Part 1 Recap

In our previous article, "Unpacking Symbiotic’s Approach to Shared Security", we explored the challenges of building decentralized applications (dApps) on Ethereum. While Ethereum boasts a robust Proof-of-Stake (PoS) network—with over 1 million active nodes and $110 billion in staked ETH—new protocols often struggle to establish their own security networks independently.Symbiotic emerges as a pioneering solution to this problem. It enables "restaking," a process where existing staked ETH is used to secure additional protocols.

This approach creates a more cost-effective and secure environment for new dApps. By connecting stakers, operators, and protocol builders through smart contracts, Symbiotic leverages Ethereum’s economic security in a modular and permissionless way. Unlike EigenLayer, which primarily supports ETH and its derivatives, Symbiotic offers greater flexibility by supporting various ERC-20 tokens and customizable security settings.

In this second part, we'll delve deeper into how Symbiotic integrates with Mellow Finance and examine the role of Liquid Restaking Tokens (LRTs) in enhancing liquidity and rewards across decentralized networks on the Ethereum network.

What are Liquid Restaking Tokens (LRTs)?

Liquid Restaking Tokens (LRTs) provide liquidity for users participating in restaking—a new primitive for PoS networks introduced by EigenLayer in 2023. Restaking allows existing staked ETH to secure additional networks beyond Ethereum's core layer, enabling participants to earn extra rewards. When users deposit their staked ETH or Liquid Staking Tokens (LSTs) into a restaking platform like Mellow, they receive LRTs in return.

These tokens represent ownership of the restaked assets and any rewards earned from securing other networks, such as EigenLayer’s Actively Validated Services (AVS) or Symbiotic’s Networks. Essentially, LRTs let participants restake their assets while maintaining liquidity, allowing them to engage in other decentralized finance (DeFi) applications.

LRTs are gaining popularity as restaking grows, with over $9.973 billion USD currently deposited in liquid restaking protocols on Ethereum. Designed to enhance capital efficiency, LRTs make it easier for stakers to secure multiple networks without sacrificing liquidity. Like LSTs, LRTs are typically redeemable 1:1 with the underlying asset—often Ethereum.

The Difference between LRTs vs. LSTs

Liquid Staking Tokens (LSTs)

Liquid Staking Tokens (LSTs) are tokens received when users stake their Ether (ETH) through liquid staking protocols like Lido. These tokens represent ownership of the staked ETH and any rewards generated from staking. By issuing LSTs, these protocols enable users to maintain liquidity of their staked assets, allowing them to participate in other decentralized finance (DeFi) activities while still earning staking rewards. This liquidity means that LSTs can be used as ETH equivalents in various money markets and decentralized exchanges. How They Work:

• Staking: Users stake their tokens through a liquid staking protocol like Lido.
• Token Issuance: Users receive LSTs (e.g., stETH) equivalent to the staked amount.
• Liquidity: LSTs can be used in DeFi activities while still accruing staking rewards.
• Redeemability: Can be redeemed 1:1 for the original staked asset plus accrued rewards through the liquid staking protocol.

Liquid Restaking Tokens (LRTs)

Liquid Restaking Tokens (LRTs) are tokens received when users deposit native ETH or ETH LSTs in liquid restaking DeFi protocols. LRTs allow users to gain access to the base ETH staking rewards plus additional rewards from AVS networks.

As described in part 1, AVS networks rent security from existing ETH validators on the Ethereum network. Those rent payments are distributed to restakers. LRTs differentiate themselves from LSTs by also earning these rewards while keeping their staked position liquid instead of locking up their tokens for an extended period of time.

This is attractive to users because they benefit from increased rewards on their ETH while also being able to use their restaked ETH position in other DeFi protocols. Essentially, LRTs are to restaking as Liquid Staking Tokens (LSTs) are to staking.

How They Work:

• Restaking: Users deposit their ETH tokens or LSTs into a liquid restaking platform like Mellow Finance, Swell, or Puffer Finance.
• Token Issuance: Receive LRTs (e.g., ifsETH, pufETH, and swETH) representing restaked assets across multiple networks.
• Liquidity: Just like LSTs above, LRTs can be used in DeFi activities while still accruing staking rewards, while also receiving additional restaking rewards.
• Redeemability: Can be redeemed 1:1 for the original staked asset plus accrued rewards through the liquid restaking protocol.

Both LSTs and LRTs offer the following shared benefits:

Liquidity: Access to staked capital for DeFi use. The LST can be used as ETH equivalent in various money markets and decentralized exchanges.

Accessibility: Enables (re)staking with less than the required amount for solo staking (e.g., you can deposit 0.01 ETH into LST/LRT protocols, which is significantly less than the 32 ETH required to run a validator at home).

Simplicity: Easier to manage with lower complexity than running your own validator.

Lower Risk: Established infrastructure service providers are running the validators ensuring consensus rules are followed and near-perfect uptime is maintained.
When deciding between Liquid Staking Tokens (LSTs) and Liquid Restaking Tokens (LRTs), it's important to consider factors like risk tolerance, technical expertise, slashing penalties, liquidity needs, and the security track record of your chosen operator. LSTs are generally suitable for users with lower risk tolerance seeking simplicity; they require a basic understanding of staking and DeFi, and the potential for slashing penalties is confined to a single network.

