LayerZero is jointly "attacked" by peers, the real business battle behind cross-chain bridges

Author: Rhythm Little Worker, BlockBeats

According to BlockBeats, on October 26, the cross-chain interoperability protocol LayerZero announced an important message: the launch of the wrapped stETH (wstETH) feature for transferring liquid staking protocol Lido Finance on Ethereum, Avalanche, BNB Chain, and Scroll.

LayerZero's move quickly attracted industry attention. The reason behind this is that wstETH is integrated with LayerZero's Omnichain Fungible Token (OFT) standard. Omnichain Fungible Tokens (OFT) are a new cross-chain token standard introduced by LayerZero, which has now been adopted by Avalanche, PancakeSwap, and Trader Joe.

According to LayerZero, the OFT standard provides a more user-friendly and efficient cross-chain transfer solution, serving as a new scalable token standard (similar to ERC-20) that allows tokens to be externally composed in any type of dApp and any DeFi ecosystem. This means that tokens can now have a unified standard across all protocols and blockchains, enabling users to seamlessly swap across chains and use tokens on any dApp on any chain.

OFT has two versions, v1 and v2, with the main difference being that v2 supports non-EVM chains (such as Aptos). Additionally, there are OFNT721 and OFNT1155 that support Omnichain NFTs. Besides Avalanche, PancakeSwap, and Trader Joe, many other projects have adopted LayerZero's OFT standard, such as Ethereum layer2 Metis, multichain stablecoin MIM, CDP protocol TapiocaDAO, Wrapped Bitcoin protocol BTC.b, and multichain lending protocol Radiant.capital, among others.

Joint Letter of "Attack" from Peers

LayerZero's launch of the wrapped stETH (wstETH) feature for transferring Lido Finance on Ethereum, Avalanche, BNB Chain, and Scroll has faced joint resistance from nine cross-chain projects, including Connext, Across, Celer Network, Chain Safe, Sygma, LI.FI, Socket, Router Protocol, and the Cross-chain Interoperability Alliance.

In their joint letter, they expressed concern over LayerZero's recent actions: "LayerZero has deployed the proprietary standard for wstETH to Avalanche, BNB Chain, and Scroll without the support of Lido DAO. We believe this action is a direct consequence of the collapse of the incentive system surrounding interoperability, which can only be fixed through healthy competition by standardizing and bridging every layer of the stack."

"Vendor-locked proprietary standards are not standards; locking will create systemic risks, and token issuers should own their tokens. Open vendor-agnostic standards encourage healthy competition." In the joint letter, these projects collectively committed to establishing and improving these standards across the entire bridge stack and invited others to do the same.

Lido's official statement also issued a reminder: "A bridge has been deployed to bring wstETH to Avalanche, BNB, and Scroll at the urging of @LayerZero_Labs. Please note that this bridge is not standardized and has not been audited or approved by Lido DAO. If you choose to interact with the bridge, please exercise caution. Proposals supporting this bridge by Lido DAO must still go through the necessary checks, discussions, and governance processes."

The Community Has Long Suffered from LayerZero

Previously, LayerZero Labs completed a $135 million Series A funding round, with participation from a16z, FTX Ventures, Coinbase, and Binance, among others. Notably, one of the investors is PayPal Ventures, as LayerZero is the first Web3.0 project in their portfolio. Such a star project naturally attracts significant community attention, with the issuance or non-issuance of tokens being a major concern for the community, but LayerZero's stance on this has remained ambiguous.

Information about the ZRO token in LayerZero code snippets

The community has long suffered from LayerZero, which is reflected in this Lido incident. Under the "resistance" and "attack" from these cross-chain projects, community discussions have been stirred up.

Community member hal2001 stated: "I was almost unaware that LayerZero had fully deployed it into production, yet it did not receive official voting and approval from Lido. Now on stargate.exchange, if you bridge wstETH from Ethereum to Avax/BNB/Scroll, you are bridging to the LZ proprietary OFT standard. This looks completely official. There is no use of 'beta' or 'wrapped' or 'demo' language at all.

Ordinary users do not know they will not receive official Lido wstETH tokens. Furthermore, the security issues here have not been discussed at all. I believe the message oracle used by LayerZero is Google's oracle, which is completely centralized and not resistant to censorship. I personally think it is completely inappropriate to deploy it into production before Lido DAO votes or approves anything. My point is that LayerZero should remove it before the DAO vote occurs."

Cryp further pointed out: "LayerZero is really too centralized; in fact, there is almost nothing decentralized at the moment. For example, they are related to Google and Conflux. There is currently no information on how tokens will be distributed (but given the amount of funds raised, it can be assured that it will definitely be centralized).

There is no transparency about what the team is doing… no blog… their website does not show their ecosystem… Most importantly, the large amount of marketing and the ambiguity of utilizing airdrops, I find this ridiculous."

In contrast, LayerZero's official response seemed very formal: "Thank you for the active interaction and strong dialogue from the DAO. We encourage broader discussions in the DAO regarding wstETH on L2. We support the DAO in using standardized bridging on L2 and believe the best migration method is native bridging. We make decisions in collaboration with the core team and hope Lido DAO manages the BNB and Avalanche contracts. We have long collaborated with the Lido team, adjusting strategies based on feedback, and look forward to more technical discussions. We always support the growth of cross-chain LST."

As we all know, Stargate is the first protocol built on LayerZero. In this storm, Strategy Advisor Hasu stated that although LayerZero's actions are a domineering sales strategy attempting to force the DAO to accept its proposal, he also believes that LayerZero's solution might be the best solution and should be evaluated: "LayerZero's bridge might be the best, especially for other L1s that cannot achieve trustless bridging. But this is not the way to run this process; we should first conduct a public review of what has happened and then run it correctly."

In this cross-chain bridge business war, Chainlink Labs was also present. Michael from Chainlink Labs expressed his views, stating that cross-chain interoperability is an extremely sensitive issue regarding security, as past vulnerabilities and hacks have led to significant losses, and there should be an objective assessment standard for selecting cross-chain infrastructure rather than making hasty decisions.

At the same time, Michael also recommended Chainlink's solution to the community: "Chainlink's Cross-Chain Interoperability Protocol (CCIP) provides reliable standards for such assessments. It leverages the same proven decentralized oracle network (DON) infrastructure that has been a pillar of DeFi for years, using multiple DONs to secure cross-chain interactions, a unique independent risk management network for secondary validation and anomaly detection, and additional security features such as per-token and aggregated rate limits for cross-chain token transfers. CCIP operates under the highest levels of cross-chain security, providing deep defense solutions that address many of the security issues present in historical cross-chain protocols."

LayerZero's behavior has triggered responses from multiple parties. Although their technology and solutions are recognized by certain experts, how to transparently and fairly deploy and use these solutions remains a point of contention for the entire community.

As Michael pointed out, cross-chain interoperability is indeed a sensitive issue involving vast assets and user trust. Therefore, decisions should be made based on in-depth research and community consensus, rather than unilateral actions. After all, in this crypto circle, there are still many believers and followers of "complete decentralization," whose voices cannot be ignored.