The Battle Resumes Who Will Have the Last Laugh Between Symbiotic Eigenlayer and Karak

The Battle Resumes Who Will Have the Last Laugh Between Symbiotic Eigenlayer and Karak

The Battle Resumes Who Will Have the Last Laugh Between Symbiotic Eigenlayer and Karak

Author:
IGNAS | DEFI RESEARCH
Translation by: Deep Tide TechFlow
This week, I had originally planned to write a blog post about emerging trends in cryptocurrency, but due to Symbiotic’s sudden launch and its deposit limit reaching nearly 200 million dollars within a day, I had to shift my focus to restaking. The emerging trends can be put on hold temporarily, but the opportunity for high-yield airdrops cannot be missed.
Currently, with Karak included, we already have three restaking protocols. So, what are the differences between these protocols? How should we approach them?
Table of Contents
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Motivation behind Symbiotic’s Launch
Symbiotic vs Eigenlayer
Symbiotic: Permissionless and Modular
Eigenlayer: Management and Integration Approach
Mellow Protocol: Modular LRT
What Problems Does Mellow Solve for LRT?
DeFi Degen’s Restaking Wars Script
Lastly: Karak
Reportedly, Paradigm had contacted Eigenlayer’s co-founder Sreeram Kannan for investment, but Kannan chose the competitor Andreessen Horowitz (a16z), with a16z leading a 100 million dollar Series B funding round. Since then, Eigenlayer has grown to become the second-largest DeFi protocol, with a TVL of 18.8 billion dollars, second only to Lido’s 33.5 billion dollars. The FDV of EIGEN token is 13.36 billion dollars.
Considering that Eigenlayer was valued at 500 million dollars FDV in March 2023, this represents a 25-fold increase in book profits. Paradigm was not pleased with this, so they funded Symbiotic to position it as a direct competitor to Eigenlayer. Symbiotic raised 5.8 million dollars in seed funding from Paradigm and cyber•Fund.
The competition between Paradigm and a16z is common knowledge (and a joke), but this story has a second part.


Cyber Fund is the second-largest investor in Symbiotic, founded by Lido’s co-founders Konstantin Lomashuk and Vasiliy Shapovalov.
Coindesk reported in May that individuals closely related to Lido believed that Eigenlayer’s restaking method posed a potential threat to its dominance.
Lido missed the trend of Liquid Restaked Tokens. In fact, stETH’s TVL has stagnated and decreased by 10% in the past three months. Meanwhile, the inflow into EtherFi and Renzo has surged, reaching 6.2 billion dollars and 3 billion dollars respectively.

Restaking with LRT is particularly attractive because it offers higher returns, although at this stage, most of it is essentially points.
To strengthen Lido’s position, Lido DAO launched the “Lido Alliance,” whose primary task is to develop a permissionless, decentralized restaking ecosystem.

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On a side note, one of the strategic priorities is to reiterate that stETH is LST, not LRT.

