wstETH suffered a setback, SSL certificate raises doubts, where should LayerZero's "over-centralization" go from here?

Author: Mia, ChainCatcher

With the development of blockchain technology, cross-chain interoperability has become a highly discussed topic, attracting more and more developers, enterprises, and investors to research and solve the technologies and solutions for cross-chain interoperability. The popular project in the cross-chain space, LayerZero, has gained funding from well-known crypto capital firms such as a16z, Sequoia Capital, Coinbase Ventures, Binance Labs, and Multicoin Capital, leveraging this "tailwind." In April this year, it secured $120 million in Series B funding at a valuation of $3 billion, and recently, it has become the center of attention again due to the launch of the wrapping feature for the liquid staking protocol stETH.

Previous report states that on October 26, the cross-chain interoperability protocol LayerZero launched a new feature called wrapped stETH (wstETH), which will be deployed on Ethereum, Avalanche, BNB Chain, and Scroll. This move has garnered widespread attention in the industry but has also sparked a joint resistance from some cross-chain projects, with the so-called "over-centralization of LayerZero" once again becoming a focal point of public opinion.

Recently, rumors about "LayerZero's upcoming airdrop" have also begun to spread wildly across major social media and communities.

LayerZero's New Feature Faces Setback

It is reported that LayerZero's new feature involves the Omnichain Fungible Token (OFT) standard, which has been adopted by projects such as Avalanche, PancakeSwap, and Trader Joe. The OFT standard provides a more user-friendly and efficient cross-chain solution, allowing tokens to be externally composed in any type of dApp, thus enabling seamless cross-chain exchanges.

However, LayerZero's seemingly accelerated efforts in cross-chain development faced a 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 actions, believing that these actions could lead to the collapse of interoperability systems, which would be detrimental to the standardization and healthy competition of cross-chain technology.

They also emphasized that proprietary standards locked by vendors, if not standardized, could create systemic risks, and that token issuers should own their tokens. Open vendor agnostic standards encourage healthy competition.

Additionally, Lido's official statement warned that LayerZero deployed the proprietary standard for wstETH on Avalanche, BNB Chain, and Scroll without Lido DAO's support, urging users to exercise caution when interacting with the bridge. The proposal supporting this bridge by Lido DAO still requires necessary checks, discussions, and governance processes.

Although LayerZero's technology and solutions have received recognition from some industry experts, how to transparently and fairly deploy and use these solutions remains a contentious point for the entire community. Cross-chain interoperability involves significant assets and user trust, so decisions should be made based on in-depth research and community consensus rather than unilateral actions.

However, LayerZero's official response indicated support for DAO using L2 standard bridging and decision-making in collaboration with the core team. They also look forward to more technical discussions and the growth of cross-chain liquid staking protocols. Furthermore, LayerZero emphasized the importance of in-depth research and community consensus for cross-chain interoperability while acknowledging these controversies and reactions.

"Centralized Power" a16z Promotes LayerZero

However, this is not the first time LayerZero has sparked widespread controversy and discussion. In fact, as early as March this year, LayerZero's competition in cross-chain bridge voting attracted significant attention. In the options between Uniswap and BNB Chain, Wormhole won the heated check vote. However, in the final official vote, the struggle among cryptocurrency investors could lead the results in different directions, involving hundreds of millions of dollars in interests. This struggle involves venture capital firms a16z and Jump, which support LayerZero and Wormhole, respectively. This competition is not only about technical choices but also about governance and interest balance.

a16z once initiated a vote using its 15 million UNI tokens to oppose the proposal to "use Wormhole as the cross-chain bridge between Ethereum and BNB Chain," choosing to extend an olive branch to the cross-chain protocol LayerZero, which it backed. Because of this, a16z has been accused of being a centralized force in DeFi, making all voting custodianship seem trivial in the face of large token holdings in DAO-based decentralized governance, and LayerZero seems to have inherited a16z's tendency towards over-centralization.

