LayerZero's New Bridged Token Receives Criticism from Nine Ethereum Ecosystem Protocols
Summary:
LayerZero's recently launched bridged token, built on its cross-chain protocol, raises concerns among nine protocols in the Ethereum ecosystem, such as Connext, Chainsafe, Sygma, LiFi, Socket, Hashi, Across, Celer, and Router. These protocols contend that the new token limits issuer freedom and creates potential systemic risks. The security of LayerZero's token is also under scrutiny, with claims that it might expose Ethereum's central protocol to substantial risks. In response, LidoDAO members have voiced their apprehension and objections, despite the company's silence on the matter. Earlier this year, LayerZero collected over $120 million to build more cross-chain functionality into the Web3 ecosystem and cooperated with Radix to integrate these functions to the Radix Babylon network.
LayerZero's recent breakthrough token from its cross-chain protocol is facing scrutiny from nine protocols within the Ethereum ecosystem. Collaboration among Connext, Chainsafe, Sygma, LiFi, Socket, Hashi, Across, Celer, and Router on October 27 has led to a declaration, labeling the token’s standard “a vendor-locked proprietary standard.” They suggest this standard curbs the liberty of token issuers.
LayerZero's new token is described as “a proprietary representation of wstETH to Avalanche, BNB Chain, and Scroll, with no backing from the LidoDAO [decentralized autonomous organization]” according to the combined declaration from the protocols. They state that the token is formed by “provider-specific systems [...] essentially owned by the bridges that execute them,” thereby cultivating “systemic risks that can be challenging to measure.” Instead of LayerZero's new token, the protocols proposed utilizing the xERC-20 token standard for bridging stETH.
When Ether (ETH) is deposited into the Lido protocol for staking, it produces a liquid staking derivative known as Lido Staked Ether (stETH). LayerZero introduced a bridged version of stETH called "Wrapped Staked Ether (wstETH)" on sites like BNB Chain, Avalanche, and Scroll as of October 25. Before this introduction, these three platforms did not offer stETH. Having the power to form a bridged version of a token gave LayerZero the possibility of launching wstETH without requiring consent from Lido’s governing body, LidoDAO. BNB Chain and LayerZero also reported the token’s introduction on X (used to be Twitter), with the former even tagging the Lido development team in their published announcement. In response, LidoDAO members expressed their belief that these maneuvers were aimed at deceiving users into presuming the novel token had LidoDAO's support.
On wstETH's launch date by LayerZero, a proposition was made to LidoDAO to accept the novel token as the stETH's formal version on the three new platforms. To convince the DAO, LayerZero offered to give up control of the token’s protocol to LidoDAO, giving up managing powers. Several LidoDAO members claimed this was an attempt to exert pressure on the DAO to endorse the proposal, which they wouldn't have otherwise.
A LidoDAO member, Hart Lambur, communicated on the forum, “There appears to have been a synchronization in marketing between Avalanche, BNB, and LayerZero with a string of tweets implying that LidoDAO has officially approved the OFT standard. How is this feasible when it's still under consideration?” Other members raised concerns about the security of the new token, stating that “LayerZero is extremely centralized, posing a massive risk to Ethereum’s central protocol,” highlighting potential hacking risks in the verification layer.
As of publication time, LayerZero has not responded to the concerns raised, despite efforts to contact them via Telegram and email. In an earlier venture, LayerZero was successful in raising over $120 million in April to further infuse cross-chain functionality into the Web3 ecosystem and collaborated with Radix to bring similar functionality to the Radix Babylon network.
Published At
10/27/2023 7:45:00 PM
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