Does Ethena portend an advantage for Symbiotic over Eigen?

Author: Macauley Peterson Source: blockworks Translation: Shan Ouba, Golden Finance

EigenLayer, a pioneer in the re-staking space, has demonstrated remarkable success in attracting capital, becoming a "black hole" in the Ethereum space and becoming one of the largest DeFi protocols in the process. However, Symbiotic's entry into the shared security space with its "stake any asset" design may bring disruptive changes.

Since its launch on the Ethereum mainnet more than a year ago, EigenLayer has absorbed approximately 5.4 million ETH, worth $20 billion at its peak in early June. The protocol began actively raising deposit limits and accepting more types of Ethereum in early 2024. By March, deposits increased from less than 1 million ETH to approximately 3 million. This growth rate continued after the launch of Karak, a multi-asset re-staking model designed to increase staking returns.

Symbiotic takes this concept one step further, supporting any ERC-20 asset as collateral for re-pledge. This customization option and flexible re-pledge model enables developers to use a variety of assets to secure their applications. Yesterday, Ethena’s native token ENA and its collateralized version of synthetic USD sUSDe became the first non-ETH assets to be re-pledged on Symbiotic. sUSDe earns yield through Ethereum staking and futures basis trading.

The new sUSDe vault on Symbiotic’s risk management platform Mellow Finance quickly reached its $40 million cap, while the ENA vault was already half full after the first day of deposits. Both Mellow and Symbiotic are backed by Cyber ​​Fund and are part of the Lido Alliance, and currently other Mellow vaults only accept Lido-collateralized Ethereum (stETH).

The Ethena vault has three managers: MEV Capital, Re7 Labs, and K3. Laurent Bourquin, general partner at MEV Capital, said he expects liquid re-collateralization tokens (LRTs) to be accepted as deposits in Symbiotic vaults.

Symbiotic’s key differentiator is its “non-differentiation”, allowing EigenLayer’s LRTs to enter Symbiotic. This will create a double slashing, and therefore double earnings.Other liquid staking and re-collateralization providers are also eager to join the space. Sunand Raghupathi, co-founder of Veda Protocol and Seven Seas Capital, said that through Veda, they were able to launch an LRT on Symbiotic two days after Symbiotic announced its launch.

Veda has partnered with EtherFi to launch a “Super Symbiotic” vault, which accepts a variety of Ethereum derivatives, including EtherFi’s eETH, and converts it into stETH for Symbiotic to use. Technically, Symbiotic could accept eETH itself, which would double-stake — first on EigenLayer, then on Symbiotic — but that’s not what EtherFi does. If a user provides eETH, it’s removed from EigenLayer first. Symbiotic co-founder Misha Putiatin noted that double-staking is inherently risky. We can’t stop people from double-staking, but we have no plans to incentivize that behavior. MEV Capital’s Bourquin believes double-staking is inevitable. For now, that risk is on hold because there’s no slashing mechanism on EigenLayer. Deposits accepted by EigenLayer can be delegated to Active Validation Services (AVS), but none of them currently have slashing conditions enabled, which would ultimately put depositors’ funds at greater risk. Bourquin sees Symbiotic’s flexibility as a clear advantage.

EtherFi started out as an EigenLayer re-staking protocol, but has since become a trusted brand in other areas, such as launching Liquid, a stablecoin vault managed by Seven Seas that earns high yields through multiple DeFi channels such as liquidity provision, lending optimization, and price arbitrage. By allowing its users to participate in Symbiotic, EtherFi can retain these users within its ecosystem and capture part of the capital flow. This approach provides an alternative to avoiding the conversion of eETH through on-chain liquidity pools, which may put pressure on the stability of derivatives.

Even if the amount of eETH decreases as a result, EtherFi can still retain these users through its brand and front-end. EigenLayer believes that most assets should not be used for this purpose, and it took them a long time to find that ETH is in a sense the king of safe assets. Symbiotic believes that market forces should determine what is suitable collateral for AVS staking. EigenLayer does have plans to support dual collateralization, using ETH and a custom crypto asset, but Symbiotic’s permissionless design enables this today.

Anyone can create a market on Symbiotic, so the variety of tokens used to secure AVS on Symbiotic will be much greater than EigenLayer, which is very focused on ETH.