Lido Co-Founders, Paradigm Secretly Back EigenLayer Competitor as DeFi Battle Lines Form

The
co-founders
of
Lido,
the

biggest
liquid
staking
protocol
on
Ethereum,
are
secretly
funding
a
competitor
to
EigenLayer,
the
buzzy
“restaking”
service
that
has
emerged
rapidly
this
year
to
become
a
powerful
force
in
decentralized
finance.

According
to
several
people
with
knowledge
of
the
matter,
the
project
is
called
Symbiotic
and
has
drawn
backing
from
not
only
the
Lido
co-founders,
Konstantin
Lomashuk
and
Vasiliy
Shapovalov,
through
their
venture
firm
Cyber
Fund,
but
also
Paradigm,
the
crypto
venture
capital
firm
that
is
one
of
Lido’s
lead
investors.

CoinDesk
also
obtained
internal
Symbiotic
documents
that
describe
the
project,
which
allows
users
to
“restake”
using
Lido’s
staked
ether
(stETH)
token
and
other
popular
assets
that
are
not
natively
compatible
with
EigenLayer.

Developed
by
the
team
that
previously
built
a
staking
service
called
Stakemind,
Symbiotic
will
be
“a
permissionless
restaking
protocol
that
provides
flexible
mechanisms
for
decentralized
networks
to
coordinate
node
operators
and
providers
of
economic
security,”
according
to
the
internal
company
documents
reviewed
by
CoinDesk.

The
documents
were
marked
as
“preliminary”
and
“not
for
distribution,”
but
several
teams
working
in
the
nascent
restaking
ecosystem
–
including
actively
validated
services
(AVSs)
and
liquid
restaking
services
building
on
EigenLayer
–
say
they
have
already
been
in
discussions
to
integrate
with
the
protocol.

Representatives
of
Paradigm,
Symbiotic
and
Cyber
Fund
declined
to
comment
on
the
deal.

Lido
was
the
breakout
sensation
in
DeFi
just
a
couple
of
years
ago
when
it
developed
a
protocol
that
allowed
users
to
stake
cryptocurrency
on
Ethereum
–
essentially
locking
it
in
–
but
still
get
a
token
“stETH”
that
they
could
use
to
trade
in
the
meantime.
The
project
proved
so
popular
that
it
now
ranks
as
the
largest
decentralized
finance
protocol
on
Ethereum,
with
$27
billion
worth
of
deposits,
attaining
such
a
dominant
position
that
some
players
worried
about
the

operational
risks
of
its
outsize
influence.

But
lately,
Lido
has
been
grappling
with
a
falling
market
share
as
users
shifted
assets
over
to

EigenLayer,
a
newer
service
that
allows
users
to
restake
Ethereum’s
native
ETH
token
to
help
secure
other
networks.

EigenLayer
is
one
of
the
biggest
crypto
success
stories
in
recent
memory,
drawing
in
some
$16
billion
worth
of
deposits
since
it
opened
up
to
investors
last
year.

Similar
to
EigenLayer,
Symbiotic
will
offer
a
way
for
decentralized
applications,
called
actively
validated
services,
or
“AVSs,”
to
collectively
secure
one
another.
Users
will
be
able
to

restake
assets
that
they’ve
deposited
with
other
crypto
protocols
to
help
secure
these
AVSs
–
be
they
rollups,
interoperability
infrastructure,
or
oracles
–
in
exchange
for
rewards.

The
key
difference
between
Symbiotic
and
EigenLayer
is
that
users
will
be
able
to
directly
deposit
any
asset
based
on
Ethereum’s
ERC-20
token
standard
into
Symbiotic
–
meaning
the
protocol
will
be
directly
compatible
with
Lido’s
staked
ETH
(stETH)
token,
as
well
as
thousands
of
other
assets
that
use
the
ubiquitous
ERC-20
standard.
EigenLayer,
meanwhile,
only
accepts
ETH
tokens.

In
what
might
be
a
twist
of
irony,
when
crypto
venture
giant
Paradigm
approached

Sreeram
Kannan,
co-founder
of
EigenLayer,
to
invest
in
his
project,
he
turned
their
money
down
in
favor
of
rival
venture
capital
firm
Andreessen
Horowitz,
according
to
several
people
briefed
on
the
matter.
Paradigm
told
Kannan
that
they
would
invest
in
a
competitor
to
his
project
instead.

Kannan
didn’t
immediately
reply
to
a
request
for
comment.