This is good news for us as we can get more tokens and more farming opportunities.
Just a month after initial discussions, key alliance member Mellow launched LRT deposits on Symbiotic, supporting stETH deposits!
But let’s take a step back, discuss the differences between Symbiotic and Eigenlayer, and then delve deeper into the unique features and farming opportunities of Mellow LRT.
Symbiotic is characterized by its permissionless and modular design, offering more flexibility and control. Its key features include:
Multi-asset support:
Symbiotic allows direct deposits of any ERC-20 tokens, including Lido’s stETH, cbETH, etc. This makes Symbiotic more diverse than Eigenlayer, which primarily supports ETH and its derivatives.
Customizable parameters:
Using Symbiotic’s network, users can choose their collateral assets, node operators, rewards, and slashing mechanisms. This modular design allows the network to adjust its security settings according to its specific needs.
Immutable core contracts:
Symbiotic’s core contracts are immutable (similar to Uniswap), reducing governance risks and potential failure points. Even if the team disappears, Symbiotic can continue to operate.
Permissionless design:
Allows any decentralized application to integrate without approval, providing a more open and decentralized ecosystem.
Misha also told Blockworks, “Symbiotic does not compete with other market participants, so there are no native staking, rollup, or data availability products.” When dApps launch, they typically need to manage their security models. However, the permissionless, modular, and flexible design of Symbiotic allows anyone to use shared security to protect their networks.
In practice, this means that crypto protocols can launch native staking for their native tokens to enhance network security. For example, Ethena collaborates with Symbiotic, using staked ENA to provide USDe cross-chain securities.
According to a Symbiotic blog post, Ethena is integrating Symbiotic with LayerZero’s decentralized validator network (DVN) framework to introduce Ethena assets (such as $USDe backed by $ENA staking) on top. This is one of the first of several components in their infrastructure and system that will aim to leverage staking $ENA.
Other use cases include cross-chain oracles, threshold networks, MEV infrastructure, interoperability, shared sorters, etc. Symbiotic was launched on June 11, with the stETH deposit limit reached within 24 hours.

Eigenlayer takes a more management and integration approach, focusing on leveraging the security of Ethereum ETH stakers to support various dApps (AVS):
Single-asset focus:
Eigenlayer primarily supports ETH and its derivatives. This focus may limit its flexibility.
Centralized management:
Eigenlayer manages staked ETH delegations, node operators validate various AVS. This centralized management helps simplify operations but may also lead to bundling risks, making it difficult to accurately assess the risks of individual services.
Dynamic marketplace:
Eigenlayer provides a decentralized trust marketplace that allows developers to leverage pooled ETH security to launch new protocols and applications. Risks are shared by pool depositors.
Slashing and governance:
Eigenlayer’s management includes specific governance mechanisms for handling slashing and rewards, which may provide less flexibility.
To be honest, Eigenlayer is an extremely complex protocol, with risks and overall functionality beyond my understanding, so I had to summarize criticisms from various sources in this section, one of which is Cyber Fund itself. I do not favor either side, and I believe the comparison between Symbiotic and Eigenlayer will be very popular among DeFi geeks.
The most notable aspect of Symbiotic’s launch is its upper layer protocol Mellow for LRT. As a member of the Lido Alliance, Mellow benefits from Lido’s marketing, integration support, and liquidity guidance.
As part of the deal, Mellow will reward Lido with 100,000,000 MLW tokens (10% of the total supply), which will be locked in the Lido Alliance legal entity after the TGE. “These tokens will be subject to the same vesting and cliff terms as team tokens: a 12-month cliff after TGE and a 30-month vesting period after the cliff (edited for feedback received).” The alliance proposal also mentioned two additional benefits:
“Mellow will help spread Lido’s geographical and technical decentralization work beyond Ethereum validation.”
“Lido node operators can launch their own composable LRT and control the risk management process by choosing AVS that suit their needs, rather than being forced to accept AVS imposed by LRT or restaking protocols.”
The impact of these partnerships will take time to manifest, but LDO has grown by 9% since the release of the Lido collaboration tweet below, reaching one of the four 42 million dollar LRT caps before the LRT airdrop expiration.

Regardless, if you are familiar with Eigenlayer LRT (such as Etherfi and Renzo), you will know that depositing on Mellow will bring double the fun: you can earn Symbiotic and Mellow points simultaneously. However, Mellow is different from Eigenlayer LRT.
The advantages of Mellow include:
Diversified risk configurations:
Current LRTs often force users to accept a uniform risk configuration. Mellow allows for multiple risk adjustment models, allowing users to choose their preferred risk exposure.
Modular infrastructure:
Mellow’s modular design allows for specific asset and configuration requests in shared security networks. Risk curators can create highly customized LRTs for their needs.
Smart contract risks:
By allowing modular risk management, Mellow reduces vulnerabilities in smart contracts and shared security network logic, providing a safer environment for restakers.
Decentralized operator selection:
Mellow decentralizes the decision-making process for operator selection, preventing centralization and ensuring a balanced and decentralized operator ecosystem.
LRT withdrawal risk:
Mellow’s design addresses liquidity crunch risks caused by withdrawal closures. Current withdrawals require 24 hours.

