Yesterday, the re-collateralization project Symbiotic was officially launched and completed a $5.8 million seed round of financing led by Paradigm and Cyber Fund. Symbiotic is described as a permissionless shared security protocol. Shared security refers to multiple networks sharing the services and security guarantees of the same set of node operators, thereby increasing capital efficiency and security. This concept has previously been applied in the EigenLayer re-staking project.
Although belonging to the re-staking track like EigenLayer, Symbiotic differs in that it allows for a wider range of tokens to be staked, including ERC20 tokens, Ethereum validator withdrawal certificates, or liquidity provider proofs. Additionally, Symbiotic offers more flexible customization options for components. While the core protocol is defined by immutable core contracts, other components such as staking assets, reward mechanisms, and penalty criteria can be configured by the network or other agents as needed.
According to CoinDesk, Lido co-founders Konstantin Lomashuk and Vasiliy Shapovalov, along with Paradigm, secretly funded a new project similar to EigenLayer earlier in May, which turned out to be Symbiotic. Interestingly, the report also mentioned that Paradigm had expressed interest in investing in EigenLayer to co-founder Sreeram Kannan but was rejected. EigenLayer then raised $100 million from a16z. In response, Paradigm stated that they would invest in projects competing with EigenLayer.
Symbiotic Architecture Breakdown: Concise Thin Coordination Layer
Symbiotic is designed as an extremely flexible, permissionless, and reliable thin coordination layer to simplify system architecture, reduce operational costs, and ensure the network can efficiently handle transactions and execute protocols. According to Symbiotic documentation, the Symbiotic network architecture consists of five core components that work together to maintain and enhance the security and efficiency of decentralized networks.
1) Collateral
Role: Safeguarding economic security in Symbiotic
Function: In the Symbiotic system, the concept of tokens that users can stake is broader, covering various on-chain assets such as ERC20 tokens, Ethereum validator withdrawal certificates, or liquidity provider proofs. Users can stake these assets and convert them into specific staking tokens, which have extended functionality for use in penalties or compensations when necessary.
2) Vaults
Role: Coordinating and managing the staking and re-staking processes
Function: Vaults in the Symbiotic protocol act as bridges connecting staking asset holders and network infrastructure operators called Operators. The staking tokens converted by users are stored in Vaults, which then delegate these tokens to operators in the network to support network operations. Additionally, since Vaults are configurable, they can be deployed in various ways to meet different needs and security considerations.
3) Operators
Role: Infrastructure providers in the Symbiotic ecosystem
Function: By receiving staking tokens from Vaults, Operators can ensure necessary economic support for network security and operations. Symbiotic establishes a registry to record and track the performance of Operators. Operators can receive economic support from multiple partners through Vaults without needing to build or maintain separate infrastructure for each partner. In the future, Symbiotic plans to introduce more validation and evaluation systems for Networks to select Operators based on reputation and historical performance.
4) Resolvers
Role: Acting as arbitrators in the ecosystem, responsible for adjudicating and handling economic penalties resulting from malicious behavior in the network, can be entities or contracts
Function: Resolvers can be implemented in two ways, either fully automated for clearly provable malicious behavior or through more complex forms like establishing a committee or introducing an external dispute resolution framework. Vaults and Networks can collectively choose the type of Resolvers suitable for them. Vaults also have the authority to determine the specific terms of how Resolvers handle staking tokens. Furthermore, Resolvers can be shared across networks, allowing multiple networks to use the same Resolver mechanism to address potential disputes.
5) Network
Role: Various protocols or platforms relying on decentralized infrastructure to provide services
Function: Symbiotic allows these Networks to obtain the necessary security guarantees in a flexible manner, including technical services and economic support from operators. Networks can customize recruitment and management strategies for node operators and independently select collaborating Vaults through Symbiotic’s modular design. Additionally, the core contracts provided by Symbiotic are open-source and immutable, ensuring network security and stability without worrying about external governance risks.
In summary, in the Symbiotic protocol, users first convert their staking assets into Collateral, which are then stored in Vaults. Vaults delegate these tokens to Operators based on set strategies to provide necessary economic resources for network operation. Operators execute network tasks such as data processing and transaction verification based on these strategies. Resolvers play a critical arbitration role in the system, handling any economic penalty issues resulting from Operator behavior. As the ultimate service provider, Networks define and adjust interaction rules with Vaults and Operators, including how to accept staking, allocate rewards, and address penalties.
Symbiotic Ecosystem
The Symbiotic system offers high flexibility to support projects at different stages of decentralization. For example, projects can collaborate with existing operators at the start to build a trust-minimized and decentralized network. They can also expand their ecosystem by adding a cluster of operators to increase attack costs and align the ecosystem.
Currently, Symbiotic has partnered with 16 projects, including USDe developer Ethena, cross-chain application platform Hyperlane, oracle network Ojo, Aizel building a verifiable AI network, and Cycle Network developing a shared sequencer for its full ledger protocol. Ethena is integrating Symbiotic with LayerZero’s decentralized verification network (DVN) framework to enhance cross-chain security for Ethena assets. Cycle Network plans to power its shared sequencer with Symbiotic, while Celestia’s modular Rollup framework product, Rollkit, is exploring integrating Symbiotic re-staking into its modular stack to facilitate launching sovereign Rollups on Celestia.
In conclusion, according to DefiLlama data, EigenLayer has locked in over $18 billion, making it the second-largest project in terms of locked value after Lido and leading the re-staking track with no other project locking in over $1 billion. This data demonstrates EigenLayer’s leading position in the re-staking track. However, the launch of Symbiotic may bring new competition, especially since it supports the re-staking of assets like Lido’s stETH and other assets incompatible with EigenLayer, potentially giving it an advantage in competition with EigenLayer in TVL. According to Symbiotic’s Twitter, the project reached a staking cap of 41,290 wstETH within 5 hours.
Additionally, as a new project supported by Paradigm, Symbiotic has shown broader applicability in technical support and use cases. Paradigm stated, “In the short term, Symbiotic will primarily be used to launch new consensus instances, such as the election of new L1 operators and decentralized sequencing. In the long term, Symbiotic will also support block production and use cases like multiparty computation.” Paradigm has also developed Reth Execution Extensions (ExEx) to further enhance shared security services based on Symbiotic.
However, EigenLayer has already established a strong market position and ecosystem in the re-staking field, so it remains to be seen whether Symbiotic can break EigenLayer’s dominance with its advantages.
