LayerZero Faces Backlash for Integration of wstETH on OFT Standard
LayerZero, an interoperability protocol, is receiving criticism for its handling of the integration of wstETH on its omnichain fungible token (OFT) standard. This technology allows the token to be moved across three new blockchains.
Interoperability Projects Call for Open Bridge Standards
Connext Network, ChainSafe, and Sygma, leading interoperability projects, have released a joint statement advocating for open bridge standards. They argue that OFTs promote vendor lock-ins and believe that token-issuing DAOs should have the final say on which version of their asset is canonical on a specific chain.
In response to LayerZero’s actions, the interoperability protocols expressed concerns about their deployment of a proprietary representation of wstETH to Avalanche, BNB Chain, and Scroll without support from the Lido DAO. They emphasize the need for standardization and healthy competition in the bridge stack to address the broken system of incentives around interoperability.
The Tension between LayerZero and LidoDAO
The tension arises from LayerZero’s ability to create tokens across permissionless systems and whether LidoDAO officially endorses it. Hasu, a crypto researcher and strategic advisor for LidoDAO, expressed surprise at LayerZero’s approach. They believe that LayerZero’s marketing tactics put pressure on the DAO to accept their proposal and create difficulties for Lido stakers and participating chains.
LayerZero Responds
In response to the backlash, LayerZero stated that their omnichain fungible-token standard is an open-source set of reference contracts used by over 75 projects. They highlight that developers always have the freedom to choose their validation layer and can include other bridges within the LayerZero framework. LayerZero clarifies that once the Lido DAO takes ownership of the contracts, the deployment of wstETH on AVAX and BNB becomes the sole responsibility of Lido, independent of LayerZero Labs.
Hot Take: The Importance of Standardization in Interoperability
The controversy surrounding LayerZero’s integration of wstETH highlights the need for open bridge standards and standardized approaches to interoperability. Without clear standards and healthy competition, interoperability projects risk creating vendor lock-ins and undermining the autonomy of token-issuing DAOs. Standardization ensures a level playing field and promotes seamless transfers between different chains, benefiting users and stakeholders across the crypto ecosystem.
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