Lido DAO Expresses Disapproval of LayerZero’s Actions by Backing Competitors Wormhole and Axelar for Crypto Bridge

Bryan Pellegrino

Last Updated on 1 month by cryptoevent

In October, LayerZero introduced a crypto bridge for Lido’s staked ETH (stETH) without obtaining permission from Lido DAO. This week, the community responded by endorsing competing solutions. While blockchain protocols often emphasize “permissionlessness,” the practicality of seeking approval becomes apparent in certain situations.

LayerZero, a leading firm in interoperability infrastructure for blockchains, established a crypto bridge enabling the transfer of Lido’s stETH token to various networks. Despite seeking Lido DAO’s endorsement, LayerZero deployed the bridge before receiving official approval. Although technically permissible, some members of the Lido DAO community perceived LayerZero’s marketing as an attempt to present itself as an official Lido partner without proper authorization.

Critics voiced concerns in the Lido DAO governance forum, accusing LayerZero of disrespecting the DAO and displaying a lack of seriousness by announcing initiatives without community approval. A letter from a consortium of crypto infrastructure providers suggested that LayerZero was seizing a first-mover advantage to “lock in” users ahead of competitors.

As the competition for cross-chain interoperability intensifies among bridge protocols, Lido’s stETH endorsement is highly coveted due to its status as the largest decentralized finance (DeFi) protocol with a total value locked of $20.8 billion.

In response to LayerZero’s actions, Lido DAO members expressed their dissatisfaction in a poll, with 81% favoring a rival bridge proposal from competitors Axelar and Wormhole. Pending a formal vote, Axelar and Wormhole could become Lido’s “official” providers for moving stETH tokens to BNB Chain.

Axelar and Wormhole collaborated on a proposal, emphasizing the combination of their networks’ security to enhance the overall security of transferring staked ETH between chains. The proposal aims to prevent “vendor lock-in,” where service providers use a first-mover advantage to solidify their position in a protocol’s infrastructure.

LayerZero’s competing proposal received only 5% of the votes in the temperature-check poll. The outcome reflects a broader concern about principles rather than just technological aspects. The Wormhole Foundation’s chief commercial officer emphasized the importance of token holders expressing their views in the best interest of the protocol, emphasizing the fundamental principles of decentralization. LayerZero Labs CEO Bryan Pellegrino did not respond to requests for comment.