Author: LINDABELL Source: ChainFeeds
Yesterday, the re-collateralization project Symbiotic officially launched and completed a $5.8 million seed round of financing led by Paradigm and Cyber Fund. According to the introduction, Symbiotic is a permissionless shared security protocol. Shared security refers to multiple networks being able to share the services and security provided by the same group of node operators, thereby improving capital efficiency and security. This concept has been previously applied in EigenLayer’s re-collateralization.
While belonging to the re-collateralization track like EigenLayer, Symbiotic differs in that it allows users to collateralize a wider range of tokens, including ERC20 tokens, Ethereum validator withdrawal credentials, or liquidity provider proofs. Additionally, Symbiotic offers more flexible customization options for components. While the core protocol is defined by immutable core contracts, other components such as collateral assets, reward mechanisms, and penalty criteria can be configured by the network or other agents as needed.
According to CoinDesk, Lido co-founders Konstantin Lomashuk and Vasiliy Shapovalov, along with Paradigm, secretly funded a new project similar to EigenLayer earlier in May, which turned out to be Symbiotic. Interestingly, the report also mentioned that Paradigm had expressed interest in investing in EigenLayer co-founder Sreeram Kannan but was rejected. EigenLayer then raised $100 million from a16z. In response, Paradigm stated that they would invest in projects competing with EigenLayer.
Symbiotic Architecture Analysis: Concise Thin Coordination Layer
Symbiotic is designed as an extremely flexible, permissionless, and reliable thin coordination layer aimed at simplifying system architecture, reducing operational costs, and ensuring efficient transaction processing and protocol execution. According to Symbiotic documentation, the Symbiotic network architecture consists of five core components that work together to maintain and enhance the security and efficiency of decentralized networks.
1) Collateral
Role: Safeguarding economic security in Symbiotic
Function: In the Symbiotic system, collateral covers a wide range of on-chain assets, such as ERC20 tokens, Ethereum validator withdrawal credentials, or liquidity provider proofs. Users can collateralize these assets and convert them into specific collateral tokens, which have extended functionality for use in penalties or compensation when necessary.
2) Vaults
Role: Coordinating and managing the collateral and re-collateralization process
Function: Vaults serve as bridges connecting collateral asset holders and operator infrastructure networks in the Symbiotic protocol. Collateral tokens converted by users are stored in Vaults, which delegate these tokens to operators in the network to support network operations. Additionally, Vaults are configurable and can be deployed in various ways to meet different needs and security considerations.
3) Operators
Role: Infrastructure providers in the Symbiotic ecosystem
Function: By obtaining collateral tokens from Vaults, operators can ensure the necessary economic support for network security and operations. Symbiotic establishes a registry to record and track operator performance. Operators can receive economic support from multiple partners through Vaults without the need to build or maintain separate infrastructure for each partner. In the future, Symbiotic plans to introduce more validation and evaluation systems to allow the network to select operators based on reputation and historical performance.
4) Resolvers
Role: Acting as arbitrators in the ecosystem, responsible for adjudicating and handling economic penalties resulting from malicious behavior in the network, can be entities or contracts
Function: There are two specific implementation methods, one being fully automated for provable malicious behavior and the other involving more complex forms such as setting up a committee or introducing an external dispute resolution framework. Vaults and the network can jointly select the type of Resolvers that best suit their needs. Vaults also have the authority to specify the terms of how Resolvers handle collateral tokens. Additionally, Resolvers can be shared across networks, allowing multiple networks to adopt the same Resolver mechanism to address potential disputes.
5) Network
Role: Various protocols or platforms that rely on decentralized infrastructure to provide services
Function: Symbiotic allows these networks to obtain the necessary security through flexible means, including technical services and economic support from operators. These networks can customize strategies for recruiting and managing node operators and autonomously choose cooperating Vaults through Symbiotic’s modular design. Furthermore, the core contracts provided by Symbiotic are open-source and immutable, ensuring the security and stability of network operations without the need to worry about external governance risks.
In summary, in the Symbiotic protocol, users first convert their collateral assets into Collateral, which are then stored in Vaults. Vaults delegate these tokens to operators based on set strategies to provide the necessary economic resources for network operations. Operators then execute network tasks according to these strategies, such as data processing and transaction verification. Resolvers play a critical arbitrating role in the system, handling any economic penalty issues that may arise from operator behavior. As the ultimate service provider, the Network defines and adjusts interaction rules with Vaults and Operators, including how to accept collateral, allocate rewards, and respond to penalties.
Symbiotic Ecosystem
The Symbiotic system is highly flexible and can support projects at different stages of decentralization. For example, projects can collaborate with existing operators at the start to build a trust-minimized and decentralized network. They can also expand their ecosystem by increasing the cluster of operators to raise the cost of attacks and align the ecosystem.
Currently, Symbiotic has partnered with 16 projects, including Ethena, developer of the USDe stablecoin, cross-chain application-building platform Hyperlane, oracle network Ojo, Aizel building a verifiable AI network, and Cycle Network developing a full ledger protocol. Ethena is integrating Symbiotic with LayerZero’s decentralized validation network (DVN) framework to enhance the cross-chain security of Ethena assets. Cycle Network plans to use Symbiotic to power its shared sequencer. Celestia’s modular Rollup framework product, Rollkit, is exploring integrating Symbiotic re-collateralization into its modular stack to facilitate launching sovereign Rollups on Celestia.
In conclusion
DefiLlama data shows that EigenLayer’s total value locked has exceeded $18 billion, making it the second-largest project after Lido and the leader in the re-collateralization field, with the remaining projects having less than $1 billion locked. These data demonstrate EigenLayer’s leading position in the entire re-collateralization field. However, the launch of Symbiotic may bring a new competitive landscape, especially as it supports re-collateralization using assets like Lido’s stETH and others that were originally incompatible with EigenLayer, potentially giving it an advantage in TVL competition. According to Symbiotic’s Twitter, the project reached a collateral limit of 41,290 wstETH within 5 hours.
Furthermore, as a new project supported by Paradigm, Symbiotic has demonstrated broader applicability in technical support and use cases. Paradigm stated, “In the short term, Symbiotic will mainly be used to launch new consensus instances, such as the election of new L1 operators and decentralized sequencing. In the long term, Symbiotic will also support block production and multi-party computation use cases.” Additionally, Paradigm has developed Reth Execution Extensions (ExEx) to further enhance shared security services based on Symbiotic.
However, EigenLayer has already established a strong market position and ecosystem in the re-collateralization field. Whether Symbiotic can break EigenLayer’s dominance remains to be seen.
