Nine protocols express concerns over LayerZero’s ‘wstETH’ token, labeling it as ‘proprietary.’

A newly introduced bridged token from the cross-chain protocol LayerZero is facing backlash from nine protocols within the Ethereum ecosystem. On October 27, a collective statement from Connext, Chainsafe, Sygma, LiFi, Socket, Hashi, Across, Celer, and Router described the token’s standard as “a vendor-locked proprietary standard,” asserting that it restricts the autonomy of token issuers.

Today, we’re announcing a unified call for
Open Bridge Standards
alongside @AcrossProtocol @CelerNetwork @ChainSafeth @buildwithsygma @lifiprotocol @SocketDotTech @routerprotocol and @hashialliance pic.twitter.com/D4CLw2lBD1

— Connext (@ConnextNetwork) October 27, 2023

The protocols stated in their joint declaration that LayerZero’s new token is “a proprietary representation of wstETH to Avalanche, BNB Chain, and Scroll without endorsement from the Lido DAO [decentralized autonomous organization],” which is generated by “provider-specific systems […] fundamentally owned by the bridges that implement them.” Consequently, it introduces “systemic risks for projects that can be challenging to quantify,” they noted. The protocols recommended utilizing the xERC-20 token standard for bridging stETH instead of adopting LayerZero’s new token.

Lido Staked Ether (stETH) is a liquid staking derivative created when a user deposits Ether (ETH) into the Lido protocol for staking purposes. On October 25, LayerZero unveiled a bridged variant of stETH, termed “Wrapped Staked Ether (wstETH)” on BNB Chain, Avalanche, and Scroll. Before this launch, stETH was unavailable on these three networks.

Since any protocol can generate a bridged version of a token, LayerZero was able to introduce wstETH without requiring approval from Lido’s governing body, LidoDAO. Furthermore, both BNB Chain and LayerZero announced the token’s launch on X (formerly Twitter), with BNB Chain tagging the Lido development team in its announcement. Members of LidoDAO later asserted that these actions were an attempt to mislead users into thinking that the new token had the DAO’s backing.

On the same day that LayerZero launched wstETH, they suggested that LidoDAO should endorse the new token as the official version of stETH on the three new networks. They proposed to transfer control of the token’s protocol to LidoDAO, relinquishing LayerZero’s management of it. In response, some LidoDAO members expressed concerns that this move was designed to create a fait accompli to pressure the DAO into approving the proposal when they otherwise might not have.

Related: LayerZero partners with Immunefi to launch $15M bug bounty

“There appears to have been a coordinated marketing effort between Avalanche, BNB, and LayerZero with a series of Twitter posts and polished videos suggesting that LidoDAO has already officially accepted the OFT standard,” LidoDAO member Hart Lambur posted to the forum, adding “How is this possible when this is just a proposal?”

Some members also contended that the new token could present security risks. “Layer Zero is a highly centralized option that exposes Ethereum’s main protocol to an unprecedented disaster,” LidoDAO member Scaloneta asserted, arguing that a breach in the protocol’s verification layer “would imply that infinite wsteth will be minted.”

Cointelegraph reached out to the LayerZero team for comment via Telegram and email but did not receive a response by the time of publication. In April, LayerZero secured over $120 million to enhance cross-chain functionality within the Web3 ecosystem and partnered with Radix to integrate cross-chain capabilities into the Radix Babylon network.