The Game Among Giant VCs: A Detailed Explanation of the Re-staking Protocol Symbiotic Supported by Paradigm and Lido
As one of the few popular narratives in this bull market, the re-staking track welcomes another heavyweight player. On June 11, Symbiotic announced the completion of its initial deployment and raised $5.8 million in a seed round led by Paradigm and Cyber Fund. Just 5 hours after launch, the wstETH staked on Symbiotic reached its limit, showing an impressive momentum.Author: Yangz, Techub News
As one of the few popular narratives in this round of the bull market, the re-staking track welcomes another heavyweight player. On June 11, Symbiotic announced the completion of its initial deployment and raised $5.8 million in a seed round led by Paradigm and Cyber Fund. Just 5 hours after launch, the wstETH staked on Symbiotic reached its limit, showing a truly fierce momentum.
Considering that the current re-staking track EigenLayer only supports ETH and certain ETH derivative stakes, while Symbiotic supports staking of any asset that adheres to the ERC-20 token standard, the two may become direct competitors. According to a previous report by CoinDesk, this financing is actually a game among giant VCs. Several insiders revealed that EigenLayer co-founder Sreeram Kannan had rejected Paradigm's investment in favor of a16z. Cyber Fund was created by Lido co-founders Konstantin Lomashuk and Vasiliy Shapovalov. Although Cyber Fund published a statement respecting EigenLayer's pioneering work in re-staking, it is not hard to imagine that this investment is also a measure to counter EigenLayer's encroachment on its market share.
So, what exactly is the Symbiotic re-staking protocol?
Introduction to Symbiotic
According to the official documentation, Symbiotic is a shared security protocol that serves as a coordination layer, allowing network builders to control and adjust their (re)staking strategies in a permissionless manner.
The advantages of this protocol include:
- Flexibility from Modularity
The network can control all aspects of (re)staking strategies, including supported staking assets, choice of node operators, rewards, penalties, and related settlement mechanisms. All participants can flexibly choose to join or exit Symbiotic.
- Minimizing Risks through Immutability
The immutable core contracts on Ethereum eliminate external governance risks and single points of failure. The contract design of Symbiotic minimizes execution layer risks.
- Enhancing Capital Efficiency through Re-staking and Reputation-based Curation
The permissionless, multi-asset, and network-agnostic design helps achieve scalable and highly capital-efficient economic security. Additionally, the evolving operator-centric cross-network reputation system will further enhance the capital efficiency of network builders.
Core Modules of Symbiotic
The Symbiotic protocol consists of five interrelated modules, including collateral for the economic security layer, treasury for the staking layer, operators for the infrastructure layer, resolvers for the arbitration layer, and networks for the service layer.
Collateral
Collateral can be held outside the Symbiotic protocol itself by using assets that protect the security of the Symbiotic network (for example, holding DeFi positions on networks outside of Ethereum) to enhance capital efficiency and scale.
Symbiotic achieves this by separating the ability to seize assets from the underlying assets themselves, similar to how liquid staking tokens create a tokenized representation of underlying staking positions. Technically, the collateral positions in Symbiotic are ERC-20 tokens with extended functionality for handling penalties.
Collateral tokens are minted and deposited into the treasury by users who own assets or wish to re-stake positions, and the treasury delegates the collateral to operators within the Symbiotic network. The treasury defines acceptable collateral, and the network must accept the treasury's collateral and terms (such as penalty limits) to receive rewards.
Treasury
The treasury is the delegation and re-staking management layer of Symbiotic, with functions including:
"Accounting": The treasury handles deposits, withdrawals, and penalties of collateral, thereby managing its related assets.
Delegation Strategy: Treasury deployers/owners formulate delegation and re-staking strategies for operators on the Symbiotic network.
Reward Distribution: The treasury distributes the network's staking rewards to collateral holders.
The treasury can be deployed in an immutable, pre-configured manner, or it can designate owners who can update treasury parameters. Operators and custodians, such as cryptocurrency institutions or liquidity (re)staking protocols, are expected to use the treasury to create differentiated products, such as:
Operator-specific Treasury: Operators can create a treasury and re-stake collateral through any network configuration to their infrastructure. Operators can create multiple differently configured treasuries to serve clients without additional node infrastructure.
Multi-operator Treasury: Configuring re-staking networks and delegation strategies for different operators. The treasury can also set custom penalty limits, establishing caps on the amount of collateral that can be seized for specific operators or networks. These commitment terms need to be approved by the network providing curation services.
Immutable Pre-configured Treasury: The treasury can be deployed using unchangeable pre-configured rules to prevent risks such as treasury managers adding additional re-staking networks or changing configurations in any other way.
