Original title: From Staking to Restaking
Original author: Arjun Balaji, Dave White, Georgios Konstantopoulos, Paradigm
Original translation: Ismay, BlockBeats

Editor's note: On June 11, Symbiotic announced its official launch and said it had completed a $5.8 million seed round of financing, led by Paradigm and Cyber Fund. This morning, the re-staking protocol Symbiotic tweeted that Symbiotic reached the staking limit of 41,290 wstETH in 5 hours. Symbiotic, which has been the focus of the market since its birth, can be said to be very glorious. Last month, it was reported that Lido co-founder and Paradigm were secretly funding a new company, Symbiotic, which would compete in the re-staking track. Symbiotic allows users to use Lido's stETH to re-stake with other assets that are not natively compatible with EigenLayer. This means that Symbiotic will become a direct competitor of EigenLayer.

This article introduces the core concepts of the Symbiotic shared security system and its application prospects. As a flexible, permissionless protocol, Symbiotic allows network developers to fully control staking implementation and operator selection while providing a wide range of security services. In the short term, Symbiotic is mainly used to launch new consensus instances, such as the election of new L1 operators and decentralized sorting. In the long term, Symbiotic will also support use cases such as block production and multi-party computing. In addition, Paradigm has developed Reth Execution Extensions (ExEx) to further enhance Symbiotic-based shared security services.

The following is the full text of Symbiotic written by Paradigm:

Decentralized networks require coordination mechanisms to incentivize and supervise their node operators. This mechanism started with Proof of Work and then evolved into Proof of Stake, an important development that enabled the network to obtain the security of validators through economic collateral. The next frontier is shared security, which expands the services that PoS node operators can provide while leveraging the same economic collateral.

Symbiotic is a general purpose, permissionless protocol that provides shared security through re-staking. We have invested in Symbiotic alongside Lido and other protocol partners Cyber.Fund.

We believe that Symbiotic’s flexible and permissionless approach will be a good fit for many of the most useful consumers of shared security, and over time it could become the default choice for launching decentralized networks.

Background

Lido is Ethereum’s largest liquid staking token, founded on the insight of separating staked capital from validator infrastructure (labor) without modifying Ethereum’s consensus mechanism, using a smart contract layer to allocate users’ stake to operators in a decentralized manner. This separation into “delegation” is a natural and inherent trend in proof-of-stake systems. Lido enables proof-of-stake to scale on Ethereum without compromising decentralization by matching staked ether with the highest quality infrastructure operators.

Since 2021, Paradigm has been working with contributors to the Lido protocol. Since then, Lido has grown from ~$800M to over $36B in staked ETH deposits and has fostered the strongest ecosystem of node operators: reputable, geographically distributed, diverse, and consistent.

Paradigm has also long supported the Cosmos ecosystem, leading Tendermint Inc.’s initial Series A round and later investing in Osmosis and dYdX. With Cosmos, we observed that the challenges of recruiting validators and capital from scratch every time a developer wants to launch a new chain greatly limits the pace of innovation.

A natural “second phase” for Ethereum staking is to repurpose the staking and validator infrastructure and expertise to move beyond L1 consensus to secure multiple protocols simultaneously. This makes it much easier to build new protocols. Cosmos pioneered the idea of "shared security", and EigenLayer's "restaking" recognizes that an Ethereum-centric approach can successfully launch this validator ecosystem. This original mechanism is novel and powerful, but needs to be designed properly to safely enable useful applications given the risks of overloading Ethereum consensus.

As we thought about the market, we realized that Konstantin was also interested in this. Through him, we met Misha and Algys, the founders of Statemind, a top auditing firm that has worked closely with Lido (i.e. their V2 audit), Curve, InstaDapp, and others. We were very aligned in our views of their respective markets and jumped at the opportunity to collaborate.

About Symbiotic

Symbiotic is a new shared security system. It is designed to be an extremely flexible, permissionless, and reliable lightweight coordination layer. Symbiotic allows network developers full control over their (re)staking implementation and operator setup. Overall, the long-term goal of the protocol is to provide foundational components that help networks navigate the roadmap of decentralization while prioritizing security and capital efficiency.

Flexibility

Protocols built on Symbiotic can control their collateral assets, rewards, and penalty criteria. Symbiotic will initially focus on staked ETH, as this is the largest pool of staked capital. However, the protocol is general and can accept any ERC-20 asset as collateral. Over time, we expect Symbiotic to serve multiple asset and related operator infrastructure groups.

Symbiotic network developers will also have full control over its operator selection mechanism. Over time, it will be possible to maximize the number of participants, their geographic distribution and their overlap with other protocols, reputation, and other selection criteria.

Permissionless

Symbiotic’s core contracts are immutable, which eliminates external governance risk. Symbiotic will never have a central multi-signature, penalty committee, or other permissioning mechanism for shared security services. Services built on Symbiotic will be able to support a variety of different penalty resolution mechanisms, which we believe is critical for innovation.

Reliability

Building a network of infrastructure operators is challenging, something we learned from our work with Lido. Symbiotic will ensure that restaking is scalable by bringing in reputable and geographically distributed infrastructure partners, and supporting smaller operators.

What Should Be Built on Symbiotic?

At Paradigm, we believe that the core of a restaking protocol is a delegated staking system. Stakers are incentivized to vote for operators they believe will be honest validators. In a sense, this is exactly how Ethereum staking (via stETH and other liquid staking tokens) already works today.

In the short term, we believe the clearest and safest use case for shared Delegated Proof of Stake security is for launching new consensus instances:

Electing new L1 operators (e.g. Cosmos appchains, sidechains, etc.)

Decentralized ordering

Distributed auctions (e.g. leaderless auctions)

Multi-party computation (MPC) and threshold decryption networks

In the long term, we are also interested in L1 block production use cases, such as new MEV auction types, pre-confirmation, and base ordering. However, we believe block production use cases may take longer to flourish: they generally benefit from adoption by more L1 proposers, and may pose a more immediate security risk to Ethereum L1.

To achieve this vision, we have also created Reth Execution Extensions (ExEx). ExEx allows for fast ingestion and processing of data from nodes, and enables networks/services to peer with other ExEx to reach a state that should eventually be injected into Ethereum. We hope to make ExEx the best tool for building shared security services with Symbiotic.

Of course, Symbiotic is a general purpose system that developers can build any protocol on top of, without requiring permission or using our codebase. These are just our intuition about the types of use cases that are most likely to succeed.

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