Spindl, a Web3 startup founded by Silicon Valley veteran Antonio Garcia Martinez, has launched what it bills as the first truly on-chain ad network.

Like Web2's off-chain ad networks, this one connects advertisers, publishers, and providers of so-called attribution services that track where customers come from. In this case, the "publishers" are providers of crypto wallets that increasingly resemble social apps, with news feeds and "discover" tabs.

To be clear, the serving of ad content would occur off-chain as usual. But the advertisers would transfer funds for a campaign to a smart contract, which would release the money to the publisher only once the attribution provider verifies, by reviewing on-chain data, that an ad led to a sale. Conducting ad business this way brings advantages to all parties, according to participants.

"It's more transparent. It's fair. It's natively on-chain. It's, to be blunt, better for privacy," said Garcia Martinez, CEO of Spindl, whose core service is attribution. "We're not using weird, sketchy Web2 data," such as consumers' browsing history or their personal information, to target campaigns – just on-chain transactions, which are already public.

"We're not doxxing anybody," he said.

This article is part of CoinDesk's Web3 Marketing Week series, presented by Cookie3.

What's in it for advertisers

Unlike the "cost per mile" model of web advertising, in which advertisers pay a price based on the number of times consumers see ads regardless of whether they buy anything, this network's advertisers will pay only for on-chain conversions, Garcia Martinez said. Such events could include a user minting an NFT or swapping tokens through a decentralized exchange or depositing crypto into a DeFi liquidity pool.

In turn, the wealth of public data about crypto wallet activity makes for more sophisticated prospecting.

"A lot of our clients are looking for Web3-native ways to target new users," said A.J. Banon, general partner at Serotonin, a marketing agency that will buy ads on the network on behalf of crypto projects. He gave a hypothetical example of a project that wants to sell fashion-related NFTs for 0.05 ether {{ETH}} a pop.

"A traditional way of targeting someone might be to find out who follows Louis Vuitton on Twitter, and also follows a Web3 account," Banon said. That's crude compared to what you can do with on-chain data: search for users who have minted an NFT in a given time period (the last 24 hours, say); whittle the results down to those who paid something close to the project's target price; of the remaining 50,000 users, whittle it down further to 12,000 who have fashion NFTs in their wallets.

"Now, we have a really targetable audience that we have a high degree of confidence is going to convert," Banon.

What's in its for publishers

Referring to wallets as publishers might sound odd. But Garcia Martinez, who worked in the early 2010s as Facebook's first ad targeting manager, sees these services quickly evolving into portals to Web3, as Yahoo was for Web1 in the late-1990s. Like Yahoo, they can make money on ads, to supplement their transaction fee revenues.

The wallet business has become "super-competitive," so providers are "super-motivated to become more than a transaction app," Garcia Martinez said. "I think you're gonna start seeing a lot of social experiences and transactional wallets kind of come together."

On this side of this market, the new network's flagship participants are Collab.land and Daylight, which will sell ad inventory on behalf of crypto wallet services, Garcia Martinez said. (He said he couldn't identify the wallet providers themselves.)

Traditional publishers, such as crypto news sites, can also use the network, he said; Decrypt and RugRadio have done test campaigns.

Collab.land is best known for its integrations that allow users to sign in with their wallets to crypto communities' token-gated websites, Discord servers, Telegram channels and the like; on its website it boasts more than 10 million wallet connections. Daylight brings another 5 million active wallet addresses across its partners, Garcia Martinez said.

What's different, what's next

Other ad networks claim to be native to Web3, but "there's nothing Web3 about them," Garcia Martinez said. "They just have some crypto publishers they resell inventory for. There's nothing actually going on on-chain."

Spindl has no plans to issue a token for the network, though Garcia Martinez wouldn't rule it out. For now, payment can be made in stablecoins like USDC, or other existing tokens.

Neither is the network tied to any one blockchain. The choice of chain depends on where the advertiser wants to track events or payouts, Garcia Martinez said. Most clients are using Ethereum Virtual Machine-compatible chains, or their own chains, he said.

At the moment, Spindl is the network's sole attribution provider, verifying that an ad impression led to a conversion, thus acting as the smart contract's oracle, for a cut of the revenue. In the coming months, Garcia Martinez said, he aims to open the network to rivals.

"It's a real mentality shift for us to go from a world where we're ruthlessly competing … and suddenly I have to put on my little protocol hat and say, 'welcome' to a lot of these companies," he said. "But that's the way it is."

The co-founders of dominant liquid staking protocol Lido, along with the venture capital firm Paradigm, are secretly helping to fund a new company, Symbiotic, that would compete in the fast-growing arena of "restaking," according to people briefed on the matter.

Internal company documents obtained by CoinDesk lay out diagrams of how the project would work.

The emergence of a restaking player with deep-pocketed backers could portend a face-off that might redefine the DeFi landscape.

The co-founders of Lido, the biggest liquid staking protocol on Ethereum, are secretly funding a competitor to EigenLayer, the buzzy "restaking" service that has emerged rapidly this year to become a powerful force in decentralized finance.

According to several people with knowledge of the matter, the project is called Symbiotic and has drawn backing from not only the Lido co-founders, Konstantin Lomashuk and Vasiliy Shapovalov, through their venture firm Cyber Fund, but also Paradigm, the crypto venture capital firm that is one of Lido's lead investors.

CoinDesk also obtained internal Symbiotic documents that describe the project, which allows users to "restake" using Lido's staked ether (stETH) token and other popular assets that are not natively compatible with EigenLayer.