Conversely, LRTs appeal to those willing to accept higher risks for the potential of greater rewards, demanding deeper knowledge of multiple protocols and risk management due to compounded slashing risks from all associated networks. While both options offer liquidity, LRTs provide broader opportunities across multiple platforms. Partnering with trusted operators like InfStones can mitigate some risks associated with both LSTs and LRTs, ensuring a more secure staking experience. By carefully evaluating these risks, you can make an informed decision that aligns with your risk tolerance.

Introducing Mellow Protocol

Symbiotic has partnered with Mellow Finance to integrate Mellow’s flagship liquid restaking solution on Symbiotic. This partnership allows vault curators to create self-titled, customizable Liquid Restaking Tokens (LRTs).

Traditional LRTs such as pufETH or swETH force users into a single risk profile. In other words, users don’t have a choice with regards to their risk tolerance with these liquid restaking DeFi protocols - the Puffer Finance team and the Swell team decide what basket of AVS protocols to secure on behalf of the user.
Think of going to a large burger chain and only having one option on the menu - you have to buy the cheeseburger combo with no choice of toppings and a predetermined side of cola and fries. This approach, while simplifying LRTs, fails to address the diverse needs of users and tends to either provide too little or too much risk.

What if you wanted a salad instead of fries, orange soda instead of cola, or a burger with bacon but no cheese? What if you only wanted the burger without any sides? There is no flexibility for the end user. Some restakers can be okay with securing a smaller, less risky bundle of AVS protocols. Others are open to increased slashing penalties if it means they can earn the highest amount of rewards possible by securing as many AVS networks as possible. Flexibility is the goal of Mellow Finance liquid restaking protocol - giving users the choice of selecting between different risk-adjusted baskets.

Curators are given the responsibility of determining which basket of AVS protocols they want to secure on behalf of depositors to their vault. In other words, curators can decide which combination of menu items they would like to offer. Each curator’s vault has a unique LRT that provides different rewards than the other vaults.

Anyone can apply to become an LRT vault curator on Mellow and InfStones is proud to have been selected as an exclusive vault curator on the Mellow Finance liquid restaking platform.

InfStones Mellow Vault – ifsETH

By depositing to the InfStones Mellow vault, a user will generate a Liquid Restaking Token (LRT) called ifsETH. To deposit, simply visit our vault page, connect your wallet, and pick between either stETH, wstETH, wETH, or native ETH on the deposit tab. An equal amount of ifsETH will be minted and credited to your wallet. ifsETH will create restaking rewards for the user and can be redeemed for the original deposited collateral through the withdrawal tab in the Mellow Finance Vault below.

Source: Mellow Finance

Users will receive hourly loyalty points based on the amount of deposited collateral to the ifsETH vault. These points accrue as long as the deposit remains in the vault. Users will receive one Symbiotic and one Mellow point for each ETH LST restaked on the platform per hour. These points will be used to qualify for potential future airdrops from both Symbiotic and Mellow protocols. To clarify, if a user has one ETH LST deposited for one day, they will receive 24 Symbiotic points and 24 Mellow points.

Source: Mellow Finance

The majority of restakers prefer to delegate their stake to Vault Curators rather than manage their AVS nodes themselves. This underscores the importance of selecting a reliable curator who conducts thorough due diligence before blindly supporting any AVS offering rewards. While slashing is primarily aimed at deterring dishonest behavior, there is also the risk of accidental slashing due to vulnerabilities in emerging AVS smart contracts, which pose individual risks and potential systemic threats to Ethereum if a significant amount of ETH is impacted.

InfStones is committed to rigorous standards and has engaged with one of the largest number of AVS protocols among all restaking node operators. Our strict due diligence framework ensures the safety and profitability of our restakers, allowing us to support more AVS protocols than our competitors. Our commitment to due diligence and putting restakers first has helped us grow our AVS portfolio. In addition, our extensive experience enhances our ability to discern and mitigate potential malicious activities, offering superior security and rewards to those who choose to mint ifsETH by depositing to our Mellow Vault.

Conclusion

Symbiotic’s restaking model, paired with Mellow Finance, represents a breakthrough in how Ethereum’s existing validators can secure multiple protocols, unlocking new revenue streams while minimizing the complexity for both stakers and operators. This modular and permissionless framework not only enhances security for decentralized applications but also introduces Liquid Restaking Tokens (LRTs) as a flexible and capital-efficient way for stakers to maximize their rewards across networks.

By depositing your Liquid Staking Tokens (LSTs) into InfStones' Mellow Vault, you gain access to the next evolution of staking: minting ifsETH, a Liquid Restaking Token that provides additional rewards while maintaining liquidity for DeFi participation. With InfStones’ proven track record, rigorous due diligence, and industry-leading infrastructure, your assets are in safe hands as you explore new earning opportunities across Symbiotic’s Actively Validated Services (AVS).

Join us in shaping the future of decentralized security. Deposit your LSTs into our Mellow Vault today and begin earning both restaking rewards and loyalty points for future airdrops. Take the first step toward maximizing your staking potential with InfStones.

Article written by Rohit Sarkar, Business Operation Generalist at InfStones.