Last October, LayerZero, a leading player in building interoperability infrastructure for blockchains, introduced a crypto bridge enabling users to transfer Lido’s popular staked ETH (stETH) token across various networks, including Binance’s BNB chain and the Avalanche blockchain. However, the move was not without controversy.
Despite LayerZero seeking Lido DAO’s endorsement for the bridge, they deployed it without waiting for the official go-ahead from the community that governs the protocol. While technically permissible, LayerZero’s marketing approach triggered concerns among some members of the Lido DAO community. Critics accused LayerZero of presenting itself as an official Lido partner without the DAO’s approval, leading to heated discussions within the community.
A consortium of crypto infrastructure providers expressed concern that LayerZero might be seizing the first-mover advantage to “lock in” users ahead of competitors. The unilateral deployment and the perceived attempt to pressure the DAO triggered discontent within the Lido DAO community.
The contentious issue revolves around the increasing importance of cross-chain interoperability as more blockchains emerge. Bridge protocols are at the center of a turf battle, representing crucial infrastructure for cross-chain interoperability. However, these services are not without challenges, prompting protocols to be cautious about their endorsements.
Lido’s stETH endorsement is considered a significant prize for interoperability providers due to Lido’s prominence as the largest decentralized finance (DeFi) protocol, boasting a total value locked (TVL) of $20.8 billion, according to DeFi Llama.
In a recent temperature-check poll by Lido DAO members, 81% of votes favored a rival bridge proposal from Axelar and Wormhole, two of LayerZero’s major competitors. Pending a formal vote, this proposal is poised to become Lido’s “official” provider for moving stETH tokens to the BNB Chain.
Axelar and Wormhole collaborated on a joint proposal, emphasizing the combined security of both networks to facilitate secure movement of staked ETH between chains. Sergey Gorbunov, CEO of Interop Labs, the initial developer of Axelar, highlighted the proposal’s focus on preventing “vendor lock-in,” where first-mover advantage secures a permanent position within a protocol’s infrastructure.
Notably, LayerZero’s competing proposal for the official endorsement received only 5% of the vote in the recent temperature-check poll, signaling a strong preference for the Axelar-Wormhole proposal among Lido DAO members.
The controversy surrounding the bridge endorsement reflects a broader principle in decentralized governance. Robinson Burkey, the Wormhole Foundation’s chief commercial officer, emphasized the importance of token holders being able to express their opinions on the protocol’s best interests, underscoring the fundamental principles of decentralization.
As the race for Lido’s stETH bridge endorsement continues, the community awaits a formal vote that will determine the future of interoperability for stETH tokens across different blockchain networks.
