The Lido community, a major liquid staking provider, is in the middle of a controversy. The discussion centers on the implementation of a bridge for stETH transfers to chains such as Avalanche, BNB Chain and Scroll, made by LayerZero Labs, without the support of Lido Governance.
This move has sparked strong disagreement in the Lido community, which accuses LayerZero, Avalanche, and BNB Chain of carrying out a misleading marketing strategy.
A bridge has been deployed to bring wstETH to Avalanche, BNB and Scroll, facilitated by @LayerZero_Labs.
Please note this bridge is not canonical and has not been audited or endorsed by the Lido DAO.
Please exercise extreme caution if you choose to interact with the bridge.
— Lido (@LidoFinance) October 26, 2023
They allege that these actors have implied that Lido supports the new bridge, even though Lido is still discussing a proposal related to this issue, scheduled for October 26.
Lido issued a statement clarifying that the bridge is not canonical, has not been audited, and is not endorsed. It warns users to exercise extreme caution if they choose to interact with the bridge.
LayerZero’s implementation is based on its Omnichain Fungible Token (OFT) protocol, which enables cross-chain transfers compatible with the Ethereum Virtual Machine (EVM).
Although LayerZero has not been exploited so far, some members of the Lido community express concerns about the security that this protocol introduces.
At Lido, Safety Comes First
As a full evaluation of the proposed solution has not been performed either by Lido DAO contributors or independent experts.
In addition to security concerns, there is concern that wstETH liquidity could be fragmented between LayerZero’s OFT representation and native implementations.
This could have significant implications on user experience and transaction efficiency.
In particular, when it comes to Scroll, a Layer 2 network, it already maintains a native bridge between Layer 1 and Layer 2, which threatens to further fragment liquidity.
Given these concerns, LayerZero has asked the Stargate Foundation to remove support for bridging wstETH to Scroll.
The ongoing controversy highlights the importance of transparency and informed decision-making in the crypto ecosystem, and underscores the need to carefully evaluate the implications of new implementations before widespread adoption.
The community is closely following developments, and the outcome of this discussion will likely have a significant impact on the future of crypto interoperability and staking.