Decoding the Game Between Big VC Players A Look at Symbiotic a ReStaking Protocol Supported by Paradigm and Lido

Authored by Yangz, Techub News
In this rare DeFi hot narrative of the current bull market, the re-collateralization track has welcomed another heavyweight player. On June 11th, Symbiotic announced the completion of its initial deployment and raised $5.8 million in seed funding led by Paradigm and Cyber Fund. Just 5 hours after going live, the wstETH staked on Symbiotic hit the limit, showing strong momentum.
Considering that the current re-collateralization track EigenLayer only supports ETH and certain ETH derivatives for staking, while Symbiotic supports staking of any asset following the ERC-20 token standard, the two may become direct competitors. According to a previous report by CoinDesk, the funding round was actually a game between giant VCs. Several sources revealed that EigenLayer co-founder Sreeram Kannan had turned down an investment from Paradigm and opted for a16z instead. Cyber Fund, on the other hand, was founded by Lido co-founders Konstantin Lomashuk and Vasiliy Shapovalov. Although Cyber Fund expressed respect for EigenLayer’s pioneering work in re-collateralization, it is not hard to imagine that this investment is also a measure to counter EigenLayer’s market share erosion.
So, what exactly is the Symbiotic re-collateralization protocol?
Introduction to Symbiotic
According to the official documentation, Symbiotic is a shared security protocol that acts as a coordination layer allowing network builders to control and adjust their (re)stake strategies in a permissionless manner.
The protocol’s advantages include:
Flexibility brought by modularity
The network can control all aspects of the (re)stake strategy, including supported staking assets, selection of node operators, rewards, penalties, and related settlement mechanisms. All participants can flexibly choose to join or exit Symbiotic.
Risk minimization through immutability
The non-upgradable core contracts on Ethereum eliminate external governance risks and single points of failure. The contract design of Symbiotic minimizes execution layer risks to the greatest extent.
Capital efficiency improvement through re-collateralization and reputation-based curation
The design of permissionless, multi-asset, and network-agnostic nature helps achieve scalable and highly capital-efficient economic security. Furthermore, the evolving operator-centric cross-network reputation system will further enhance the capital efficiency of network builders.
Core Modules of Symbiotic
The Symbiotic protocol consists of 5 interrelated modules, including collateral for economic security layer, treasury for staking layer, operators for infrastructure layer, resolvers for arbitration layer, and network for service layer.
Collateral
Collateral allows assets used to protect the security of the Symbiotic network to be held outside the Symbiotic protocol itself (e.g., holding DeFi positions on networks other than Ethereum) to improve capital efficiency and scale.
Symbiotic achieves this goal by separating the ability to penalize assets from the underlying assets themselves, similar to how liquid staking tokens create representations of underlying stake positions. Technically, the collateral positions in Symbiotic are ERC-20 tokens with extended functionalities for handling penalties.
Staking tokens are minted and deposited by users who own assets or want to stake positions, and are entrusted to operators in the Symbiotic network by the treasury. The treasury defines acceptable collateral while the network needs to accept the treasury’s collateral and its terms (such as penalty limits) to receive rewards.
Treasury
The treasury is the delegation and re-staking management layer of Symbiotic, with functions including:
“Accounting”: The treasury handles deposits, withdrawals, and penalties of collateral, thereby managing its related assets.
Delegation strategies: The treasury deployer/owner formulates delegation and re-staking strategies to operators on the Symbiotic network.
Reward distribution: The treasury distributes staking rewards to collateral depositors.
The treasury can be deployed in an immutable, pre-configured manner, or specify owners who can update treasury parameters. Cryptocurrency institutions or operators such as liquidity (re)stake protocols are expected to use the treasury to create differentiated products, such as:
Operator-specific treasury: Operators can create treasuries and re-stake collateral through any network configuration onto their infrastructure. Operators can create multiple treasuries with different configurations to provide services to clients without the need for additional node infrastructure.
Multi-operator treasury: Configure re-staking networks and delegation strategies for different operators. The treasury can also set custom penalty limits, setting limits on the amount of collateral that can be penalized for specific operators or networks. These commitment terms require approval from the network providing curation services.
Immutable pre-configured treasury: The treasury can be deployed using pre-configured rules that cannot be updated, thus preventing treasury managers from adding additional re-staking networks or changing configurations in any other way.
