Connext, Chainsafe, Sygma, LiFi, Socket, Hashi, Across, Celer, and Router jointly issued a statement of criticism against the new token.
A fresh bridged token introduced by LayerZero, a cross-chain protocol, is facing scrutiny from nine protocols within the Ethereum ecosystem. In a collective statement issued on October 27 by Connext, Chainsafe, Sygma, LiFi, Socket, Hashi, Across, Celer, and Router, the token’s standard is labeled as a “vendor-locked proprietary standard,” with allegations of constraining the autonomy of token creators.
In their collective statement, the protocols contended that LayerZero’s latest token is “a proprietary representation of wstETH to Avalanche, BNB Chain, and Scroll, independent of support from the Lido DAO (decentralized autonomous organization).” They argued that this new token relies on “provider-specific systems fundamentally controlled by the bridges implementing them,” potentially introducing “systemic risks that are challenging to quantify.”
To address this issue, the protocols endorsed the utilization of the xERC-20 token standard for bridging stETH, rather than adopting LayerZero’s novel token.
Lido Staked Ether (stETH) is a tradable derivative formed when a user deposits Ethereum (ETH) into the Lido protocol for staking. On October 25, LayerZero introduced a bridged variant of stETH known as Wrapped Staked Ether (wstETH) on BNB Chain, Avalanche, and Scroll. Prior to this launch, stETH was not accessible on these three networks.
As any protocol has the capability to create a bridged token, LayerZero was able to roll out wstETH without requiring approval from Lido’s governing body, the Lido DAO. Furthermore, both BNB Chain and LayerZero publicized the token’s launch on social media, and BNB Chain mentioned the Lido development team in its announcement. Subsequently, members of the Lido DAO raised concerns that these actions were intended to mislead users into thinking that the new token had the endorsement of the DAO.
On the same day LayerZero introduced wstETH, they proposed that the Lido DAO should ratify the new token as the official stETH version on the three new networks. LayerZero offered to transfer the token’s protocol control to the Lido DAO, relinquishing its administrative role. In response, some Lido DAO members expressed suspicions that this move aimed to create a situation where the DAO would feel compelled to pass the proposal when it might not have done so otherwise.
“There seems to have been a coordinated marketing campaign involving Avalanche, BNB, and LayerZero, including a series of tweets and polished videos, suggesting that the Lido DAO has already formally endorsed the OFT standard,” voiced Lido DAO member Hart Lambur on the forum. He questioned, “How is this possible when it’s still just a proposal?”
Several members also expressed concerns about potential security issues associated with the new token. Lido DAO member Scaloneta argued, “Layer Zero presents a highly centralized option that exposes Ethereum’s core protocol to an unprecedented catastrophe.” They contended that a security breach in the protocol’s verification layer “could result in the unlimited minting of wsteth.”
Cointelegraph reached out to the LayerZero team for comment via Telegram and email. In their response, they asserted that the wstETH token’s protocol is both secure and decentralized, stating:
“The omnichain fungible-token (OFT) standard is a thoroughly audited, open-source collection of reference contracts employed by over 75 projects to facilitate native, horizontally composable transfers between layer 1s and layer 2s. These contracts, which have integrated the OFT, have moved more than $3 billion in value.”
LayerZero added, “As part of the inherent design, developers retain the freedom to independently choose their validation layer and incorporate other bridges within the unchangeable LayerZero framework.”
Back in April, LayerZero successfully secured over $120 million to further enhance cross-chain capabilities within the Web3 ecosystem and formed a strategic partnership with Radix to introduce cross-chain functionality to the Radix Babylon network.
