{"id":183196,"date":"2023-10-29T14:30:55","date_gmt":"2023-10-29T09:00:55","guid":{"rendered":"https:\/\/dripp.zone\/news\/?p=183196"},"modified":"2023-10-29T14:30:55","modified_gmt":"2023-10-29T09:00:55","slug":"layerzero-hit-with-hefty-backlash-after-frontrunning-lido-governance-crypto-news","status":"publish","type":"post","link":"https:\/\/dripp.zone\/news\/layerzero-hit-with-hefty-backlash-after-frontrunning-lido-governance-crypto-news\/","title":{"rendered":"LayerZero Hit With Hefty Backlash After \u2018Frontrunning\u2019 Lido Governance – Crypto News"},"content":{"rendered":"
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A bridge too far it seems for LayerZero.<\/p>\n

After announcing it would integrate<\/a> a wrapped version of Lido\u2019s ever-popular staked Ethereum<\/a><\/span> token, the team behind the cross-chain protocol was hit with hefty backlash from the Lido community.<\/p>\n

The wrapped version of stETH is an ERC-20<\/span><\/a> version of the original blend stETH, making it easier to be reused in other applications. Lido Finance is a popular staking protocol.<\/p>\n

This is what LayerZero had integrated on Wednesday across BNB Chain<\/a><\/span>, the buzzy layer-2 network Scroll, and Avalanche<\/a><\/span>.<\/p>\n

But why the backlash exactly?<\/p>\n

Well, first and foremost, they didn\u2019t ask<\/a> first<\/a> apparently, circumventing the governance powers that oversee the smooth operation of Lido Finance.<\/p>\n

Often, when a decentralized finance (DeFi<\/a><\/span>) project wants to make a change to the project, it first seeks approval from members of its decentralized autonomous organization (DAO<\/span><\/a>) who vote for or against the change using their governance tokens. Lido’s governance token, for example, is LDO.<\/p>\n

\u201cHonestly shocked by LayerZero\u2019s move here,\u201d wrote<\/a> bridging project Socket\u2019s growth lead Lito Coen. \u201cCompletely frontrunning LidoDAO’s governance process and its network expansion team to deploy a wstETH version to Scroll, BNB chain and Avalanche.\u201d<\/p>\n

Simultaneous with the technical implementation, LayerZero did actually introduce<\/a> a governance proposal to approve the integration and transfer bridge ownership to LidoDAO.<\/p>\n

However, a LidoDAO representative told Decrypt<\/i> that the decentralized organization was not aware of the integration.<\/p>\n

The staking protocol tweeted<\/a> yesterday that the LayerZero \u201cbridge is not canonical and has not been audited or endorsed by the Lido DAO\u201d and advised \u201cextreme caution\u201d when using the bridge.<\/p>\n

Beyond \u201cfrontrunning\u201d governance, others in the Lido community pointed to security concerns around LayerZero\u2019s design.<\/p>\n

<\/p>\n

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Security concerns around LayerZero<\/h2>\n

LayerZero is a complicated beast, but understanding its architecture in broad strokes can also make clear some of the concerns raised by those in the Lido community.<\/p>\n

When the bridging protocol integrated wstETH, they basically made it available as an Omni-chain Fungible Token (OFT). This token standard is what allows tokens from different networks to interact with one another through LayerZero.<\/p>\n

In the process of transferring tokens, it creates a new token on the bridged side, whose supply is based on the amount of assets bridged through LayerZero.<\/p>\n

If a user were to send 1 wstETH token from Ethereum to Avalanche, for example, it\u2019s not technically the exact same token. Instead what is happening is LayerZero is custoding the original wstETH token in a smart contract<\/span><\/a> and then minting an Avalanche-compatible representation on the other side.<\/p>\n

When the user decides to move that representation back to Ethereum, the LayerZero protocol then destroys that representation before returning the original wstETH token.<\/p>\n

This, in a nutshell, is what is understood as a \u201cmint-and-burn\u201d bridge. This mechanism isn\u2019t without its risks, though.<\/p>\n

Hart Lambur, a LidoDAO community member and co-founder of UMA Protocol wrote<\/a>, \u201cThis means that if this messaging layer is ever corrupted, there is the possibility of an unlimited mint of wstETH.\u201d<\/p>\n

Additionally, the security of LayerZero\u2019s OFT-based tokens is dependent on LayerZero\u2019s native validators. That\u2019s not the case with other layer-2 networks like Arbitrum<\/a> and Optimism<\/a>, which already have wstETH added to the ecosystem via a native bridge.<\/p>\n

Independent DeFi analyst Arixon tweeted<\/a> that layer-2 blockchains are supposed to provide a \u201ctrustless bridge to layer-1; you lose this with OFT.\u201d<\/p>\n

DefiYaco, a business development lead at LidoDAO, agreed with Arixon\u2019s point in the LidoDAO discussion forum saying<\/a> that \u201cwstETH should be by default minted with the native bridge.\u201d<\/p>\n

He added, \u201cusing any other bridge provider without a strong case for it just adds more risk.\u201d<\/p>\n

LayerZero drops Scroll<\/h2>\n

To make amends, the bridging protocol appears to be backtracking on at least one integration.<\/p>\n

A LayerZero representative said in a reply on LidoDAO\u2019s governance proposal, \u201cwe recognize the preferences of the DAO regarding native bridges and L2s,’\u201d before removing LayerZero\u2019s wstETH token from Scroll Network.<\/p>\n

The representative added that they \u201cstrongly agree\u201d with the DAO regarding the preferences of both users and protocol developers for native bridges over those built by LayerZero.<\/p>\n

Edited by Liam Kelly<\/a>.<\/i><\/p>\n

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<\/p>\n

Stay on top of crypto news, get daily updates in your inbox.<\/h3>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A bridge too far it seems for LayerZero. After announcing it would integrate a wrapped version of Lido\u2019s ever-popular staked Ethereum token, the team behind the cross-chain protocol was hit with hefty backlash from the Lido community. The wrapped version of stETH is an ERC-20 version of the original blend stETH, making it easier to […]<\/p>\n","protected":false},"author":2,"featured_media":183197,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[230,225,221,227,226,228,229,60,223,224,222],"class_list":["post-183196","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-brave","tag-coinbase","tag-crypto","tag-decentralised","tag-decentralized","tag-decentralized-exchange","tag-erc-20","tag-featured","tag-meme-coin","tag-robinhood","tag-solana"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/183196","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=183196"}],"version-history":[{"count":2,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/183196\/revisions"}],"predecessor-version":[{"id":183199,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/183196\/revisions\/183199"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/183197"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=183196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=183196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=183196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}