How Does Mellow Restaking Work?

Permissionless vault smart contracts allow anyone to create curated LRT vaults with custom risk profiles, asset allocations, and AVS delegation strategies

The permissionless vault model democratizes LRT creation but introduces unbounded curator risk — hedge funds, node operators, and individuals can all deploy vaults with no quality requirements.

Vaults deposit into Symbiotic protocol (not EigenLayer) for restaking, securing AVSs with multi-asset collateral including wstETH and other ERC-20s

Aligning with Symbiotic over EigenLayer is a strategic bet. Symbiotic's permissionless multi-asset model is more flexible but less battle-tested, with AVS slashing conditions still being defined.

Each vault issues its own reward-bearing LRT token that can be used in DeFi while underlying assets are restaked on Symbiotic

Per-vault LRT tokens provide composability but create a proliferation problem — dozens of different Mellow LRT tokens fragment liquidity across DeFi.

Curators (Lido, P2P, Steakhouse, etc.) manage vault strategies including AVS selection, risk parameters, and asset allocation decisions

Curator quality varies widely. Blue-chip curators like Lido bring institutional risk management, while permissionless curators may make poor AVS delegation decisions that expose depositors to slashing.

Primary deposit asset is Lido's wstETH, with vaults restaking wstETH on Symbiotic to earn additional AVS rewards

wstETH dependency means Mellow inherits all Lido risks plus adds Symbiotic restaking and vault-specific risks on top. Three-layer risk stacking.

Vault share prices depend on accurate pricing of underlying restaked assets and any pending slashing/reward events

Vault share pricing becomes complex when underlying Symbiotic positions have pending slashing or reward distribution events, creating temporary pricing uncertainty.

Depositors earn Symbiotic points and Mellow points simultaneously, with potential for future token airdrops from both protocols

Dual-point accumulation drives mercenary capital. When caps on Symbiotic deposits are reached, new Mellow deposits don't get restaked but still dilute points among existing stakers.

Anyone can deploy a Mellow vault and market themselves as a curator, but there is no on-chain quality assurance or insurance mechanism. An inexperienced or malicious curator could delegate to high-risk AVSs, exposing depositors to slashing losses without adequate risk disclosure.

A Symbiotic-level security incident (contract exploit, AVS slashing cascade) would simultaneously impair all Mellow vaults restaking through Symbiotic. Per-vault LRT tokens would depeg across the entire Mellow ecosystem, with no circuit breaker to contain the damage.

Three-layer risk stacking: Lido staking risk → Symbiotic restaking risk → Mellow vault risk. A problem at any layer cascades upward. If Lido's stETH depegs, Symbiotic positions are impaired, and Mellow vault LRT tokens face compounding losses.

Each Mellow vault creates a unique LRT token, leading to dozens of low-liquidity LRT tokens across DeFi. This fragments composability — lending protocols must individually assess each vault's risk, and DEX liquidity pools for each LRT are thin.

When Symbiotic caps are reached, new deposits into Mellow vaults don't actually get restaked on Symbiotic but still dilute points among all depositors. Early depositors see their expected airdrop value eroded as capital continues flowing into capped vaults.