Lido DAO raise concerns over LayerZero unapproved wstETH bridge on Avalanche, BN, Scroll

Lido DAO has distanced itself from LayerZero’s rollout of a wstETH bridge on Avalanche (AVAX), BNB, and Scroll.

In an Oct. 26 statement, the staking protocol said the bridge was “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 added.

On Oct. 25, LayerZero announced the successful launch of wstETH as an omnichain fungible token (OFT), allowing users to move their tokens between Ethereum, Avalanche, BNB, and Scroll blockchain networks.

“Expanding wstETH access to these chains will enable their respective DeFi ecosystems to flourish while supporting Lido’s desire for chain expansion,” LayerZero added.

Lido is the largest liquid staking provider, with the total value of staked Ethereum on the protocol lued at more than $15 billion, according to DeFillama data.

Lido community concern

LayerZero’s unilateral action has sparked apprehensions within the Lido community, with some interpreting it as an attempt to pressure the staking protocol into consenting, while others perceive it as an aggressive marketing strategy.

Community contributor Hart Lambur contends that the wstETH designation appears to be a coordinated marketing effort involving Avalanche, BNB, and LayerZero. He also highlights the risk of potential abuse with the mint-and-burn feature of the OFT, which could lead to unlimited wstETH minting.

Hasu, a strategy advisor, said:

“By unilaterally deploying a bridge and marketing it in an official-seeming way, it feels like you are trying to pressure the DAO into accepting your proposal to avoid liquidity fragmentation and bad UX for users. Driving users to it through marketing makes accepting an alternate bridge proposal more painful. These actions put the DAO, Lido stakers, and participating chains in a difficult position.”

Similarly, TheDZhon, another community member, voiced concerns about liquidity issues, inadequate security assessments, and risk management. He concluded that:

“The current proposal suggests the simultaneous endorsement of three networks. I have reservations about this approach and believe a more measured, pilot-based strategy might be more prudent, especially when considering each network’s unique attributes and needs.”

Furthermore, several community members express dissatisfaction with including Scroll in the networks supporting wstETH.

In response, LayerZero has removed Scroll from the networks supporting wstETH. Additionally, they emphasize active engagement with the Lido Core team, community members, and independent security teams regarding the bridge’s deployment.