaking protocol</a> but has branched out to become a trusted brand in other areas — for instance, launching Liquid, a stablecoin vault which is managed by Seven Seas and earns high yields through myriad DeFi avenues such as liquidity provisioning, lending optimization and peg arbitrage.



By allowing its users to participate in Symbiotic, EtherFi can retain them within its ecosystem, capturing a portion of the capital flows. This approach provides an alternative to swapping out of eETH via on-chain liquidity pools, which could otherwise pressure the derivative&#8217;s stability.



Read more: <a href="https://blockworks.co/news/renzo-liquid-staked-eth">What was behind the run on Renzo’s liquid restaked ETH?</a>



Even if the amount of eETH declines as a result, EtherFi retains those users through its brand and frontend, the argument goes.



“The EigenLayer view is that most assets should not be used for this,” Raghupathi said. “We&#8217;ve spent a long time discovering that ETH is in some sense the king of secure assets.”



Symbiotic’s view is market forces should determine what is or isn’t suitable collateral for AVS staking.



EigenLayer does have plans of supporting dual staking, using ETH and a bespoke cryptoasset together, but Symbiotic’s permissionless design enables that today, Raghupathi said.



“Anyone can spin up markets on Symbiotic, and so you&#8217;re going to see a much larger diversity of tokens that are being used to secure AVSes on Symbiotic than you see in EigenLayer which is very, very ETH focused.”



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Does Ethena portend a Symbiotic edge over Eigen?

Shared security protocol Symbiotic came out of stealth today.&nbsp;



Symbiotic allows networks to customize their staking implementation, including collateral assets, node operator selection, rewards and penalty mechanisms. Ethereum serves as the protocol’s coordination and orchestration layer.



Whereas EigenLayer is pitched as “a marketplace for decentralized trust,” Symbiotic is a sort of operating system for decentralized coordination.



“The goal was to create a protocol that is suitable for almost any decentralized network,” Symbiotic co-founder and CEO Misha Putiatin told Blockworks.



Symbiotic acts as a thin coordination layer that offers high flexibility and control to network builders. As such, it will be immutable from launch — like Uniswap — and does not require a token to function.



<h2 class="wp-block-heading">Ambition to “create an industry”</h2>



Truly decentralized networks alter how we think about security, trust and coordination in the digital world. <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a>’s proof-of-work allowed a decentralized network of miners to secure digital transactions without relying on a central authority​.



<a href="https://blockworks.co/tag/ethereum">Ethereum</a>’s proof-of-stake achieves broadly similar levels of security using economic collateral rather than electricity consumption.



Shared security extends these concepts further by allowing multiple networks to share their resources. This enables new and emerging networks to bootstrap their growth by piggybacking on the established security of larger, more mature networks.



Implementations can involve complex coordination to ensure that node operators meet the protocol&#8217;s rules across various networks​​. Some of the most well known purveyors of shared security are <a href="https://blockworks.co/news/polkadot-reaches-major-milestone-with-launch-of-parachain-auctions">Polkadot’s Relay Chain</a>, <a href="https://blockworks.co/news/cosmos-greenlights-interchain-security">Cosmos’ Interchain Security</a> and <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a>.



“Polkadot was one of the pioneers of that, and then Cosmos proceeded with their own flavor,” Putiatin said. “Our idea is that we wanted to create a protocol [with as few] tradeoffs as possible.”



Listen: <a href="https://blockworks.co/podcast/bellcurve/1cc11b5c-e809-11ee-849d-7b1f8d682b33">Restaking and Shared Security: Lessons from Cosmos, Polkadot, and Beyond</a>



Symbiotic began development about nine months ago, co-founded by Putiatin and Algys Ievlev and built by the team behind auditing and security firm Statemind. Before that, Putiatin was CEO of MixBytes, a smart contract auditing firm where Ievlev served as chief technology officer. The pair both studied in Moscow and now live in Dubai.



