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Tuesday, June 11, 2024
HomeCryptoLido introduces "restaking vaults" in partnership with Symbiotic, Mellow Finance

Lido introduces “restaking vaults” in partnership with Symbiotic, Mellow Finance

Lido, the stalwart Ethereum staking giant, has recently struggled with the “restaking” craze, a new trend that threatens to erode this staking platform’s dominance in the DeFi sector.

Lido is under the control of the Lido DAO, an organization of LDO token holders who vote on protocol strategy and major upgrades.

A new initiative from the DAO will usher in a partnership between Lido and Mellow Finance, a platform that allows users to generate profits by depositing funds into a restaking “vault” and the Symbiotic restaking protocol No permission required. Under the new initiative, traders will have access to staking tools that help bring Lido stETH back to the center stage.

adcv, anonymous co-founder of Steakhouse Financial and Lido DAO financial process said in an interview:

“Lido’s strategy is to demonstrate to the market that using stETH as the staking asset of choice is actually a better way to staking.”

Lido sits at the heart of Ethereum’s DeFi ecosystem, allowing users to stake cryptocurrency — attaching it to the chain to help protect it and in exchange for rewards. Lido’s big innovation when it launched a few years ago was to provide depositors with a “liquidity staking token” called Lido staked ETH (stETH) that users can trade even if their deposits are physically locked Technical on Ethereum.

Lido currently ranks as the largest decentralized finance protocol on Ethereum, with $33 billion worth of deposits, according to DefiLlama. Meanwhile, StETH has grown to become one of the most popular assets in DeFi.

But recently, Lido’s dominance declined as users moved assets to EigenLayer, a newer service that allows users to “restake” assets like ETH and stETH to help secure other networks and in exchange for rewards. additional.

Lido recently introduced The Lido Alliance — a group of partners and protocols committed to championing stETH’s role in Ethereum DeFi. Lido’s head of strategy, Hasu, also outlined reGOOSEa multi-pronged strategy to help Lido address the risks posed by staking.

This new initiative launches four stETH-focused staking products on Mellow Finance – the first example of reGOOSE and The Lido Alliance in action. It’s also the first hint at how Symbiotic, a startup backed by Lido’s co-founders and biggest investors, could play a key role in Lido’s future plans.

Lido supports Mellow Finance

Lido DAO is officially endorsing Mellow Finance, a DeFi protocol that offers liquidity staking “vaults.” Users can deposit assets like stETH into vaults, and “curators” (like cryptocurrency underwriters) will deploy those assets on various actively validated services (AVS*) ( protocols secured by staking assets), to help users earn more from their funds.

Mellow’s new platform is an answer to liquidity restaking protocols such as Renzo and Ether.Fi, which retake user deposits into EigenLayer (and soon other restaking protocols) to help investors earn more profit.

Like everything else in DeFi, liquidity staking exists as a way for people to get the most “economic efficiency” (profit) from their digital assets. Protocol users earn money from their deposits called “liquidity restaking tokens” (LRT), which can be traded, lent, and borrowed on other protocols in exchange for additional rewards.

In liquidity staking, “you have players like Renzo and EtherFi doing this from top to bottom, but Mellow brings a permissionless quality, which we find quite attractive,” adcv said.

While traditional liquidity staking protocols take a one-size-fits-all approach to choosing where to deploy user capital, Mellow allows anyone to set up a vault and distribute deposits according to risk and their own investment thesis.

Lido DAO said in a shared statement:

“Vaults are an important step in realizing the reGOOSE strategy, providing stakers with the power to navigate the diverse terrain of the risk/reward landscape.”

Mellow curators Steakhouse, P2P Validator, Re7 Labs and MEV Capital are all introducing vaults that accept stETH in tandem with Tuesday’s announcement.

For now, the rewards users receive for depositing into Mellow’s vault will be in the form of loosely defined “points” that could eventually be tied to future token airdrops. There are currently no AVS rewarding profits on Symbiotic or any other staking protocol.

Currently, the vaults are seen as the best evidence for why stETH is a useful asset for staking. Adcv emphasized:

“stETH is the best possible asset to use as collateral staking. It has all the network effects. It has all the liquidity and the ability to bypass native staking consideration […] It always earns original staking profits. Personally, I expect and hope other LRTs including Renzo, EtherFi or whoever realize that and in turn adopt stETH as their primary collateral,” acdv said.

Why Symbiotic?

It’s no coincidence that Mellow Finance is building a restaking vault using Symbiotic, an upcoming EigenLayer competitor.

Last month, a report revealed for the first time that Symbiotic was being quietly funded by Paradigm, Lido’s biggest backer, and cyber•fund, a joint venture led by Lido’s co-founders. The report also features internal company documents detailing for the first time how the yet-to-be-launched Symbiotic protocol will work.

On a purely technical level, it makes sense for Mellow to choose Symbiotic to build its permissionless vault: EigenLayer only accepts certain cryptocurrencies (namely ETH, EIGEN, and some other certain ETH derivatives), while Symbiotic accepts any based on Ethereum’s ERC-20 Token Standard.

In addition, there is another reason. Aside from investors or Symbiotic’s technical details, why might Lido DAO choose to partner with another staking platform other than EigenLayer? While EigenLayer accepts Lido stETH deposits meaning it is possible to use Lido and EigenLayer at the same time, they have placed a limit on the amount of stETH one can deposit.

As a result, EigenLayer’s growth has come at the expense of Lido as some users withdrew their stakes from Lido to transfer more assets to the newer staking platform.

“EigenLayer has effectively limited the amount of steETH that can go into their middleware on an arbitrary basis – in my view, quite arbitrarily,” Adcv said. I expect that this type of restriction will become increasingly rare in the future, because from the perspective of a staking service provider, you don’t want to cause any disruption to the ability to mobilize my capital.”

EigenLayer “things have been easy so far, but with more competition, the choice will become more difficult.”

*Active Authentication Service (AVS) – is a general concept for any service that operates based on an authentication request model.

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According to Coindesk

Mark Tyson
Mark Tyson
Freelance News Writer. Always interested in the way in which technology can change people's lives, and that is why I also advise individuals and companies when it comes to adopting all the advances in Apple devices and services.
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