Operators
Operators are entities operating decentralized network infrastructure both inside and outside the Symbiotic ecosystem. The Symbiotic protocol creates an operator registry, recording interactions with the protocol, where participants can attach credentials and other data to operator entities. In the initial version, this includes metadata provided by operators themselves, as well as data created through interactions with the Symbiotic protocol, such as:
Networks operators choose to join
Related treasuries and re-staked collateral in the treasuries
Historical penalty logs and all other interactions with the Symbiotic ecosystem
An important advantage of the Symbiotic protocol and its treasury system is that operators can receive shares of the same set of node infrastructure across different networks from different partners (through the treasury). This system allows node operators to obtain shares from different stakeholders with different risk profiles without having to build separate infrastructure for them.
Resolver
Symbiotic introduces resolvers to support various modes of handling penalty events. Resolvers are contracts or entities that can veto penalty events forwarded from the network, determined by terms proposed by the network and accepted by the treasury providing collateral support for operators. The treasury can allow multiple different (or none) resolvers to cover all of its collateral. Additionally, decentralized dispute resolution frameworks like UMA, Kleros, reality.eth can also act as resolvers. Furthermore, additional security measures can be provided to participants of the Symbiotic protocol through either veto mechanisms requiring a certain number of votes or through specific penalty events.
Network
In Symbiotic, a network is defined as any protocol that requires decentralized infrastructure networks to provide services in the crypto economy, such as validating and ordering transactions, providing off-chain data to applications in the crypto economy, or providing guarantees for cross-network interactions for developers to launch decentralized applications.
Decentralized infrastructure networks can leverage Symbiotic to acquire their security in the form of operators and economic support. In some cases, a protocol may consist of multiple sub-networks with different infrastructure roles. The modular design of the Symbiotic protocol allows developers of such protocols to define participation rules for joining any sub-network.
Progress in the Symbiotic Ecosystem
According to sources quoted by CoinDesk, Renzo has been in discussions for integration after the launch of Symbiotic. Additionally, Ether.Fi co-founder Mike Silgadze is also excited about Symbiotic, stating “I’m excited about what they’re researching. It looks interesting and innovative.”
The Symbiotic ecosystem currently has nearly 20 partners, with the following developments:
Ethena is integrating Symbiotic with LayerZero’s decentralized verification network (DVN) framework to enable cross-chain assets (such as USDe) for Ethena.
Bolt, built by Chainbound, is a protocol that allows Ethereum block proposers to make trustworthy commitments (such as trustless pre-contracts) and plans to use Symbiotic for operator pools re-staking and penalties.
Hyperlane is exploring a chain-agnostic security module (ISM) driven by Symbiotic for its modular interoperability framework.
Kalypso is a ZK proof market supporting private inputs, using Symbiotic re-collateralization to provide validity and response time guarantees for proof generation.
Fairblock is collaborating with Symbiotic to explore the dynamic crypto-service network (CSN), which ensures security through (re)staked assets and customizes applications with different security parameters, performance, and availability needs.
Aori plans to combine Symbiotic re-collateralization with stablecoin assets, enabling market makers and resolvers to take responsibility when interacting with their high-frequency order protocols.
Drosera is working with the Symbiotic team to research re-collateralization applications for Ethereum Layer2 solutions.
Ojo is a cross-chain oracle network that will enhance its economic security through Symbiotic.
Blockless enables builders to create secure, network-neutral applications with complete autonomy and flexibility in shared security by integrating Symbiotic’s customizable security with its customizable computing infrastructure.
Rollkit is exploring the integration of Symbiotic re-collateralization into its modular stack to facilitate launching sovereign Rollup on Celestia; initially, Symbiotic will help provide accountability for the Rollup sorter, with the long-term goal of decentralizing the sorter.
Cycle Network is a unified liquidity network aiming to achieve blockchain agnosticism, powered by Symbiotic for shared sorters.
Stork aims to integrate Symbiotic re-collateralization to enhance trustless utilization of on-chain data.
Aizel is building a verifiable AI network, researching how to use Symbiotic to restructure different node roles for verifiability from reasoning to execution.
Mind Network will combine Symbiotic re-collateralization with FHE to enhance economic and consensus security in decentralized networks.
DOPP is building a fully on-chain options protocol, studying Symbiotic re-collateralization to help its oracle network achieve decentralization and obtain price feedback for specific options.
As Cyber Fund pointed out, composability and capital efficiency have always been core value propositions of DeFi protocols. EigenLayer brought efficient capital redeployment for protocols needing security outside Ethereum, despite initial criticisms, its role in inspiring innovation cannot be denied. Now, with Symbiotic entering the re-collateralization track with strong capital, the competition between the two is inevitable. Whether Symbiotic will become the “default choice for launching decentralized networks” as Paradigm hopes remains to be seen, but its competition with EigenLayer will undoubtedly inject new vitality into the currently stagnant DeFi track.