EigenLayer, Symbiotic: the restaking war has begun

Introduction to restaking 🧬

The notion of restaking has been widely popularised by EigenLayer, which was the first project to launch publicly in this field.

Staking involves immobilising a specific cryptocurrency to secure one's own network, for example, staking ether (ETH) to secure Ethereum.

Restaking, on the other hand, involves securing a decentralised project by relying on a crypto that is not native to its operation. For example, securing an X project with ether. The idea is to create a store of value that can then be used as common security for projects that use restaking protocols.

The main advantage is that the same token can contribute to the security of an unlimited number of projects. However, the more projects a token secures, the more it is exposed to slashing risks (a financial penalty against "bad" stakers and restakers).

Restaking addresses a major problem: the cost of economic security for decentralised projects, particularly in their early stages.

In fact, a project secured solely by the staking of its own token can be attacked, especially if the value of its token is low.

In addition, as most new projects opt for high staking rewards to compensate for the risks associated with the exposure of an emerging token, this generates very high inflation on these tokens.

Restoring a token such as ETH allows you to rely on an asset with a large capitalisation and reduce token issues linked to network security.

The idea of common economic security had already been addressed with "Parachains" in the Polkadot ecosystem and "Interchain Security" for the Cosmos ecosystem.

The advantage of restaking is that it offers more flexibility to projects wishing to use this security, in particular by not subjecting them to penalties when they wish to abandon it after a certain period of time.

The proliferation of restaking protocols

Restaking was quickly seen as a major innovation with significant potential. Several protocols have emerged to seize this opportunity. The main objective of each restaking protocol is to connect a supply with a demand:

• Supply: accumulation of a large amount of value locked into their protocol
• Demand: projects that want to benefit from the security offered by the restaking protocol

To achieve these objectives, restaking protocols seek to differentiate themselves from each other.

The type of security accepted by these protocols is an element of differentiation. The value of a restaked token is not the only important indicator. Other factors such as its volatility and dependencies must also be taken into account.

For example, a natively restakened ETH is more valuable than a liquid staking token (such as Lido's stETH), as this token also depends on the protocol that issues it.

We offer a global analysis of the various restaking protocols for attracting liquidity and securing projects.

EigenLayer

EigenLayer benefits from first-mover advantage.

The protocol quickly attracted $20 billion of locked-in value, largely thanks to de numerous projects that announced their intention to launch on it early on.

EigenLayer has launched its EIGEN token, which enhances the security offered by restaking. The EIGEN token facilitates consensus on data that cannot be directly verified on the network where it is stored, but can be validated by "intersubjective agreement" (consensus between several human observers). For more details, read our detailed analysis.

EigenLayer is currently the only restaking protocol to support native ETH staking. This avoids reliance solely on liquid staking tokens and offers a more "pure" collateral.

EigenLayer provides security for AVS "Actively Validated Services", the technical term for projects that wish to benefit from its security. As Sreeram Kannan, CEO of Eigen Labs, explains, EigenLayer can serve as the foundation for the development of hundreds of applications that will offer specialised services to Web3 and Web2 players.

EigenLayer has published a list of high-potential services that can be built on its protocol.

In addition to this, Eigen Labs (the start-up behind its development) has launched the "Build on Eigen" initiative to support projects that want to launch on EigenLayer.

EigenLayer has chosen to start as a protocol with fairly strong centralisation around Eigen Labs: it builds its own AVSs, the team is widely promoted, smart contracts can be modified, AVSs must be validated by Eigen Labs.

Karak

Karak was the second restaking protocol to be publicly announced.

Karak is differentiated in particular by the fact that it accepts a wide variety of tokens for its restaking offering, including rather exotic tokens such as Ethena's USDe stablecoin (read our analysis), derivatives tokens issued by Pendle and even liquid restaking tokens derived from ethers restaked on EigenLayer.

Despite this, the protocol still lags far behind EigenLayer in terms of traction, since it took it several months to reach $1 billion in immobilized value (currently the maximum deposit threshold).

Karak recently announced a partnership with Wormhole, which plans to build two Karak-secured AVSs. In addition, Karak has said it is building its own AVS: an aggregator of data availability networks such as Celestia, Avail and EigenDA.

Symbiotic

Symbiotic was publicly announced in early June 2024 and is openly positioned as a competitor to EigenLayer.

It draws its strength from its close link with Lido, the undisputed leader in liquid staking (see our analysis). Konstantin Lomashuk and Vasiliy Shapovalov, the co-founders of Lido, have actively funded Symbiotic.

In addition, Symbiotic is part of the "Lido Alliance", a protocol group aiming to expand the use of stETH, Lido's liquid staking token, particularly in the restaking business.

In fact, Lido wants to retain stETH as the leader in liquid staking while exploiting the opportunities offered by restaking.

In contrast to EigenLayer, where users delegate their restaked tokens to operators who choose which AVSs to secure, Symbiotic uses a vault system that allows users to directly choose which AVSs to secure.

Since its launch, Symbiotic has announced partnerships with major protocols in the ecosystem (Ethena, LayerZero, Hyperlane, etc.).

It should be noted that projects such as Hyperlane are planning to build on both EigenLayer and Symbiotic. It is therefore not impossible for projects to rely on several restaking protocols simultaneously.

In less than two days, Symbiotic has attracted $250 million in deposits, although it is not currently possible to deposit more (this threshold will increase gradually).

Symbiotic is taking a different approach to EigenLayer in terms of strategy. There is less focus on the project team and the smart contracts are immutable. What's more, the team behind Symbiotic has announced that it will not be launching any self-built SVAs to keep the protocol as neutral as possible.

Finally, Symbiotic eventually plans to roll out beyond Ethereum and become blockchain agnostic.

Babylon

Babylon is not in direct competition with the protocols mentioned above.

In fact, Babylon is built on the Bitcoin network and aims to enable the restaking of native bitcoins. It will therefore eventually be possible to generate returns on bitcoins, which would represent a great opportunity for this token whose usefulness has until now been based on simple holding.

The project seems to have succeeded in integrating a slashing system on the Bitcoin network, which is nevertheless very limited in terms of possibilities.

For the moment, Babylon is still in the testnet phase.

The others?

There are other restaking protocols such as Picasso, which aims to enable tokens to be restaked from different networks in the Cosmos ecosystem and even from Solana.

Similarly, Solayer aims to enable restaking on Solana.

However, they don't enjoy the same level of traction as the restaking protocols we mentioned earlier.

For now, restaking seems to be struggling to gain traction outside of the Ethereum (and eventually Bitcoin) ecosystem.

The Big Whale's opinion 🐳

EigenLayer remains the undisputed leader in restaking to date, thanks to two major advantages: native ETH staking support and the EIGEN token, which strengthens the security offered by the protocol.

Symbiotic appears to be positioning itself as a serious competitor to EigenLayer, striving to present itself as the most neutral restaking platform possible from the outset. EigenLayer, meanwhile, favours a more gradual approach to decentralisation.

On the other hand, Karak offers no clear prospects, apart from the ability to support restaking of a large number of tokens, a feature that will also be available on EigenLayer and Symbiotic in the future.

Finally, Babylon also looks promising, particularly with the possibility of offering more utility to Bitcoin and a return for its holders.