Symbiotic vs EigenLayer: A Deep Dive into Restaking Approaches

Symbiotic and EigenLayer are two platforms that provide shared security through restaking. Both aim to reduce the cost of launching distributed trust networks and enhance their security by allowing “Operators,” backed by user-staked funds, to take on node duties for multiple “Networks.” While both achieve their functionality through restaking, these projects exhibit distinct differences:

Restaking Asset Types: Symbiotic, positioning itself as a DeFi service, supports nearly all ERC-20 Tokens, according to its official documentation. Conversely, EigenLayer focuses exclusively on ETH-related staking, emphasizing its role as blockchain ecosystem infrastructure.

Design Philosophy: Symbiotic employs a broader approach to restaking, aiming to create a flexible and open DeFi market. In contrast, EigenLayer concentrates on leveraging existing trust within the Ethereum PoS system to maintain a stable and reliable foundation, taking a narrower approach.

Design Methodology: Symbiotic is more modular and decentralized, supporting a broader range of assets and allowing for deeper customization. EigenLayer appears somewhat more centralized, prioritizing Ethereum PoS system security in its overall design.

Functional SimilaritiesBoth Symbiotic and EigenLayer achieve shared pool security through restaking, aiding in reducing the cost of launching distributed trust networks and freeing up innovation on the blockchain. Their restaking mechanisms allow Operators, backed by assets from Restaker, to use these assets across multiple Networks, executing various tasks, incurring diverse risks, and reaping multiple rewards.

Symbiotic’s restaking involves the following process:

• Restaker: Users (Restaker) restake their assets.

• Operators: Restaker’s assets are delegated to Operators who undertake computations.

• Networks: Operators choose to join selected Networks, agreeing to the terms to provide node services for the distributed trust network.

EigenLayer’s restaking functionality is remarkably similar, referring to distributed “Networks” as “Active Validation Services” (AVS). Furthermore, EigenLayer doesn’t explicitly differentiate between Operators and Restaker in its core narrative. We’ll delve deeper into the distinctions between these two later.

Conceptual DifferencesAt an abstract level, EigenLayer and Symbiotic have contrasting stances on the “trust split” problem in the Ethereum PoS space. This divergence manifests in their distinct approaches to restaking:

• EigenLayer: Aims to attract users using restaking, building a better blockchain ecosystem based on Ethereum. It emphasizes restaking Ethereum PoS trust, allowing only ETH-related staking, safeguarding Ethereum PoS from the trust split problem. EigenLayer positions itself as a fundamental service enhancing the Ethereum ecosystem.

• Symbiotic: Seeks to leverage restaking to attract as many users as possible, aiming to create a flexible and open DeFi market where everyone can profit. It supports restaking of various ERC-20 tokens, viewing itself as a DeFi service, maximizing opportunities for income and capital efficiency. Symbiotic doesn’t prioritize the trust split problem, even opposing its resolution. Their growing TVL (Total Value Locked) could pose a threat to Ethereum PoS.

Furthermore, Symbiotic separates the Staker role from the Operator role, likely due to their strong backing from Lido, which possesses optimal resources for Operators. Consequently, users need only focus on staking rather than delegation. This separation also encourages users to invest as much as possible.

Design and Service DiscrepanciesSymbiotic is characterized by its emphasis on an open, modular, and flexible DeFi market, with clear role differentiation. Key features include:

• Open: Supports multi-asset restaking, enhancing asset utilization by allowing various ERC-20 tokens to be staked.

• Modular: The system has clear role divisions, making it developer-friendly by separating responsibilities among different participants.

• Flexible: Permits extensive customization, enabling top-tier networks to have complete control over their underlying services.

• Permissionless: Symbiotic’s core implementation contracts are relatively lightweight, and the roles involved are permissionless, allowing developers to deploy them independently.

In contrast, EigenLayer retains some centralized elements. A prime example is the slashing penalty regulation. Symbiotic utilizes the Resolver role for customized arbitration decisions, enabling potential decentralization. This provides a more flexible and decentralized solution compared to EigenLayer’s centralized slashing penalty council.

Let’s delve deeper into Symbiotic’s flexible and modular design.

Key Components of SymbioticSymbiotic’s modular design involves five primary roles: Collateral, Vaults, Operators, Resolvers, and Networks. We’ll provide a brief overview of these roles.

• Collateral: Represents the assets to be staked, acting as an abstraction of the underlying assets. It supports various asset types and creates corresponding Collateral ERC-20 tokens with extended slashing mechanisms for staking purposes. This Collateral token separates the asset itself from the ability to access, apply rewards, or penalties. This separation abstracts the asset into a Collateral token, potentially extending support to diverse assets beyond the Ethereum mainnet.

• Vaults: Manage the Collateral tokens held. They handle delegating tokens to Operators and implement reward and penalty mechanisms based on predefined protocols. Vaults are typically created by Operators based on the terms they receive from the network.