Developed by the team that previously built a staking service called Stakemind, Symbiotic will be "a permissionless restaking protocol that provides flexible mechanisms for decentralized networks to coordinate node operators and providers of economic security," according to the internal company documents reviewed by CoinDesk.

The documents were marked as "preliminary" and "not for distribution," but several teams working in the nascent restaking ecosystem – including actively validated services (AVSs) and liquid restaking services building on EigenLayer – say they have already been in discussions to integrate with the protocol.

Representatives of Paradigm, Symbiotic and Cyber Fund declined to comment on the deal.

New kid in town

Lido was the breakout sensation in DeFi just a couple of years ago when it developed a protocol that allowed users to stake cryptocurrency on Ethereum – essentially locking it in – but still get a token "stETH" that they could use to trade in the meantime. The project proved so popular that it now ranks as the largest decentralized finance protocol on Ethereum, with $27 billion worth of deposits, attaining such a dominant position that some players worried about the operational risks of its outsize influence.

But lately, Lido has been grappling with a falling market share as users shifted assets over to EigenLayer, a newer service that allows users to restake Ethereum's native ETH token to help secure other networks.

EigenLayer is one of the biggest crypto success stories in recent memory, drawing in some $16 billion worth of deposits since it opened up to investors last year.

Similar to EigenLayer, Symbiotic will offer a way for decentralized applications, called actively validated services, or "AVSs," to collectively secure one another. Users will be able to restake assets that they've deposited with other crypto protocols to help secure these AVSs – be they rollups, interoperability infrastructure, or oracles – in exchange for rewards.

The key difference between Symbiotic and EigenLayer is that users will be able to directly deposit any asset based on Ethereum's ERC-20 token standard into Symbiotic – meaning the protocol will be directly compatible with Lido's staked ETH (stETH) token, as well as thousands of other assets that use the ubiquitous ERC-20 standard. EigenLayer, meanwhile, only accepts ETH tokens.

In what might be a twist of irony, when crypto venture giant Paradigm approached Sreeram Kannan, co-founder of EigenLayer, to invest in his project, he turned their money down in favor of rival venture capital firm Andreessen Horowitz, according to several people briefed on the matter. Paradigm told Kannan that they would invest in a competitor to his project instead.

Kannan didn't immediately reply to a request for comment.

Uber, Lyft and a potentially huge market

The emergence of a potentially formidable EigenLayer competitor underscores how companies and investors have become eager to capitalize on restaking as the trend has taken over the industry conversation. Blockworks reported in April that Karak, another restaking upstart, had secured funding from the major U.S. crypto exchange Coinbase, among others.

"The space is big enough for more than one player to be big," said one restaking infrastructure operator who plans to integrate with Symbiotic but spoke on the condition of anonymity since the project remains in stealth. "Uber and Lyft, I think, are perfect examples. It's the same thing here. Restaking is going to be massive."

The involvement of Cyber Fund, led by Lido's co-founders, and Paradigm, its main venture backer, could put Symbiotic in a strong position to challenge EigenLayer. It's also further evidence that people close to Lido perceive EigenLayer's approach to restaking as a potential threat to its own dominance.

Although Lido remains the largest decentralized finance protocol on Ethereum by a wide margin, the project's strategy around restaking will play a major role in whether (and how) it manages to maintain its lead in the general staking realm.

Liquid restaking startups that deposit user funds into EigenLayer have eaten into the market for Lido's stETH token. The two largest liquid restaking protocols, Ether.Fi and Renzo saw $625 million in net inflows over the past 30 days. Lido, meanwhile, saw $75 million in net outflows over that same period.

Read more: What Are Restaking, Liquid Restaking and EigenLayer?

This week, members of Lido DAO (decentralized autonomous organization), the governance body that controls the Lido protocol, publicly proposed the "Lido Alliance," a guiding framework for thinking about restaking that would place stETH squarely at the trend's center.

"Lido DAO will identify and recognize projects that share the same values and mission and have a way to positively contribute to the stETH ecosystem," the proposal stated. "Growing an Ethereum-aligned ecosystem around stETH helps decentralize the network.”

While Lido is not directly tied to Symbiotic, the restaking startup funded by Lido's co-founders lines up well with the Lido Alliance framework.

Whereas EigenLayer only accepts deposits of ether (ETH) tokens, Symbiotic will not accept ETH deposits at all. Instead, it will allow users to directly deposit any ERC-20 token, like Lido's staked ETH (stETH).

"Collateral in Symbiotic can encompass ERC-20 tokens, withdrawal credentials of Ethereum validators, or other onchain assets such as LP positions, without limitations regarding which blockchains the positions are held on," the project said in its its documents.

Discussions with restaking firms

Symbiotic's approach to collateral ties into its broader ambition to become a "permissionless" protocol, meaning apps that build on the platform should have substantial leeway over how they augment it to serve their use case.

"I’m excited about what they’re working on. It seems interesting and innovative," Mike Silgadze, co-founder of Ether.Fi, one of the largest restaking protocols, said in a Telegram message. "It seems like they’re very focused on building something fully permissionless and decentralized."

Renzo, another large liquid restaking service, is already in discussions to integrate with Symbiotic after it launches, according to a source close to both teams.

Symbiotic has not released any information publicly and would not confirm when it plans to launch, but four sources consulted for this article said they expect the platform to be released in some form by the end of this year.

Margaux Nijkerk contributed reporting.