Crypto Analyzer

Lido DAO Rebukes LayerZero by Endorsing Rivals Wormhole, Axelar for Crypto Bridge

The recent decision by Lido DAO to rebuke LayerZero and endorse their rivals, Wormhole and Axelar, for providing a bridge for crypto assets has stirred up a significant controversy in the blockchain community. This move sheds light on the complex dynamics of permissionless innovation and the growing importance of cross-chain interoperability in the blockchain space.

LayerZero, a prominent provider of interoperability infrastructure for blockchains, had previously set up a crypto bridge enabling users to transfer Lido’s staked ETH (stETH) token to other networks, including Binance’s BNB chain and the Avalanche blockchain. However, the marketing tactics employed by LayerZero, which some members of the Lido DAO community perceived as an attempt to present themselves as an official Lido partner without the DAO’s consent, sparked discontent.

The controversy escalated when a consortium of crypto infrastructure providers, including Axelar and Wormhole, raised concerns about LayerZero leveraging a first-mover advantage to potentially lock in users ahead of competitors. This situation led to heated discussions in the Lido DAO forums and prompted a temperature-check poll, in which 81% of the votes favored the rival bridge proposal put forward by Axelar and Wormhole.

With Lido DAO members expressing their dissatisfaction with LayerZero, the bridge proposal from Axelar and Wormhole is expected to become the official provider for moving stETH tokens to the BNB Chain pending a formal vote ratifying the decision. Sergey Gorbunov, CEO of Interop Labs, the initial developer of Axelar, highlighted the collaborative nature of the Axelar-Wormhole proposal, emphasizing its focus on preventing vendor lock-in and offering the potential for expanded support for other bridge providers.

LayerZero’s competing proposal received only 5% of the votes in the temperature-check poll, reflecting the clear preference of the Lido DAO in favor of Wormhole and Axelar’s bridge solution. This decision signifies a significant shift in the dynamics of interoperability infrastructure providers and emphasizes the growing importance of securing endorsements from major decentralized finance (DeFi) protocols like Lido, which currently holds a total value locked (TVL) of $20.8 billion.

The controversy surrounding this decision underscores the challenges and competition that exist within the blockchain space as various protocols vie for prominence and endorsement. It also raises important questions about governance and decentralization, as highlighted by Robinson Burkey, the Wormhole Foundation’s chief commercial officer, who emphasized the significance of token holders’ ability to voice their opinions and maintain the fundamentals of decentralization.

The Lido DAO’s move to rebuke LayerZero and endorse Axelar and Wormhole for providing a crypto bridge has significant implications for the blockchain industry. It serves as a reminder of the intricate dynamics at play in the ongoing development of blockchain infrastructure and the evolving landscape of cross-chain interoperability. As the blockchain ecosystem continues to expand, the competition among bridge protocols and the quest for endorsements from major decentralized protocols will remain crucial factors shaping the industry’s future.