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

Symbiotic, a new restaking startup backed by Lido co-founders, aims to challenge EigenLayer with permissionless approach

Lido’s co-founders clandestinely support a rival to EigenLayer, an influential “restaking” platform that surged in popularity this year and significantly shaped the decentralized finance landscape on Ethereum.

Based on multiple sources with relevant information, the project goes by the name Symbiotic. Not only have Lido’s founders, Konstantin Lomashuk and Vasiliy Shapovalov, through their investment firm Cyber Fund, shown support for it, but Paradigm, a leading crypto venture capital firm that invests in Lido, has also contributed to the project.

According to internal documents obtained by CoinDesk, Symbiotic, created by the team behind Stakemind, is described as a “decentralized protocol for permissionless re-staking.” This innovation offers flexible solutions for coordinating node operators and suppliers of economic security within decentralized networks.

Several teams within the emerging decentralized finance (DeFi) space, specifically those focused on actively validated services (AVSs) and liquid restaking services utilizing EigenLayer, have reportedly engaged in preliminary talks about integrating with the protocol despite the documents carrying warnings of “preliminary” status and being labeled as “not for distribution.”

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

New kid in town

Since its launch to investors last year, EigenLayer has amassed an impressive sum of approximately $16 billion in deposits, making it one of the most noteworthy crypto success stories in recent history.

Just like EigenLayer, Symbiotic empowers decentralized applications, referred to as “actively validated services” (AVSs), to mutually ensure each other’s security. Users can deposit assets they hold with various crypto protocols to assist in securing these AVSs – such as rollups, interoperability frameworks, or oracles – and in return, receive rewards. In simpler terms, users will effectively lend their assets to help secure multiple applications and get compensated for their involvement.

It’s intriguing how events unfolded: When Paradigm, a prominent crypto investment firm, proposed investing in EigenLayer led by Sreeram Kannan, he surprisingly declined their offer. Instead, Kannan opted for Andreessen Horowitz as his venture capital partner, following Paradigm’s announcement of investing in a competing project.

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

Uber, Lyft and a potentially huge market

The rise of a promising challenger to EigenLayer highlights the growing interest of businesses and investors in capitalizing on the trend of staking, as evidenced by the industry’s increasing discourse around it. According to Blockworks’ report from April, Karak, another staking newcomer, has managed to secure investments from notable backers such as Coinbase.

As a market analyst observing the restaking infrastructure sector, I believe that there’s ample room for multiple key players to grow substantially. Uber and Lyft serve as compelling analogies from the ride-hailing industry, where both companies thrived despite intense competition. Restaking, with its immense potential, is set to follow a similar trajectory.

The collaboration between Cyber Fund, headed by Lido’s co-founders, and Paradigm, Lido’s primary investor, could give Symbiotic a robust edge in competing against EigenLayer. This alliance also underscores the concern among Lido’s inner circle that EigenLayer’s method of restaking poses a significant challenge to Lido’s prevailing influence.

Despite Lido being the most prominent decentralized finance (DeFi) project on Ethereum with a significant gap from competitors, its approach towards restaking is crucial in determining if and how it will continue to dominate the staking marketplace.

As a crypto investor, I can say that although Lido and Symbiotic are separate entities, the vision of Symbiotic, a restaking startup founded by Lido’s co-founders, aligns perfectly with the Lido Alliance framework.

In the Symbiotic project, collateral can take various forms including ERC-20 tokens, Ethereum validator withdrawal credentials, and other on-chain assets like LP positions. There are no restrictions on which blockchains these assets reside.

Discussions with restaking firms

Symbiotic’s method for dealing with collateral aligns with its larger goal of transforming into a “permission-free” platform. This means that applications constructed on the foundation will have significant autonomy in enhancing it according to their specific requirements.

As an analyst, I’m intrigued by their current project. It exudes an aura of novelty and intrigue that piques my interest. From what I’ve gathered, it appears they’re dedicated to constructing a system that is completely permissionless and decentralized in nature.

I’ve obtained information from a reliable source that Renzo, a notable liquid staking service similar to mine, is actively considering integration with Symbiotic following its launch.

Based on my analysis of the current situation, I have gathered information from four reliable sources who anticipate that Symbiotic will unveil its platform by the close of this year, despite the company’s reluctance to disclose any specific details or launch timeline publicly.

Margaux Nijkerk contributed reporting.