Lido DAO’s Bridge Battle: Axelar and Wormhole Triumph Over LayerZero

Blockchain protocols often boast about their “permissionlessness,” emphasizing the idea that anyone can build on their platform without explicit approval. However, practical considerations sometimes make seeking permission a wise choice.

Last October, LayerZero, a leading firm specializing in interoperability infrastructure for blockchains, established a crypto bridge enabling users to transfer Lido’s popular staked ETH (stETH) token across various networks, including Binance’s BNB chain and the Avalanche blockchain. While LayerZero sought approval from Lido DAO, the governing community, it deployed the bridge before receiving official confirmation.

While technically permissible and not entirely unprecedented, LayerZero’s marketing approach irked some members of the Lido DAO community. Critics felt that LayerZero presented itself as an official Lido partner without the DAO’s explicit approval. This triggered a debate within the community forums, with concerns about disrespect and perceived pressure tactics.

The controversy stems from the increasing importance of cross-chain “interoperability” as more blockchains emerge. Bridge protocols play a crucial role, but their deployment can be problematic, leading to cautious endorsements from protocols.

Lido’s stETH endorsement is highly coveted among interoperability providers due to Lido’s status as the largest decentralized finance (DeFi) protocol, with a total value locked of $20.8 billion.

In response to the dispute, Lido DAO members expressed their dissatisfaction with LayerZero in a poll, with 81% of votes favoring a rival bridge proposal from competitors Axelar and Wormhole. Pending a formal vote, this alternative proposal is set to become Lido’s “official” provider for moving stETH tokens to BNB Chain.

Competitors aimed their proposal at preventing “vendor lock-in,” where first-mover advantages are used to solidify a provider’s position within a protocol’s infrastructure. The Axelar-Wormhole bridge offers flexibility, potentially supporting other bridge providers based on the Lido Foundation’s choice.

LayerZero’s competing proposal received only 5% support in the recent poll, highlighting the significance of the matter beyond a typical governance vote. This situation emphasizes the principles of decentralization and the power of token holders to influence protocol decisions.


Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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