What Is Symbiotic?

Symbiotic offers a flexible and modular approach to restaking, enabling networks to manage their staking processes, including collateral asset support, node operator selection, and reward mechanisms.

Key Takeaways

• Symbiotic is a restaking protocol, enabling new decentralized networks and applications to secure their networks through their shared security mechanism, while allowing users to compound their interest rewards.

• Symbiotic adopts a flexible and modular approach to restaking. It allows direct deposits of any ERC-20 tokens that represent staked assets or liquidity positions from multiple blockchains, enabling cross-chain capital efficiency.

• Symbiotic’s ecosystem includes partners like Ethena, EtherFi, Mellow, and Hyperlane. 

Refresher on Restaking and Liquid Restaking Tokens

Following Ethereum’s move to Proof of Stake with the Merge in 2023, interest from retail and venture investors in liquid staking and restaking protocols has surged. Restaking mechanics, coded into smart contracts, enable staked tokens to be repurposed and staked again. This not only allows users to compound their interest rewards but also enhances the security of the blockchain.

Restaking also addresses the issue faced by new protocols around establishing security for their network by leveraging the existing security of major networks. Instead of requiring new decentralized networks to establish their crypto-economic security through issuing and staking new tokens, which can be costly and time-consuming, restaking pools the security of established networks. This allows other applications to use the robust security of these established networks, making the process more efficient and reducing the need for new projects to create their tokens solely for security purposes.

This year alone, Total Value Locked (TVL) in the restaking sector grew dramatically from $1.3 billion in January to $20.12 billion in June. Liquid Restaking Tokens (LRTs), which emerged from the concepts of liquid staking and restaking, allow users to participate in restaking while maintaining liquidity through a liquid staking token. Decentralized finance (DeFi) platforms like Pendle and Gearbox found their product market fit by allowing for the generating of yield through LRT tokens. As a result, the Total Value Locked (TVL) in this sector grew dramatically from $1.3 billion in January to $20.12 billion in June.

Understanding Symbiotic

Symbiotic takes a flexible and modular approach to restaking. Their vision of a permissionless shared security enables for effective decentralization and alignment of any network and is not bound to a singular monolithic chain. 

This means with Symbiotic, networks have full control over their staking and restaking processes as they allow direct deposits of any ERC-20 token. This makes Symbiotic more versatile compared to EigenLayer, which primarily focuses on ETH and its derivatives. 

Symbiotic allows decentralized applications to secure their networks through their shared security mechanism. The Symbiotic platform allows dApps to implement their native staking for their tokens without the need to create their security systems independently. The permissionless nature of the platform also allows dApps to integrate seamlessly without requiring approval, fostering a decentralized way for new projects to build on top of Symbiotic.

Symbiotic successfully raised $5.8 million in a seed funding round led by Paradigm and cyber•Fund. One point of note is good to note is that cyber•Fund was established by Lido’s co-founder, and it’s speculated that investing in Symbiotic is a fight against the threat to Lido’s dominance in staking.

The platform, founded by Misha and Algys, launched on June 11, and within 24 hours, the deposit caps for staked ETH were filled totaling its TVL to $242.85 million. The Symbiotic team has mentioned across their socials that restaking caps will be increased and more assets will be added as part of the future roadmap.

How Does Symbiotic Work?

Symbiotic allows for any ERC-20 tokens representing staked assets or liquidity positions from various blockchains enabling cross-chain capital efficiency. Networks utilizing Symbiotic can selectively choose their collateral assets, node operators, rewards, and slashing from a diverse range of restakers with varying risk tolerances without needing to establish separate infrastructures for each one.

A key component in delegation and staking management is Vaults. Responsible for accounting, delegation strategies, and rewards distribution, it serves as an intermediary layer between users, the network, and operators, where users can delegate assets beyond ETH and select trusted vaults for their deposits. 

Vaults provide economic security to networks by pooling the staked assets and managing the delegation of these assets to operators or opting into running the infrastructure of chosen networks, as seen with operator-specific Vaults like the Chorus One Vault. For Vaults that are not operator-specific, Symbiotic offers a registry of operators with their credentials to facilitate restakers’ delegation strategies. 

One of the big restaking risks is slashing. Slashing involves penalizing operators for malicious behavior or underperformance. Symbiotic ensures that slashing incidents are handled transparently, with resolvers or committees having the ability to veto these incidents to provide added security to participants.

Additionally, with their core contracts non-upgradable just like Uniswap, Symbiotic immutability of their core contracts eliminates risks from external governance and potential points of failure. This is also a step towards a fully decentralized application, where it can function independently without the Symbiotic team.

Partnerships and Ecosystem

Here are some of the network partners that are exploring Symbiotic’s restaking primitives:

Ethena

Ethena is leveraging Symbiotic’s staking framework along with LayerZero’s Decentralized Verifier Network (DVN) framework to enable cross-chain security for Ethena assets like USDe using staked ENA. This integration is a key component of Ethena’s infrastructure, leveraging staked ENA to benefit from permissionless shared security. 

ENA and Ethena’s native stablecoin, USDe, is now available on Symbiotic. The $50 million cap for sUSDe was reached within 15 minutes, but ENA can still be staked, with caps set to increase over time.