Their experience at Statemind led the team to “expand their mission to secure everything blockchain and everything decentralized” with Symbiotic, Putiatin said.



Symbiotic has raised a $5.8 million seed round from venture firms Paradigm — which also funded Uniswap — and cyber•Fund, the venture firm founded by early <a href="https://blockworks.co/tag/lido">Lido</a> contributors Konstantin Lomashuk and Vasiliy Shapovalov, as CoinDesk previously <a href="https://www.coindesk.com/tech/2024/05/14/lido-co-founders-paradigm-secretly-back-eigenlayer-competitor-as-defi-battle-lines-form/">reported</a>.



The protocol’s overarching design architecture is “permissionless, neutral and flexible.”



Neutral means Symbiotic won’t ​​compete with other market participants — so no native staking, rollup or data availability offering.



To be “symbiotic” means “to run from competition like [from] fire and to be as selfless as possible, as unopinionated as possible,” Putiatin explained.



<h2 class="wp-block-heading">Maximally flexible</h2>



All major decisions remain with the networks who build on top of Symbiotic, such as what collateral they will accept, which node operators can participate, who resolves disputes — so slashing and punishment — and how much stake they want from each party.



A key differentiator compared to other shared security systems is that Symbiotic can accept any token and, in theory, from any chain.



To create an industry around shared security, “we needed to create a protocol that can be super modular, and the abstraction of collateral is one of these.”



Putiatin lumps that in the “neutrality” category, since even though Symbiotic is an Ethereum protocol, collateral need not be on Ethereum, although Lido staked ether (<a href="https://blockworks.co/price/steth">stETH</a>) is a likely candidate as a core collateral asset.



“You can create an obligation on the Ethereum side,” he explained, “and if [the] network sees that the messaging is trusted enough, within the slashing window, the asset on another chain might be even in DeFi — actually be used somewhere — yet is reliably slashed.”



This modularity ensures that networks can adapt and evolve according to their specific security needs and stages of decentralization​.



“When you launch a centralized network there is a gap between you being super creative and innovative, having a great idea, and you are starting in a way that is safe — because you needed to build your own economic security model,” Putiatin said.



This is why we have seen a proliferation of tokens, and decentralization compromises like <a href="https://app.blockworksresearch.com/glossary/#multi-signature-multi-sig-wallet">multisigs</a>, proof of authority networks, or subpar <a href="https://blockworks.co/tag/validator">validator</a> sets, in Putiatin’s view.



“The goal for our project is to shift the narrative — you don&#8217;t have to launch natively — it&#8217;s going to be safer and easier for you to launch on top of us, on top of shared security,” he said.



He imagines the system being applied to jumpstart all kinds of networks, mentioning cross-chain <a href="https://blockworks.co/tag/oracles">oracles</a>, threshold networks, reconfirmations and <a href="https://blockworks.co/tag/mev">MEV</a> infrastructure, interoperability and <a href="https://blockworks.co/news/shared-sequencers-decentralization">shared sequencers</a>, to name a few.



“We believe that this sort of primitive can help a lot of people, and for that we need to be as neutral as possible,” Putiatin said.



While the protocol’s ambitions for shared security are massive, its architecture is deliberately minimalist.



It will be permissionless and immutable, with no multisig anywhere. It will not collect fees, nor will it rely on any centralized frontend.



“If I die and every engineer dies, our system will still be fully operational. I don&#8217;t expect our front end to be used a lot,” he said.



Launch partners include familiar names like Ethena, LayerZero and Hyperlane, plus a slew of networks that are still in the early stages of development, according to a Symbiotic <a href="https://blog.symbiotic.fi/symbiotic-intro/">blog post</a>.



Putiatin expects the Symbiotic mainnet to be up and running for some networks as soon as the end of the summer.



“Why should you create a complex protocol when you can create a really simple and flexible one?”



Updated June 12, 2024: Noted that CoinDesk previously reported Symbiotic&#8217;s venture backing.



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Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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