Author: Donovan Choy, Crypto Analyst
Translator: Golden Finance xiaozou
1. Introduction
The battle of restaking is heating up. Challenging EigenLayer’s monopoly is a new protocol supported by Lido, called Symbiotic. The latest entrant boasts competitive advantages in protocol design and BD partnerships. Before delving into the latest competitive dynamics in the restaking space, we need to first understand the key risks present in this field.
2. Current Issues in Restaking
Today, restaking operates as follows: Bob deposits ETH/stETH into liquidity restaking protocols like Ether.Fi, Renzo, or Swell, then delegates it to an EigenLayer node operator, who ensures one or more AVSs return partial yields to Bob. Currently, a compounded risk exists in the form of a one-size-fits-all nature. EigenLayer node operators handle assets for validating numerous AVSs, leaving Bob without a say in the potential risk management related to which AVSs the operator selects.
Certainly, Bob can attempt to choose a “safer” node operator, but with hundreds of operators competing for your restaking collateral and incentivized to validate as many AVSs as possible to maximize your returns, the choice becomes complex.
A brief look at EigenLayer’s node operator page reveals numerous overt advertisements like the one below:
This competitive environment could lead to undesirable outcomes: each node operator validates AVSs they deem absolutely reliable. When AVSs experience interruptions and penalties, Bob is impacted regardless of which operator he chooses.
3. Understanding Mellow Finance
Mellow addresses this issue to some extent. Also known as “modular LRT,” Mellow serves as middleware in the restaking tech stack, offering customizable liquidity restaking vaults. With Mellow, anyone can become their own Ether.Fi or Renzo, establishing their own LRT vaults. These third-party “managers” on Mellow have full control over which restaking assets they accept, allowing users to select assets based on their risk preferences and pay a fee for this service.
Here’s a whimsical example: Alice is a DOGE enthusiast investing in DOGE for yield. She sees a vault named DOGE4LYFE on Mellow. Alice deposits her DOGE into this DOGE4LYFE vault, earns restaking yields, pays a small fee to the operator, receives LRT called rstDOGE, and can use it elsewhere as DeFi collateral. This is currently impossible because DOGE isn’t on EigenLayer’s whitelist. Even if EigenLayer’s founder Sreeram shifts focus to DOGE, the incentive misalignment among mentioned node operators persists.
Similar services have emerged in DeFi lending like Morpho, Gearbox, or the now-defunct Fuse protocol developed by Rari. Morpho, for instance, allows creating lending vaults with custom risk parameters. This lets users borrow assets from vaults with unique risk configurations instead of a one-size-fits-all risk pool on Aave. Aave also plans to use separate lending pools in its upcoming V4 upgrade.
4. Mellow x Symbiotic x Lido Strategy
Since Mellow is merely middleware in restaking protocols, assets in its vaults must be restaked somewhere else. Interestingly, Mellow diverges strategically from EigenLayer by opting to support the upcoming restaking protocol Symbiotic, supported by Lido’s venture firm cyber•Fund and Paradigm (which also backs Lido).
Unlike EigenLayer or Karak, Symbiotic supports multi-asset deposits of any ERC-20 token, making it the most permissionless token to date. From ETH to meme coins, any asset can be used as restaking collateral to secure AVSs. This could open the door to the worst-case scenario of crypto decay: envision AVSs secured by restaking DOGE collateral.
While technically feasible, this overlooks the modular nature of Mellow’s products, which allows third-party vault managers infinite composability. Here, the integration reasons between Mellow and Symbiotic become clearer, as assets can still be utilized on other restaking protocols like EigenLayer or Karak.
To date, many managers have already opened their LRT vaults on Mellow. Not surprisingly, given the close collaboration between Lido and Mellow (detailed later), most managers will stake stETH as collateral.
There are exceptions, such as two Ethena vaults accepting sUSDe and ENA. Indeed, Mellow has achieved a feat—its first sUSDe vault is already full.
Mellow’s final strategic move involves joining the recently announced “Lido Alliance,” an official consortium of Lido projects. Mellow benefits from direct stETH deposit channels through Lido, explaining its commitment to allocate 10% (100B) of its MLW token supply to foster cooperative relationships. Conversely, Lido benefits by attempting to reclaim stETH capital from liquidity restaking competitors. Since the formation of the restaking climate in 2024, Lido’s growth has stagnated due to liquidity being seized by LRT competitors.
