LayerZero recently introduced a bridged token that has not sat well with nine distinct protocols within the Ethereum ecosystem. On October 27, a collective proclamation was issued by Connext, Chainsafe, Sygma, LiFi, Socket, Hashi, Across, Celer, and Router. They jointly label the token’s standard as a “vendor-locked proprietary standard,” alleging it curtails the liberty of token issuers.
The Controversial WstETH Token
The consortium stressed that LayerZero’s novel token serves as a “proprietary avatar of wstETH to Avalanche, BNB Chain, and Scroll.” This creation, as per them, is facilitated by “provider-centric systems […] essentially governed by the bridges executing them.” This, they argue, spawns “systemic risks for endeavors, making them hard to gauge.” They pitched for adopting the xERC-20 token standard for bridging stETH instead of employing LayerZero’s fresh token.
Lido Staked Ether (stETH) emerges as a liquid staking derivative, birthed when users lock ETH into the Lido protocol for staking purposes. LayerZero unveiled a bridged rendition of stETH, dubbed Wrapped Staked Ether (wstETH), on BNB Chain, Avalanche, and Scroll. This launch marked the debut of stETH on these trio networks.
Decentralized protocols have the leeway to forge bridged versions of tokens. Therefore, LayerZero launched wstETH without seeking a nod from Lido’s governance entity. Furthermore, BNB Chain and LayerZero broadcasted the token’s launch on X, with BNB Chain tagging the Lido development squad in its announcement. Subsequently, Lido DAO affiliates contended that such maneuvers were a ploy to hoodwink users into thinking the new token enjoyed DAO’s endorsement.
LayerZero’s Proposition to Lido DAO
On the token’s launch day, LayerZero mooted that the Lido DAO should recognize the new token as the official avatar of stETH on the new networks. It proffered to transfer the token’s protocol helm to the Lido DAO, forgoing LayerZero’s oversight. This overture, however, irked some Lido DAO members who perceived it as a gambit to engineer a fait accompli, pressuring the DAO to green-light the proposal against its will.
Allegations of a synchronized marketing blitz between Avalanche, BNB, and LayerZero surfaced, fueled by a flurry of Twitter posts and polished videos suggesting Lido DAO’s nod to the OFT standard. Lido DAO member Hart Lambur aired his bafflement on a forum over such claims when it was merely a proposition.
Moreover, some members sounded alarms over potential security threats the new token might spawn. “LayerZero is a highly centralized avenue that potentially lays Ethereum’s core protocol open to an unparalleled disaster,” warned Lido DAO member Scaloneta. They assert that a breach in the protocol’s verification layer could trigger an uncontrolled minting of wstETH.
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