LayerZero’s new bridge token, which is an inter-chain protocol, has received criticism from nine protocols operating in the Ethereum ecosystem. Connext, Chainsafe, Sygma, LiFi, Socket, Hashi, Across, Celer, and Router released a joint announcement on October 27th regarding this matter. According to this announcement, the token standard was claimed to be a vendor-locked proprietary standard, restricting the freedom of individuals and institutions issuing the token.
How Did the Controversy Begin?
Lido Staked Ethereum (stETH) is a liquid staking derivative that appears in user wallets when a user deposits Ethereum into the Lido protocol for staking. On October 25th, the LayerZero team launched a version of stETH called Wrapped Staked Ethereum (wstETH) on BNB Chain, Avalanche, and Scroll. Before this launch, stETH was not available in the mentioned three ecosystems.
Since any protocol can create a bridged version of a token, the LayerZero team included the wstETH token in the system without the need for approval from Lido DAO, the governing body of Lido. Additionally, both BNB Chain and LayerZero announced the token’s launch on X.
In the BNB Chain announcement, the Lido development team was tagged by the team. After this sharing, Lido DAO members claimed that these actions were an attempt to convince users that the new token received support from the DAO.
Lido DAO Members’ Noteworthy Claim
On the day when the LayerZero team took the step of wstETH, they proposed that Lido DAO approve the new token as the official version of stETH on the three networks. They suggested transferring control of the token protocol to Lido DAO and relinquishing management from LayerZero. In response to this move, some Lido DAO members complained that this maneuver aimed to create a fait accompli by exerting pressure for the proposal to pass in the DAO. Hart Lambur, a member of Lido DAO, shared the following words on the forum:
“There seems to be a coordinated marketing effort with a series of Twitter posts and fancy videos implying that Lido DAO has officially accepted the OFT standard between Avalanche, BNB, and LayerZero. How is this possible when it’s just a proposal?”
In response to this view, some members argued that the new token could create security issues, and Scaloneta, a member of Lido DAO, attributed a super-centralized option to LayerZero that exposed the Ethereum ecosystem to an unprecedented disaster. According to this claim, a hack in the protocol’s verification layer would result in unlimited issuance of wstETH.