The
emergence
of
a
potentially
formidable
EigenLayer
competitor
underscores
how
companies
and
investors
have
become
eager
to
capitalize
on
restaking
as
the
trend
has
taken
over
the
industry
conversation.

Blockworks
reported
in
April
that
Karak,
another
restaking
upstart,
had
secured
funding
from
the
major
U.S.
crypto
exchange
Coinbase,
among
others.

“The
space
is
big
enough
for
more
than
one
player
to
be
big,”
said
one
restaking
infrastructure
operator
who
plans
to
integrate
with
Symbiotic
but
spoke
on
the
condition
of
anonymity
since
the
project
remains
in
stealth.
“Uber
and
Lyft,
I
think,
are
perfect
examples.
It’s
the
same
thing
here.
Restaking
is
going
to
be
massive.”

The
involvement
of
Cyber
Fund,
led
by
Lido’s
co-founders,
and
Paradigm,
its
main
venture
backer,
could
put
Symbiotic
in
a
strong
position
to
challenge
EigenLayer.
It’s
also
further
evidence
that
people
close
to
Lido
perceive
EigenLayer’s
approach
to
restaking
as
a
potential
threat
to
its
own
dominance.

Although
Lido
remains
the
largest
decentralized
finance
protocol
on
Ethereum
by
a
wide
margin,
the
project’s
strategy
around
restaking
will
play
a
major
role
in
whether
(and
how)
it
manages
to
maintain
its
lead
in
the
general
staking
realm.

Liquid
restaking
startups
that
deposit
user
funds
into
EigenLayer
have
eaten
into
the
market
for
Lido’s
stETH
token.
The
two
largest
liquid
restaking
protocols,

Ether.Fi
and
Renzo
saw

$625
million
in
net
inflows
over
the
past
30
days.
Lido,
meanwhile,
saw

$75
million
in
net
outflows
over
that
same
period.

Read
more:



What
Are
Restaking,
Liquid
Restaking
and
EigenLayer?

This
week,
members
of
Lido
DAO
(decentralized
autonomous
organization),
the
governance
body
that
controls
the
Lido
protocol,
publicly
proposed
the
“Lido
Alliance,”

a
guiding
framework
for
thinking
about
restaking
that
would
place
stETH
squarely
at
the
trend’s
center.

“Lido
DAO
will
identify
and
recognize
projects
that
share
the
same
values
and
mission
and
have
a
way
to
positively
contribute
to
the
stETH
ecosystem,”
the
proposal
stated.
“Growing
an
Ethereum-aligned
ecosystem
around
stETH
helps
decentralize
the
network.”

While
Lido
is
not
directly
tied
to
Symbiotic,
the
restaking
startup
funded
by
Lido’s
co-founders
lines
up
well
with
the
Lido
Alliance
framework.

Whereas
EigenLayer
only
accepts
deposits
of
ether
(ETH)
tokens,
Symbiotic
will
not
accept
ETH
deposits
at
all.
Instead,
it
will
allow
users
to
directly
deposit
any
ERC-20
token,
like
Lido’s
staked
ETH
(stETH).

“Collateral
in
Symbiotic
can
encompass
ERC-20
tokens,
withdrawal
credentials
of
Ethereum
validators,
or
other
onchain
assets
such
as
LP
positions,
without
limitations
regarding
which
blockchains
the
positions
are
held
on,”
the
project
said
in
its
its
documents.

Symbiotic’s
approach
to
collateral
ties
into
its
broader
ambition
to
become
a
“permissionless”
protocol,
meaning
apps
that
build
on
the
platform
should
have
substantial
leeway
over
how
they
augment
it
to
serve
their
use
case.

“I’m
excited
about
what
they’re
working
on.
It
seems
interesting
and
innovative,”
Mike
Silgadze,
co-founder
of

Ether.Fi,
one
of
the
largest
restaking
protocols,
said
in
a
Telegram
message.
“It
seems
like
they’re
very
focused
on
building
something
fully
permissionless
and
decentralized.”

Renzo,
another
large
liquid
restaking
service,
is
already
in
discussions
to
integrate
with
Symbiotic
after
it
launches,
according
to
a
source
close
to
both
teams.

Symbiotic
has
not
released
any
information
publicly
and
would
not
confirm
when
it
plans
to
launch,
but
four
sources
consulted
for
this
article
said
they
expect
the
platform
to
be
released
in
some
form
by
the
end
of
this
year.

Margaux
Nijkerk
contributed
reporting.