EtherFi

Liquid restaking platform EtherFi allows deposits of wETH, eETH, weETH, wstETH and many other LST into their liquid vaults called Super Symbiotic LRT where participants will earn Symbiotic, Veda and EtherFi points. This vault will automatically deposit assets into Symbiotic when caps lift, enabling for full qualification to Symbiotic points. At time of writing, the Super Symbiotic LRT vault has reached 156.8M in total value locked. 

Mellow Protocol

Another LRT project within the ecosystem is Mellow protocol, which highlighted its capability to launch Liquid Restaking Tokens (LRTs) on any staking protocol, including Symbiotic, EigenLayer or Karak. 

Mellow allows anyone, including hedge funds and node operators, to deploy Liquid Restaking Tokens (LRTs), potentially increasing their number and posing challenges for integration with DeFi protocols and liquidity. This would mean the support of varied risk profiles, enabling users to choose their preferred level of risk exposure, unlike traditional LRTs that enforce a single risk profile for all users. 

The first wave of Symbiotic points campaign on Pendle introduces 4 different LRTs: steakLRT by SteakhouseFi, Re7LRT by Re7Capital, amphrETH by MEVCapital and rstETH by P2Pvalidator where participants are able to earn 1 Mellow, and 1 Symbiotic points per hour for every wrapped staked ETH being staked. At current time to writing, three out of the four LRT pools have reached its maximum limit of 10,322 wrapped staked ETH.

Hyperlane

Hyperlane, a protocol designed to facilitate interoperability between different blockchains, is also exploring Symbiotic-powered Interchain Security Module (ISM) for their interoperability framework. Other partnerships include ZK proof marketplaces, Oracles, sequencers, market makers, Ethereum Layer 2 solutions, options protocols and many others. 

Competitive Landscape 

Now, let’s take a look at some other restaking protocols that also aim to improve the security and efficiency of decentralized networks. 

EigenLayer

EigenLayer and Symbiotic are two platforms with distinct approaches to enhancing the security and efficiency of decentralized networks. EigenLayer is a platform that focuses on liquid restaking and allows users to repurpose their staked ETH or liquid staking tokens (LSTs) to secure multiple decentralized applications (dApps). This method leverages Ethereum’s security infrastructure, creating a pooled security model that enhances the security of various applications. 

EigenLayer’s primary feature is its integration of liquid staking with restaking, offering users additional staking rewards and enhanced security for dApps. This approach allows users to earn more by restaking their liquid staking tokens and ensures robust security through a delegated proof-of-stake (PoS) system with mechanisms like watchtowers to monitor and penalize malicious activities. It also supports Actively Validated Services (AVSs) such as bridges, data availability layers, and oracles, benefiting from Ethereum’s strong security model.

Conversely, Symbiotic provides a flexible and modular staking solution, enabling networks to control aspects like collateral asset support, node operator selection, and reward mechanisms. It emphasizes a customizable and decentralized approach, utilizing non-upgradable core contracts on Ethereum to minimize governance risks and ensure security. Symbiotic supports a multi-asset, network-agnostic design, enabling scalable and efficient economic security sourcing, focusing on capital efficiency, and reducing governance risks through customizable staking processes.

When it comes to adoption and integration, EigenLayer has attracted significant attention, with over $15 billion in assets deposited into its smart contracts. It integrates with major DeFi platforms and protocols, facilitating the deployment of Liquid Restaking Tokens (LRTs) across various staking protocols. Symbiotic, meanwhile, is suitable for projects at any stage of decentralization, providing support for launching decentralized networks, expanding operator sets, and integrating multiple tokens into a network’s collateral base. 

While EigenLayer focuses on interoperability through its liquid restaking mechanism, connecting various blockchains and dApps, Symbiotic offers a modular and permissionless design that allows any decentralized application to integrate seamlessly, supporting a flexible and decentralized ecosystem.

Karak

The third biggest restaking protocol Karak has a modularity function and introduces a universal restaking layer that supports a wide range of assets beyond Ethereum, including Solana, Celestia, Arbitrum and Optimism. This is largely similar to Symbriotic’s approach, in accepting ERC-20 tokens and multi-collateral assets instead of the singular asset EigenLayer accepts, ETH.  Its modular design and creation of Distributed Secure Services (DSS) reduce costs and enhance scalability for new protocols. In contrast, Symbiotic stands out with its permissionless and modular design, emphasizing decentralized governance and enhanced security. 

Conclusion

Symbiotic’s permissionless shared security model allows networks to maintain control without being tied to a single blockchain, making it more versatile compared to protocols focused solely on Ethereum. Symbiotic emphasizes decentralization through non-upgradable core contracts on Ethereum, reducing governance risks and ensuring security. The platform’s design supports a multi-asset, network-agnostic approach, enhancing scalability and economic security sourcing. 

The increasing interest in liquid staking and restaking protocols, driven by Ethereum’s shift to Proof of Stake, has highlighted the importance of solutions like Symbiotic. By allowing direct deposits of any ERC-20 token, Symbiotic offers greater flexibility and customization for networks. The platform addresses fragmented blockchain security by leveraging existing security from major networks, which reduces the need for new projects to create their own tokens for security purposes. Symbiotic focus on decentralization and modularity, combined with its robust security measures, makes it a strong contender in the evolving landscape of restaking protocols.