Interestingly, Mellow specifically mentioned that they can launch LRT on top of any staking protocol (such as Symbiotic, Eigenlayer, Karak, or Nektar). However, I would be very surprised to see a direct collaboration between Mellow and Eigenlayer. However, if the current Eigenlayer LRT protocol collaborates with Symbiotic or Mellow, I wouldn’t be surprised either. In fact, a report from Coindesk mentioned that a source with closer ties to Renzo and Symbiotic had discussed integrating with Symbiotic a month ago.
Lastly, the cool thing about Mellow’s permissionless treasury is that we are likely to have LRT for DeFi tokens. Imagine ENA LRT tokens, which are liquidity ENA on Symbiotic, ensuring USDe bridging.
In this cycle, there has been almost no innovation in tokenomics, but Symbiotic may make holding DeFi governance tokens attractive again.
At the time of writing this article, there are four LRT vaults on Mellow, managed by four unique curators, with deposit limits about to be reached.

The timing of Symbiotic and Mellow LRT launches is perfect: EtherFi S2 points ended on June 30, Renzo S2 is ongoing, and the Swell airdrop will come soon after enabling withdrawals.
I am almost worried about what to do with my ETH after the LRT airdrop expiration. Thanks to venture capital and whale games, airdrop players will also have a big harvest.
At this stage, the game is very simple: deposit on Symbiotic to earn points, or take bigger risks to farm directly on Mellow. Please note that since Symbiotic’s stETH deposits are full, you won’t be able to earn Symbiotic points but will earn 1.5 times Mellow points.
The airdrop game may resemble Eigenlayer’s script: Mellow LRT will be integrated into DeFi, and we will see leveraged farms on Pendle and multiple lending protocols. But I believe Symbiotic tokens may be launched before EIGEN becomes tradable.
In an interview with Blockworks, Putiatin mentioned that the mainnet might “launch some networks in late summer.” Does this mean tokens will also be launched?
Stealing the limelight of restaking from Eigenlayer might be a wise move, especially when the market is quickly turning bullish, and considering Symbiotic’s proactive partnership strategy.
Two collaborations that surprised me the most were The Blockless and Hyperlane. Both protocols initially collaborated with Eigenlayer as shared security AVS, but are they changing alliances?
Perhaps Symbiotic promised more support and token distribution? I need more answers!
Regardless, these restaking wars are good for us speculative airdrop players, as they provide more opportunities and may prompt Eigenlayer to launch tokens faster.
For Symbiotic, it is still in its early stages, but early deposit inflows look promising. I am currently farming on Symbiotic and Mellow, but plan to move to Pendle YTs once the strategy is open.
I believe the expiration date of Pendle’s Symbiotic YT tokens will give us a deeper understanding of Symbiotic’s TGE timeline.
Karak is a hybrid, similar to Eigenlayer, but it refers to AVS as Distributed Security Services (DSS). Karak has also launched its own Layer 2 (called K2) for risk management and sandbox testing of DSS. However, it is more of a testnet than a true L2.
Karak has attracted over 1 billion dollars TVL for two main reasons:
Karak supports Eigenlayer’s LRT, so farmers can earn Eigenlayer, LRT, and Karak points simultaneously.
Karak raised over 48 million dollars from investors like Coinbase Ventures, Pantera Capital, and Lightspeed Ventures.
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However, since its announcement in April, Karak has not announced any significant partnerships, launched LRT protocols on Karak, or any exclusive DSS/AVS partnerships. Hopefully, Karak will accelerate its development as Symbiotic is hot on the heels of Eigenlayer.
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