Mellow Finance helps Lido consolidate its position as the largest DeFi protocol

With the launch of Mellow Finance last week, Mellow Finance has reignited competition in the re-staking space by helping pioneering liquid staking protocol Lido Finance gain an edge in its battle for market share against emerging giant EigenLayer.

Mellow Finance is a liquid re-staking protocol from Symbiotic, a competitor to EigenLayer. Now, Mellow Finance is part of the Lido Alliance, which aims to establish stETH as a foundational re-staking asset.

Mellow Finance grew to $115 million in total value locked (TVL) on its first day after going live on June 11. The re-staking service also raised $5.8 million in seed funding from venture capital firm Paradigm and Lido founder investment firm Cyber.Fund.

Mellow Finance has introduced a “modular infrastructure” for creating liquid re-staking tokens (LRTs), offering depositors a range of permissionless vault options. This setup allows users to choose their own risk level when re-staking.

Within 5 hours of going live last Tuesday, Symbiotic depositors reached the platform’s initial cap of 41,290 wstETH, worth $173 million.

"Mellow enables depositors to flexibly choose the level of risk exposure they want while enjoying the liquidity of their staked assets," the document reads.

What is a re-pledge vault?

Mellow Finance is building its re-pledge vault using Symbiotic, which accepts any crypto asset based on the Ethereum ERC-20 token standard.

EigenLayer only accepts specific assets such as ETH, EIGEN, and selected ETH derivatives. While EigenLayer accepts stETH deposits from Lido, it places a cap on the amount of deposits.

Mellow Finance will offer customizable vaults managed by managers who allocate assets to various validation services. Managers such as Steakhouse Financial, P2P Validator, Re7 Labs, and MEV Capital will launch vaults that accept stETH. Initially, users will earn "points" for their deposits, which may be converted into token airdrops later.

This is similar to EigenLayer's re-pledge points system, which allows users to accumulate points based on the amount of their staked assets and the time they stake.

What is Mellow Finance?

Mellow Finance It can also be called Mellow Protocol, which is actually a different name for the same project. Mellow Protocol is the core component or infrastructure of Mellow Finance. Specifically, Mellow Finance is the brand name of the project, and Mellow Protocol is the decentralized finance (DeFi) protocol operating under the brand.

Founded in 2021, Mellow Protocol is a modular liquidity re-collateralization primitive for institutions and experienced risk managers to issue and manage LRTs with different risk and return profiles. The system supports permissionless light rail creation and allows unlimited risk profiles by working with different AVS and operators.

Financing situation

On August 25, 2022, Mellow Protocol raised US$2.75 million in a seed round of financing. Investors include Robot Ventures, Arrington Capital, ParaFi Capital, Lemniscap, Primitive Ventures, P2P Capital, Focus Labs, Darren Lau, Santiago R SantosDaryl Lau, Jamis Johnson, Mariano Conti, IvangbiMolly, Igor Barinov, Principle Ventures, NEMO Ventures.

Mellow Protocol will be launched on the mainnet on November 17, 2022.