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Welcome to the fifth edition of Onchain Lense, a newsletter focused on onchain analysis of key blockchain protocols and sectors.

Today, we are looking at the emerging sector of restaking protocols on Ethereum. Initially pioneered by EigenLayer, the competition intensified with the launch of Karak and Symbiotic.

Restaking is a new primitive in decentralised finance (DeFi) that EigenLayer originally introduced. It is built on Ethereum and allows users to restake their staked ETH and secure various blockchain-based platforms, known as Actively Validated Services (AVS). This innovative approach has attracted billions of dollars in customer deposits, making EigenLayer the second biggest DeFi protocol by total valued locked (TVL). It has accumulated a TVL of $18 billion in the last year and is only behind Lido with a TVL of $33 billion.

EigenLayer uses a consolidated approach that leverages Ethereum-staked security to support various dApps. It primarily focuses on a single asset, ETH, and its derivatives and will support multiple assets in the future. It manages the delegation of staked ETH to node operators, who then validate various AVSes.  It is a dynamic marketplace for decentralised trust, allowing developers to use the pooled ETH security to launch new protocols. A slashing and governance mechanism is in place, and the risks are shared among pool depositors. EigenLayer has raised a $100 million series B round from a16z.

Karak is another restaking protocol that was launched earlier this year. It also offers a marketplace for developers to enhance app security using multiple assets like Ethereum, Bitcoin, Stablecoins, etc. The applications that would be built using this restaked asset are named Distributed Secure Services (DSS) by Karak as opposed to AVS by EigenLayer. Karak makes it easy for developers to access and build on any trust network, similar to how AWS made it easy and affordable to build on the cloud.

The Karak protocol has quickly secured a TVL of $1.01 billion. Its token breakdown also indicates the diversity of assets being restaked with the protocol. Karak raised $48 million from Coinbase Ventures, Pantera Capital, and Lightspeed Ventures.

Symbiotic, another restaking protocol, just launched a few days ago, and its deposit caps of $200 million are nearly reached within a day. It raised $5.8 million in seed funding from venture giants Paradigm and Cyber Fund. Notably, the Cyber Fund was established by Lido's co-founder, and it is speculated that investing in Symbiotic is a fight against a potential threat to Lido’s dominance in the DeFi ecosystem.

Symbiotic distinguishes itself with a permissionless and modular design, offering more flexibility and control. It supports any ERC-20 token, making it versatile compared to EigenLayer. Networks using Symbiotic can choose their collateral assets, node operators, rewards, and slashing mechanisms. Its permissionless design allows any DeFi application to integrate without requiring approval. The protocol has so far accumulated a TVL of $242 million.

The emerging sector of restaking protocol is still in its nascent stage but has started to see strong competition. Each protocol offers unique features and approaches, such as EigenLayer’s consolidated Ethereum-staked security model, Karak’s omnichain restaking capabilities, and Symbiotic’s permissionless and modular design. As the battle for restaking supremacy intensifies, the future of this sector will depend on user adoption, network effects, and the ability to adapt to changing market conditions.

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