Symbiotic Protocol: Modular Restaking Security

Introduction

Symbiotic is the new standout in the re-staking market. It is a shared security protocol that enables decentralized network builders to bootstrap robust, sovereign ecosystems while controlling their own permissionless, re-staking implementation.

Developers who build on Symbiotic can exercise choice and control over shared security agreements. No slashing committees or unnecessary governance are required. Furthermore, Symbiotic networks can utilize customizable punishment and reward mechanisms. Additionally, because Symbiotic crypto embraces modularity, its networks can seamlessly evolve and adjust to changing requirements with adaptable re-staking logic.

This article will further explore Symbiotic's benefits, features, and components and compare it to the highly successful EigenLayer.

What Is Symbiotic?

Symbiotic is a protocol that provides shared security for networks. Its purpose is to enhance the efficiency and security of distributed trust networks from the Ethereum ecosystem by enabling operators to leverage their staked assets across multiple networks.

The protocol's scalable design features a permissionless, network-agnostic, multi-asset system that enables capital-efficient sourcing of economic security. Symbiotic's flexible design also brings multiple, unique benefits to its network participants.

More specifically, its modular design allows developers to define the engagement rules for their protocols. Further, immutable core contracts on Ethereum remove external governance risks and eliminate single points of failure. Next, let's examine Symbiotic's core components.

Five Components of Symbiotic Crypto

Symbiotic consists of five interconnected components:

1. Collateral

2. Vaults

3. Networks

4. Operators

5. Resolvers

Collateral

Symbiotic crypto uses collateral as an abstraction to represent underlying on-chain assets, which are chain agnostic. It introduces the collateral concept to bring scale and capital efficiency to bear by allowing assets used to secure its networks to be held outside of the protocol itself. For example, collateral can be held in DeFi positions on different networks than Ethereum.

The protocol achieves this by separating asset-slashing abilities from the underlying asset itself. This process is similar to how liquid staking tokens create representations of underlying staked positions.

Collateral positions are technically ERC-20 tokens but with extended functionality to handle slashing incidents when applicable. The collateral token supports slashing, making it possible to create a "Burner" to burn the asset.

Additionally, Symbiotic allows collateral tokens to be deposited into vaults (see below). These vaults delegate collateral to operators across the networks. Vaults determine acceptable collateral and define the Burner if the vault supports slashing.

The Collateral token must support the ERC-20 interface and should be slashable if used in slashable vaults. To sum up, the default collateral is technically a wrapper over any ERC-20 token with optional slashing history functionality.

Symbiotic Vaults

Vaults are Symbiotic's re-staking and delegation management layer. They are also known as operator staking pools and liquid re-staking protocols. Vaults handle the delegation of collateral to operators across the protocol's networks. They can be curated by liquid re-staking providers or delegated to operator-specific vaults.

The vault component handles vital sections of the protocol's economy and has the following responsibilities:

1. Accounting

Vaults perform accounting by themselves, handling deposits and withdrawals plus collateral slashings.

2. Slashing Logic

The Slasher module handles slashing logic. Symbiotic allows most of its mechanics to remain flexible while providing strict guarantees regarding vault slashing.

Regarding validating slashing requirements, once a slashing request is sent, the system verifies its validity. Specifically, it determines if the operator interacts with the network and opts into the vault. We'll examine this in more detail below.

3. Delegation Strategies

Vault owners define the re-staking and delegation strategies to operators.

4. Reward Distribution

We'll examine networks and staking later, but for now, understand that vaults distribute staking rewards to collateral depositors from the networks. The vault also sets staking limits for operators and networks, and the network does not control this process except in the case of network-managed vaults.

Operator-Specific Vaults

An operator may create vaults with collateral that is re-staked to their infrastructure across any network configuration. Furthermore, an operator can create multiple vaults with different configurations without additional node infrastructure requirements.

Operators can preconfigure vaults to be deployed in an immutable way. They can also specify an owner who can update the vault's parameters. Operators and curators (like liquid re-staking protocols and crypto institutions) are expected to use vaults to build differentiated products.

Curated Multi-Operator Vaults

These vaults are curated configurations of re-staked networks. They offer delegation strategies to multiple operators. Curated vaults can set custom slashing limits, which cap the collateral amount that can be slashed for specific networks or operators.

Immutable Preconfigured Vaults

Operators can deploy these vaults with preconfigured rules that cannot be updated. This provides extra protection for risk-averse users who may be uncomfortable with their vault curator's ability to change configurations or add new re-staked networks on a whim.

Each Symbiotic vault must have a predefined collateral token that satisfies the ERC20 interface. All the accounting and operations in the vault are executed only with the specified collateral token. However, rewards within the vault can be distributed in different tokens. Internal funds are represented in shares, but the external interactions take place in absolute fund amounts.

Symbiotic Networks

Symbiotic networks are any protocol that needs a decentralized infrastructure to deliver its service in the Web3 economy. The network component controls the entirety of the re-staking implementation. This includes selecting the node operators, which collateral assets to support, rewards and slashing, and any other associated mechanisms.

Symbiotic networks also take care of tasks such as validating and sequencing transactions, reaching consensus about off-chain data and bringing it on-chain, providing off-chain data to dApps, providing guarantees to users on cross-network interactions, and others.

Networks on Symbiotic crypto are also known as rollups, app chains, and AVSs and require a distributed set of node operators to provide the above trust-minimized services. Network builders on Symbiotic have the advantage of being able to define and control how they onboard, incentivize and penalize operators and their delegators.

Operators

Symbiotic operators run the network infrastructure for decentralized networks within and outside of the protocol's ecosystem. They are also known as validators, sequencers, guardians, or keepers.

