Title: Transitioning from Staking to Restaking
Author: Arjun Balaji, Dave White, Georgios Konstantopoulos, Paradigm
Translation: Ismay, BlockBeats
Editor’s Note: On June 11th, Symbiotic announced its official launch and revealed that it had completed a $5.8 million seed round financing, led by Paradigm and Cyber Fund. This morning, the re-staking protocol Symbiotic tweeted that it had reached the staking cap of 41,290 wstETH within 5 hours. Symbiotic, which was highly anticipated from the moment of its birth, has been making waves in the market. Last month, reports surfaced that the co-founder of Lido and Paradigm were secretly funding a new company called Symbiotic, which would compete in the re-staking arena. Symbiotic allows users to re-stake Lido’s stETH with other assets that are not natively compatible with EigenLayer, making Symbiotic a direct competitor to EigenLayer.
This article introduces the core concepts and potential applications of the Symbiotic shared security system. As a flexible, permissionless protocol, Symbiotic allows network developers to have full control over staking implementation and operator selection while providing a wide range of security services. In the short term, Symbiotic will be primarily used for launching new consensus instances, such as the election of new L1 operators and decentralized sorting. Looking ahead, Symbiotic will also support use cases like block production and multi-party computation. Additionally, Paradigm has developed Reth Execution Extensions (ExEx) to further enhance shared security services based on Symbiotic.
The following is the full introduction of Symbiotic written by Paradigm:
Decentralized networks require coordination mechanisms to incentivize and oversee their node operators. This mechanism started with Proof of Work and evolved into Proof of Stake, a significant development that allows networks to secure validators through economic collateral. The next frontier is shared security, which expands the services that PoS node operators can provide while leveraging the same economic collateral. Symbiotic is a universal, permissionless protocol that offers shared security through restaking. We invested in Symbiotic in partnership with Lido and other protocol partners like Cyber Fund.
We believe that Symbiotic’s flexible and permissionless approach will be well-suited for many of the most useful shared security consumers, and over time, it may become the default choice for launching decentralized networks.
Background:
Lido is Ethereum’s largest liquid staking token, founded on the insight of separating staked capital from validator infrastructure (labor) without modifying Ethereum’s consensus mechanism, using smart contracts to decentralize the allocation of users’ staking to operators. This separation, termed “delegation,” is a natural trend in PoS systems. By matching staked Ether with the highest quality infrastructure operators, Lido enables PoS to scale on Ethereum without compromising decentralization.
Since 2021, Paradigm has been collaborating with contributors to the Lido protocol. Since then, Lido has grown from around $800 million to over $36 billion in staked ETH deposits and has nurtured the strongest node operator ecosystem: reputable, geographically diverse, diverse, and consistent.
Paradigm has also long supported the Cosmos ecosystem, leading the initial Series A funding of Tendermint Inc. and later investing in Osmosis and dYdX. Through Cosmos, we have observed the challenges developers face when launching new chains from scratch, recruiting validators, and capital, which greatly limits the pace of innovation.
The natural “second phase” of Ethereum staking is to repurpose staking and validator infrastructure and expertise to safeguard multiple protocols beyond L1 consensus. This makes it easier to establish new protocols. Cosmos pioneered the idea of “shared security,” while EigenLayer’s “re-staking” recognizes that Ethereum-centric approaches can successfully launch this validator ecosystem. This original mechanism is innovative and powerful, but given the risks of overloading the Ethereum consensus, it needs to be carefully designed to enable useful applications securely.
When considering the market, we realized that Konstantin was also interested in this. Through him, we met Misha and Algys, the founders of Statemind, a top auditing company with close relationships with Lido (including their V2 audit), Curve, InstaDapp, and others. We shared very similar views on their respective markets and seized the opportunity to collaborate.
Introduction to Symbiotic:
Symbiotic is a new shared security system designed as an extremely flexible, permissionless, and reliable lightweight coordination layer. Symbiotic allows network developers to have full control over their (re)stake implementation and operator settings. Overall, the long-term goal of this protocol is to provide foundational components to help networks navigate the path to decentralization while prioritizing security and capital efficiency.
Flexibility:
Protocols built on Symbiotic can control their stake assets, rewards, and penalty criteria. Initially, Symbiotic will focus on staking ETH as it is the largest staked capital pool. However, the protocol is universal and can accept any ERC-20 asset as collateral. Over time, we expect Symbiotic to serve a variety of assets and their respective operator infrastructure groups.
Network developers on Symbiotic will also have complete control over their operator selection mechanism. Over time, it will be possible to maximize the number of participants, geographical distribution, overlap with other protocols, reputation, and other selection criteria.
Permissionless:
The core contracts of Symbiotic are immutable, eliminating external governance risks. Symbiotic will never have a central multisig, penalty committee, or other permission mechanism for shared security services. Services built on Symbiotic will be able to support various penalty resolution mechanisms, which we believe are crucial for innovation.
Reliability:
Building operator infrastructure networks is challenging, as we have learned from our collaboration with Lido. Symbiotic will ensure scalability by introducing reputable and geographically diverse infrastructure partners and supporting smaller operators.
What should be built on Symbiotic?
At Paradigm, we believe that the core of a restaking protocol is a delegated staking system. Stakers are incentivized to vote for operators they believe will be honest validators. In a sense, this is how Ethereum staking (through stETH and other liquid staking tokens) operates today.
In the short term, we believe that the most clear and secure use case for shared delegated proof of stake security is for launching new consensus instances:
– Electing new L1 operators (e.g., Cosmos application chains, sidechains, etc.)
– Decentralized sorting
– Distributed auctions (e.g., leaderless auctions)
– Multi-party computation (MPC) and threshold decryption networks
Looking ahead, we are also interested in L1 block production use cases, such as new MEV auction types, pre-commitments, and base sorting. However, we believe that block production use cases may take longer to flourish: they typically benefit from more L1 proposer adoption and may present more direct security risks to the Ethereum L1.
To realize this vision, we have also created Reth Execution Extensions (ExEx). ExEx allows for the rapid extraction and processing of data from nodes and enables networks/services to interact with other ExEx peers to achieve the final state that should be injected into Ethereum. We aim to make ExEx the best tool for building shared security services using Symbiotic.
Of course, Symbiotic is a universal system, and developers can build any protocol on it without permission or using our codebase. These are just our intuitions about the most likely successful types of use cases.