We’ve been closely observing the ongoing discussions regarding the implementation of LayerZero’s OFT standard, particularly its application to wstETH.
First and foremost, it’s important to recognize the potential advantages of adopting a token standard like OFT or xERC20 for wstETH. Such a standard could potentially improve the rates and execution efficiency for bridging wstETH across different chains. This could be beneficial for aggregators, including ourselves, and the broader ecosystem.
However, we have some reservations regarding the manner in which the current proposal has been presented and marketed as an official statement, some of which were rightly voiced out by hal2001 in his comment.
Furthermore, building on our expertise of working deeply with bridging solutions and previous partnerships with DAOs, we suggest the Lido DAO consider the following recommendations:
- Using the Native Bridge for Scroll Deployment
Using the native bridge for an L2 does not introduce any new trust assumptions as it only relies on the open source, core bridge infrastructure of the chain.
This approach aligns with the recommendations made by the Uniswap Bridge Committee to the Uniswap DAO for their cross-chain governance messaging needs. Consequently, opting for a third-party bridge where a secure, battle tested native bridge exists may not be the most compelling choice.
- Adoption of a Multi-Bridge, Agnostic Token Standard like xERC20
While mint-and-burn token standards offer notable benefits in terms of pricing and user experience, they also carry significant risks when linked with an underlying messaging bridge. Given the crucial role of Lido and wstETH in the DeFi ecosystem, it’s prudent to mitigate these risks by distributing minting rights across various bridging solutions.
To this end, we propose that the DAO considers xERC20 as a potential solution.
“xERC20 allows tokens to be minted and burned across chains by multiple bridges (canonical or 3rd-party), while giving token issuers the ability to granularly control their security preferences for each bridge using rate limits.”
A recent example is Beefy’s launch of their $BIFI token as an xERC20, using LayerZero, Axelar, and Chainlink’s CCIP for messaging, coupled with mint/burn rate limits of 2.5k per day per bridge, reducing the dependency on any single bridge provider.
Conclusion and Call to Action
In conclusion, we urge the DAO to thoroughly examine the advantages and drawbacks of the various solutions under consideration. It is vital not to hasten the decision-making process regarding the deployment of wstETH across chains.
We support hal2001’s proposal for issuing an RFP (Request for Proposal) to explore options for bringing wstETH to different chains, and we advocate for an extensive, informed debate within the community. Such a measured and collective approach will undoubtedly contribute to the most beneficial outcome for the DAO and the wider ecosystem.
Thank you for considering our perspectives.