5. Market Traction
Symbiotic’s competitive advantage over EigenLayer or Karak stems from its tight integration with Lido. The core idea is that Lido node operators can issue their own LRTs through Mellow/Symbiotic, internalizing an additional layer of wstETH returns into the Lido ecosystem.
Depositing stETH into Mellow vaults now allows for four layers of returns beyond the respective vault’s LRT token: stETH APY, Mellow points, Symbiotic points, and restaking APY after AVSs operate on Symbiotic.
Since its launch, Symbiotic has accrued $316 million in TVL in less than two weeks. Symbiotic TVL
The total locked value of assets on Symbiotic priced in USD and ETH (across all chains) is as follows:
On the other hand, Mellow’s TVL stands at $374. These are both early signs of promise indicating Lido’s potential in this regard. Mellow LRT TVL
The total locked value of assets (liquidity restaking tokens) priced in USD and ETH on Mellow (across all chains) is as follows:
As of June 20th, four Mellow pools have been launched on Pendle:
Currently, only Mellow points qualify for these pools until the upper limit increase on Symbiotic. As compensation, Mellow rewards triple points for deposits (1.5x if deposited directly on Mellow). Given the short expiry dates, liquidity in these pools is quite low, resulting in substantial slippage if attempting to purchase YT. Currently, the optimal strategy may be PT fixed income, which offers quite high returns, with APYs ranging from 17% to 19% across all four vaults.
6. Overview of the Restaking Ecosystem Landscape
The restaking battlefield is becoming increasingly complex. As of today, three main restaking platforms dominate. Ranked by TVL, they are EigenLayer, Karak, and Symbiotic. Restaking protocol TVL
The total locked value of assets on EigenLayer, Karak, and Symbiotic (across all chains) is as follows:
All three restaking platforms offer services to AVSs in exchange for security. With ETH’s dominance and deep liquidity, stETH becomes the obvious choice for collateral on EigenLayer. Karak has expanded its range of restaking collateral from ETHLST to stablecoins and WBTC. Now, Symbiotic is challenging limits by supporting any ERC-20 collateral.
Meanwhile, LRT protocols like Ether.Fi, Swell, and Renzo see an opportunity and are beginning to compete with Lido through their respective token activities. Liquidity Restaking Token TVL
The total value of assets locked in liquidity restaking protocols (across all chains) so far this year is as follows:
Lido has long enjoyed dominance with stETH in the DeFi realm, but now it’s losing market share to LRT protocols. For Lido, a simple response may strategically position stETH from LST to LRT assets. However, in reality, Lido continues to position stETH as LST, while nurturing its own restaking ecosystem. In doing so, Lido strongly supports Symbiotic and Mellow as part of the “Lido Alliance,” offering modular restaking products without permission. A summary of the sales strategy is as follows: Dear token-holding projects, don’t wait for EigenLayer to whitelist your tokens. Come to Symbiotic and release your own LRT in a permissionless manner. Dear users, don’t restake your wstETH with LRT competitors; hand it to Mellow for better risk-adjusted returns.
7. Conclusion
With the restaking space heating up, several points are worth considering: How significant is the demand for AVSs in restaking, and do we really need so many restaking players? As of today, real-time AVSs are only available on EigenLayer, with a TVL of approximately 5.33 million ETH, with around 22.6 million ETH restaked at an average collateral ratio of approximately 4.24 across 13 AVSs. The primary trend among restaking platforms is integrating as many assets as possible to support restaking. Later entrants, like Karak, attempt to differentiate themselves from competitors by using WBTC collateral, stablecoins, and Pendle PT assets. Symbiotic goes a step further by allowing any ERC-20 collateral, but leaves asset management to third-party Mellow vault creators. Despite the strictest limitations, EigenLayer still maintains a huge lead in TVL. Additionally, there is no definitive conclusion on whether allowing non-ETH assets for chain security is wise. What does this mean for LRT protocols? It is certain that nothing stops them