• Operators: Provide computational services as nodes. They are backed by assets from various vaults, accepting terms dictated by the network and choosing to join. Operators are crucial within the decentralized network’s ecosystem.

• Resolvers: Customizable slashing decision arbiters. They can be centralized addresses, slashing committees, or decentralized entities, offering flexibility in arbitration.

• Networks: Services requiring distributed trust networks as a foundation. Similar to AVS in EigenLayer.

Current Project StatusAs of now, Symbiotic has only opened its restaking functionality. Delegating managed assets to distributed services requiring shared security isn’t yet available. Similarly, EigenLayer hasn’t fully implemented its intended features, with key functions like slashing and rewards still pending release.

In terms of TVL, EigenLayer maintains market dominance as of July 8, 2024, with a TVL of \(13.981 billion, while Symbiotic has reached a TVL of \)1.037 billion within a month.

Security Risks

Restaking based on ERC-20 TokensSymbiotic’s most direct security risk stems from incorporating nearly all ERC-20 tokens into the restaking realm. Restaking pools generally favor more stable assets like native ETH, minimizing risk while providing stable returns. Unlike EigenLayer, which primarily supports native ETH, Symbiotic allows a wider range of ERC-20 tokens to participate in staking. However, the stability of ERC-20 tokens varies significantly, potentially undermining the security of the staking pool and potentially leading to financial instability.

Permitting virtually all ERC-20 tokens as collateral increases platform volatility, weakening the overall stability of the ecosystem. To mitigate this security risk, a systematic Token Interdependency Monitoring System framework should be seriously considered to assess whether a token’s price crash would trigger a chain reaction, impacting other tokens within the ecosystem or the entire pool. This aids relevant Collateral managers within Symbiotic in timely problem detection and necessary adjustments.

Of course, Networks should also carefully consider their choices of supported restaking assets, avoiding unstable staking assets whenever possible.

The Trust Split ProblemThe trust split problem was raised by EigenLayer’s founder, and we discussed it in detail in a previous blog post. EigenLayer argues that the blockchain ecosystem has invested significant effort in launching distributed trust networks. Many of these networks currently serve as infrastructure for Dapps on the Ethereum mainnet, attracting substantial assets. However, the security of everything on the Ethereum mainnet is guaranteed by the staked assets in the Ethereum PoS staking pool. It seems paradoxical that the infrastructure for these Dapps diverts many staked assets into their own staking pools while still serving the Ethereum mainnet. To address this issue, EigenLayer proposed the Restaking staking set, aiming to redirect PoS staked assets to distributed trust network infrastructure. This practice of reusing Ethereum PoS staked assets can guide assets from third-party staking pools back to the Ethereum PoS staking pool, effectively alleviating the trust split issue.

In contrast, Symbiotic stands on the opposing side of this problem. By allowing non-ETH restaking in their own “Collateral,” the rapid growth of these assets could pose a trust split threat to the security of the Ethereum PoS consensus.

Embracing LeverageEigenLayer allows only ETH-related assets for restaking, where restaking enables a single asset to be staked in multiple AVS services. This introduces some leverage risk into the ecosystem. Symbiotic takes this a step further, fully embracing leverage, allowing any ERC-20 token to be restaked. As mentioned earlier, ERC-20 tokens inherently carry higher risk and greater volatility. Resting ERC-20 tokens multiple times across different networks will further amplify this risk.

Resolver Assignment RiskSymbiotic’s permissionless and modular design brings greater openness and freedom to the DeFi market but also harbors greater risk. Every role within the framework can be deployed without permission, increasing the exposure to potential security issues. For instance, the Resolver role, a significant distinction from EigenLayer, allows Networks to designate specific Resolvers to oversee the reward and punishment of their subordinate operators. This design enhances the system’s decentralization and customizability but also opens the door for potentially malicious Resolvers. To prevent such malicious Resolvers, security audits can be conducted to ensure the basic reliability of the designated Resolver.

Risks Similar to EigenLayerEigenLayer incurs the following risks, which we elaborated on in previous posts:

• Security risks associated with malicious AVS in a two-way free selection market.

• Security risks related to malicious overutilization of funds due to restaking.

• Security risks in the core contract implementation of the platform itself.

• Potential security risks associated with allowing the platform to leverage and reward/punish assets in the Ethereum PoS staking pool.

Since Symbiotic has similar restaking capabilities, these risks also exist within it.

ConclusionWhile Symbiotic and EigenLayer share functional similarities, they exhibit significant differences in asset support and system design. Symbiotic supports a broader range of assets and employs a modular, decentralized design to cater to a more flexible and open DeFi market. In contrast, EigenLayer focuses on leveraging the existing trust within the Ethereum PoS system, maintaining a more centralized yet secure platform. These discrepancies highlight the unique value propositions of each platform, addressing the needs of different parts of the decentralized ecosystem.