Operators opt into the network to validate it. Based on relevant factors like stake amount and reputation, each network can decide whether to include an operator in the active set. The Symbiotic network has the flexibility to configure the operator set within its network contract. However, operators must first opt-in to the vault and the network using opt-in service contracts.

The Symbiotic protocol creates a registry of operators and empowers them to opt-in to networks to receive capital from re-stakers through vaults. A network can use flexible mechanics to keep its operator set state up-to-date. Symbiotic uses separate opt-in service contracts to connect operators, networks, and vaults.

An essential benefit of the previously mentioned vault system is that operators can receive a stake through vaults from different partners. This means they can acquire funds from diverse stakers without setting up an isolated infrastructure for each.

The Symbiotic team envisions a future where their protocol will contain curated credentials and verifiable data about operators. In this way, future networks can source security for their use cases to maximize capital efficiency.

Staking on Symbiotic

The first stage of staking on Symbiotic is for the operator to opt into the vault and the network. Next, stakers deposit their funds into the vault, with the network setting the vault's maximum stake amount. Stakers can withdraw their current stake for at least one epoch. Furthermore, the network can limit the maximum stake amount.

Staking Rewards

Operators must register and provide necessary details such as commission rates and other relevant conditions. This process ensures networks obtain the data required to perform accurate on-chain reward calculations. Networks obtain their staking information each epoch through Symbiotic's system.

Symbiotic divides rewards into operator and staker rewards, and the network distributes the operator rewards at its discretion.

Slashing

The network can slash the entire stake of the operator for various infractions. However, the actual slashed amount may be less than what was requested. The operator can only be slashed if they are opted into the vault and the network.

After confirming all opt-ins, the operator is considered to be working as a stake provider through the network vault. The operator's stake becomes subject to slashing immediately after the opt-in process to both the vault and the network. The operator can only be slashed after those requirements are confirmed.

Symbiotic deploys a slasher module that can influence the slashing or veto process. In slashing cases, the network calls the Slasher module, which then calls the vault and the Delegator module. This module checks the provided guarantees and the slashed amount to ensure it does not exceed the guaranteed amount of funds.

Resolvers on Symbiotic

Resolvers are contracts that retain the power to veto slashing incidents. They are also called slashing committees, dispute resolution frameworks, or proofs. A resolver can veto a slashing request in the vault's slasher module. It listens to the slashing requests and can veto or agree with them. When a resolver does not veto the request, that request is considered approved for slashing. The vault defines each slashing request's veto deadline.

Symbiotic maintains various methods to handle slashing incidents by introducing resolvers.

The networks propose terms that vaults accept to determine resolvers. Vaults can allow multiple resolvers to handle their collateral. For example, Resolver A could handle 50%. Resolver B could handle 40%, and 10% could be handled without a Resolver.

Requirements could also be established requiring a quorum of resolvers to veto or pass a slashing incident. This setup provides additional security guarantees to participants in the protocol's economy.

Symbiotic vs. Eigenlayer

Symbiotic is undoubtedly the new star of the re-staking show. However, EigenLayer still dominates the sector regarding total value locked (TVL).

While the two reside in the same sector and are somewhat similar, their philosophies and the types of re-staking assets deployed differ.

Similarities Between Symbiotic and EigenLayer

But first, let's compare the similarities: They both provide shared security through re-staking. Both seek to enhance the efficiency and security of distributed networks from Ethereum's ecosystem. Moreover, they do so by enabling operators to leverage their staked assets across multiple networks.

Both platforms offer shared security. Their re-staking mechanisms facilitate re-stakers' assets operators use across multiple networks to earn rewards.

On Symbiotic, re-stakers delegate their assets to operators, and operators opt-in to their network(s) of choice to provide node services. EigenLayer provides a similar process, but they label their distributed networks Actively Validated Services (AVSs).

Different Types of Re-staking Assets

Despite the similarities, these two protocols have some differences. EigenLayer does not treat operators and re-stakers as separate entities in their narrative as Symbiotic does.

Symbiotic supports nearly all ERC-20 tokens, while EigenLayer focuses on ETH-related staking. Furthermore, EigenLayer focuses on leveraging the trust within Ethereum's system to maintain a stable foundation. Symbiotic, on the other hand, welcomes a broader definition of re-staking.

Design Approaches

Symbiotic's design allows for extensive customization, supports a wide range of assets, and is more modular and decentralized. EigenLayer adheres to a more centralized approach, prioritizing the security of Ethereum's Proof of Stake (PoS) consensus mechanism.

Philosophically, Symbiotic leverages re-staking to attract many users to an open and flexible DeFi marketplace. EigenLayer leverages re-staking to build a more solid blockchain ecosystem with Ethereum as its foundation.

Symbiotic - Conclusion

Symbiotic is the new star on the re-staking scene. While it is functionally similar to EigenLayer, it differs in how it provides shared security through re-staking. Fortunately, there is plenty of room for both in the marketplace. Symbiotic brings its unique value propositions to the re-staking sector while catering to different portions from those of its predecessor.

About Luganodes

Luganodes is a world-class, Swiss-operated, non-custodial blockchain infrastructure provider that has rapidly gained recognition in the industry for offering institutional-grade services. It was born out of the Lugano Plan B Program, an initiative driven by Tether and the City of Lugano. Luganodes maintains an exceptional 99.9% uptime with round-the-clock monitoring by SRE experts. With support for 45+ PoS networks, it ranks among the top validators on Polygon, Polkadot, Sui, and Tron. Luganodes prioritizes security and compliance, holding the distinction of being one of the first staking providers to adhere to all SOC 2 Type II, GDPR, and ISO 27001 standards as well as offering Chainproof insurance to institutional clients.