DeFi
Lido and Paradigm co-founders secretly back competitor EigenLayer in the form of DeFi battle lines — TradingView News
The co-founders of Lido, the largest liquid staking protocol on Ethereum, are secretly funding a competitor to EigenLayer, the bustling “catering” service that has emerged quickly 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 had support not only from Lido co-founders Konstantin Lomashuk and Vasiliy Shapovalov through their venture capital firm Cyber Fund, but also from Paradigm, the crypto venture capital firm. he is one of the main investors in Lido.
CoinDesk also obtained internal Symbiotic documents that describe the project, which allows users to “retake” using Lido’s staked ether token (stETH) 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 staking protocol that provides flexible mechanisms for decentralized networks to coordinate node operators and economic security providers,” according to the documents company internals reviewed by CoinDesk.
The documents have been marked as “preliminary” and “not intended for distribution,” but several teams working in the nascent foodservice ecosystem – including Actively Validated Services (AVS) and EigenLayer-based Liquid Foodservice – say have already started discussions to integrate them into the protocol.
Representatives for Paradigm, Symbiotic and Cyber Fund declined to comment on the deal.
New kid in town
Lido made a splash in DeFi just a few years ago when it developed a protocol that allowed users to stake cryptocurrency on Ethereum – essentially locking it – while getting a “stETH” token that they could use to trade in the meantime. The project has proven so popular that it now ranks as the largest decentralized finance protocol on Ethereum, with $27 billion in deposits, reaching such a dominant position that some players are concerned about the operational risks of its influence disproportionate.
But lately, Lido has been struggling with declining market share as users have moved their assets to EigenLayer, a newer service that allows users to reuse Ethereum’s native ETH token to help secure other networks.
EigenLayer is one of the biggest crypto success stories in recent memory, attracting some $16 billion in deposits since opening to investors last year.
Similar to EigenLayer, Symbiotic will provide a way for decentralized applications, called actively validated services, or “AVS,” to collectively secure each other. Users will be able to reinvest assets they have deposited with other crypto protocols to help secure these AVS – whether rollups, interoperability frameworks, or oracles – in exchange for rewards.
The main 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 the ETH (stETH) token staked by Lido, as well as thousands of other assets that use the ubiquitous ERC-20 standard. EigenLayer, on the other hand, only accepts ETH tokens.
In what may be an irony, when venture capital giant Paradigm approached Sreeram Kannan, co-founder of EigenLayer, to invest in its project, he turned down his money in favor of the venture capital firm rival Andreessen Horowitz, according to several people informed. about it. Paradigm told Kannan that they would instead invest in a competitor to his project.
Kannan did not immediately respond to a request for comment.
Uber, Lyft and a potentially huge market
The emergence of a potentially formidable competitor to EigenLayer highlights how eager companies and investors have become to capitalize on reinvestment as the trend has taken over the sector. Blockworks reported in April that Karak, another newcomer, had secured funding from leading US crypto exchange Coinbase, among others.
“The space is big enough for multiple players to go big,” said an infrastructure operator who plans to integrate with Symbiotic, but who spoke on condition of anonymity because the project remains stealthy. “Uber and Lyft, I think, are perfect examples. It’s the same thing here. The takeover is going to be massive.”
The involvement of Cyber Fund, led by Lido’s co-founders, and Paradigm, its main backer, could put Symbiotic in a strong position to challenge EigenLayer. It is also further evidence that those close to Lido perceive EigenLayer’s reconquest approach as a potential threat to its own dominance.
Although Lido remains by far the largest decentralized finance protocol on Ethereum, the project’s re-staking strategy will play a major role in whether (and how) it manages to maintain its lead in the general field. staking.
Liquid catering startups that deposit user funds into EigenLayer have eaten into the market for Lido’s stETH token. The two largest liquid replenishment protocols, Ether.Fi and Renzo, saw net inflows of $625 million over the past 30 days. The Lido, meanwhile, saw net outflows of $75 million during the same period.
This week, members of the Lido DAO (Decentralized Autonomous Organization), the governance body that controls the Lido protocol, publicly proposed the “Lido Alliance,” a guiding framework for thinking about reinvestment that would place stETH squarely at the center of the tendency.
“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 states. “Developing an Ethereum-aligned ecosystem around stETH helps decentralize the network.”
Although Lido is not directly related to Symbiotic, the startup funded by Lido’s co-founders fits well within the framework of the Lido Alliance.
While EigenLayer only accepts ether deposits ETHUSD tokens, Symbiotic will not accept ETH deposits at all. Instead, it will allow users to directly deposit any ERC-20 token, such as Lido’s staked ETH (stETH).
“Collaterals in Symbiotic may include ERC-20 tokens, Ethereum validator withdrawal credentials, or other on-chain assets such as LP positions, without limitation as to the blockchains on which the positions are held,” it says. the project in its documents.
Discussions with restructuring companies
Symbiotic’s approach to collateralization is part of its broader ambition to become a “permissionless” protocol, meaning applications that build on the platform should have substantial leeway on how they augment it to serve their use case.
“I’m excited about what they’re working on. It looks interesting and innovative,” said Mike Silgadze, co-founder of Ether.Fi, one of the largest restructuring protocols, in a Telegram message. “It seems like they are very focused on creating something completely decentralized and permissionless.”
Renzo, another large liquid catering service, is already in discussions to integrate with Symbiotic after its launch, according to a source close to both teams.
Symbiotic has not released any public information and has not confirmed its launch date, but four sources consulted for this article said they expected the platform to be released in some form of here the end of this year.
Margaux Nijkerk contributed to reporting.