Operators
Operators are entities that run decentralized network infrastructure both within and outside the Symbiotic ecosystem. The Symbiotic protocol will create an operator registry to record interactions with the protocol, and protocol participants can attach credentials and other data to operator entities. In the initial version, this includes metadata about the operator entities provided by the operators themselves, as well as data created through interactions with the Symbiotic protocol, such as:
Networks the operator chooses to join
Relevant treasuries and re-staked collateral in the treasury
Historical penalty logs and all other interaction records with the Symbiotic ecosystem
An important advantage of the Symbiotic protocol and its treasury system is that operators can receive staking shares for the same set of node infrastructure from different partners (via the treasury) for each supported network. This system allows node operators to acquire shares from different stakers with varying risk profiles without needing to establish separate infrastructure for them.
Resolvers
Symbiotic supports various modes for handling penalty events by introducing resolvers. Resolvers are contracts or entities that can veto penalty events forwarded from the network, determined by terms proposed by the network and accepted by the treasury seeking to provide collateral support for operators. The treasury can allow multiple different (or none) resolvers to cover all its collateral. Additionally, decentralized dispute resolution frameworks such as UMA, Kleros, and reality.eth can also serve as resolvers. Furthermore, additional security can be provided to participants in the Symbiotic protocol through a veto mechanism requiring a quorum or through specific penalty events.
Network
In Symbiotic, a network is defined as any protocol that requires decentralized infrastructure to provide services in the crypto economy, such as validating and ordering transactions, providing off-chain data to applications in the cryptocurrency economy, or guaranteeing cross-network interactions for users, enabling developers to launch decentralized applications.
Decentralized infrastructure networks can flexibly leverage Symbiotic to acquire their security in the form of operators and economic support. In some cases, the protocol may consist of multiple sub-networks with different infrastructure roles. The modular design of the Symbiotic protocol allows developers of such protocols to define participation rules for participants to choose to join any sub-network.
Progress of the Symbiotic Ecosystem
According to reports from CoinDesk citing insiders, Renzo has been discussing integration following the launch of Symbiotic. Additionally, Ether.Fi co-founder Mike Silgadze is also excited about Symbiotic, stating, "I am excited about what they are working on. It looks interesting and innovative."
Currently, the Symbiotic ecosystem has nearly 20 partners, and here are the relevant developments:
Ethena is integrating Symbiotic with LayerZero's Decentralized Verification Network (DVN) framework to enable cross-chain functionality for Ethena assets (such as USDe).
Bolt, built by Chainbound, is a protocol that allows Ethereum block proposers to make trustworthy commitments (such as trustless pre-confirmations) and plans to utilize Symbiotic for re-staking and penalties of operator sets.
Hyperlane is exploring a Symbiotic-driven Interchain Security Module (ISM) for its modular interoperability framework.
Kalypso is a ZK proof market that supports private inputs and uses Symbiotic re-staking to provide validity and response time guarantees for proof generation.
Fairblock is collaborating with Symbiotic to explore a Dynamic Cryptographic Service Network (CSN) that ensures security through (re)staked assets and is tailored for applications requiring different security parameters, performance, and availability trade-offs.
Aori plans to combine Symbiotic re-staking with stablecoin assets, holding market makers and resolvers accountable when interacting with its high-frequency order protocol.
Drosera is working with the Symbiotic team to study the security of re-staking applications for Ethereum Layer 2 solutions.
Ojo is a cross-chain oracle network that will enhance its economic security through Symbiotic.
Blockless enables builders to create secure, network-neutral applications by integrating Symbiotic's customizable security with its customizable computing infrastructure, providing complete autonomy and flexibility in shared security.
Rollkit is exploring integrating Symbiotic re-staking into its modular stack to facilitate launching sovereign Rollups on Celestia; initially, Symbiotic will help provide accountability for Rollup sequencers, with the long-term goal of decentralizing the sequencers.
Cycle Network is a unified liquidity network aimed at achieving blockchain agnosticism, which will use Symbiotic to power its shared sequencers.
Stork aims to integrate Symbiotic re-staking to enhance the trustlessness of on-chain data utilization.
Aizel is building a verifiable AI network, researching how to utilize Symbiotic to reconstruct different node roles to ensure verifiability from reasoning to execution.
Mind Network will leverage Symbiotic re-staking combined with FHE to enhance economic and consensus security in decentralized networks.
DOPP is building a fully on-chain options protocol that is exploring Symbiotic re-staking to help its oracle network achieve decentralization for specific options price feedback.
As noted by Cyber Fund, composable capital efficiency has always been a core value proposition of DeFi protocols. EigenLayer has brought efficient capital redeployment for protocols needing security guarantees outside of Ethereum, and despite early criticisms, it has played an indispensable role in stimulating innovation. Now, Symbiotic enters the re-staking track with strong capital, and the competition between the two is inevitable. Whether Symbiotic will become the "default choice for launching decentralized networks," as Paradigm hopes, remains to be seen, but its competition with EigenLayer will undoubtedly inject new vitality into the currently sluggish DeFi track.