"Cross-Chain Assassin" Stargate

In reality, LayerZero's centralization and lack of transparency have long been criticized by the community. As the anticipation for airdrops has gradually diminished, LayerZero has still not disclosed any information about how tokens will be distributed, leading community members to speculate about the centralization of its token distribution. As the official product launched based on LayerZero, Stargate has also become the main battlefield for LayerZero airdrop interactions since its launch, gaining user attention for its ability to deliver native assets promptly.

Currently, Stargate has launched on Ethereum, Avalanche, Polygon, BNB Chain, Fantom, Arbitrum, Optimism, and Metis, supporting the transfer of native assets such as USDT, USDC, ETH, FRAX, DAI, and BUSD across different blockchain networks. However, behind this seemingly convenient service lies the fact that cross-chain fees are much higher than those of common cross-chain bridges like MultiChain and Hop. This is because when users conduct cross-chain transactions, only the platform's service fee is deducted, without accounting for the on-chain GAS paid. The GAS fee for the target chain during cross-chain transactions is paid with the source chain token, and the actual cross-chain fee charged by Stargate is the sum of the "Gas cost" and "Fee" after deducting the source chain Gas fees. Moreover, Stargate does not proactively display the fee details, leading uninformed users to label it as the "cross-chain assassin."

Regarding the launch of wstETH, Stargate, as LayerZero's favored child, could not remain silent. Its strategic advisor Hasu stated that while LayerZero's actions represent a domineering sales strategy attempting to force DAOs to accept its proposal, he also expressed recognition of LayerZero.

The Mystery of the "SSL Certificate"

As community users' enthusiasm for airdrops surged, rumors about "LayerZero's upcoming airdrop" began to circulate. Some community users discovered that the unused domain "layerzero.foundation" had added an SSL certificate, and today, speculation about "LayerZero's upcoming airdrop" took an unexpected turn.

LayerZero co-founder and CEO Bryan Pellegrino communicated with the community in his official Telegram channel regarding the recent addition of the SSL certificate to the "layerzero.foundation" domain, unexpectedly stating, "We didn't do it!" but also acknowledging that Bryan (Primo) indeed owns the "layerzero.foundation" domain.

With this dramatic event, LayerZero's centralization and lack of transparency have come under scrutiny once again. Questions such as "What is happening internally at LayerZero?" and "Are there vulnerabilities in LayerZero's security management?" have become points of concern for community users. If even the co-founder is unclear about his project, how can users trust it? Meanwhile, speculation about "LayerZero's upcoming airdrop" continues to captivate people's attention. In response, Bryan Pellegrino stated that details of the incident would be disclosed after the truth is clarified.

Of course, we also hope that LayerZero can truly listen to the voices of community users and operate this highly anticipated cross-chain project in a genuinely transparent and decentralized manner.

Where Should LayerZero's Over-Centralization Go?

"Cryptocurrency is not only an experiment in monetary theory but also a radical experiment in decentralized governance." Overall, as a cross-chain interoperability solution, LayerZero's competition and controversies highlight the challenges in areas such as cross-chain governance, interest balance, and standardization. In response to LayerZero's launch of the wrapped feature for the liquid staking protocol stETH, some community voices have accused the LayerZero team of having a tendency toward hegemony, pursuing personal interests while controlling the entire ecosystem. Perhaps on this issue, the LayerZero team needs to seriously reflect on and pay attention to LayerZero's development to ensure the health and fairness of its ecosystem. Although LayerZero has faced concerns and joint resistance in some aspects, its official response shows that they value community voices and express a willingness to make decisions in collaboration with the core team.

As a sensitive issue, cross-chain interoperability requires in-depth research and ample technical discussions to seek broader consensus and support. For LayerZero, this is also an opportunity to further refine its solutions and work with the community to promote the development of cross-chain interoperability. As one of the most promising cross-chain interoperability solutions, LayerZero should adhere to the principles of openness, fairness, and sharing. To avoid hegemonic tendencies, the team must always center on the community, respecting the interests and opinions of community members. By establishing transparent decision-making mechanisms, encouraging community participation, and listening to feedback, LayerZero has the potential to build an open and prosperous ecosystem, making a positive contribution to the advancement of cross-chain interoperability.