Nethermind withdraws from LayerZero to become a Chainlink node operator, joining a wave of departure

Nethermind withdraws from its role as LayerZero verifier and joins Chainlink as node operator

Nethermind, the company behind Ethereum's largest execution client, has resigned from its role as a LayerZero verifier and joined Chainlink as a node operator, responsible for ensuring the security of its cross-chain interoperability protocols and data feed services.

In this wave of approximately US$15 billion in assets migrated from LayerZero to Chainlink, every previous departure-including BitGo's US$7.4 billion encapsulated bitcoin, Wyoming's state stablecoin, etc. -has been assets removed from the network rather than the node operators operating these networks.

The change comes just over three months after LayerZero publicly admitted that it allowed its own validator to act as the sole checker of high-value transactions (an arrangement linked to the $292 million attack on Kelp DAO).

Nethermind announced on August 19 that the engineering company, which supports approximately one-third of Ethereum's validator software, has withdrawn its role as one of LayerZero's largest validators and signed up to become Chainlink's node operator.

Nethermind's new responsibility is to secure the Chainlink Cross-Chain Interoperability Protocol (CCIP), which handles cross-chain messaging and token transfers, as well as its data feed service, which provides on-chain price data for the DeFi protocol. Nethermind's previous work at LayerZero was similar in nature: as the operator of the Decentralized Forensics Network (DVN), it checked whether cross-chain messages on LayerZero were authentic and valid before they took effect.

"Being a node operator means taking real responsibility for network reliability, which is consistent with the way we approach every engineering commitment," said Daniel Celeda, CEO of Nethermind. "We have always made prudent and long-term bets on the infrastructure that we believe will define the next era of on-chain finance, and integrating our cross-chain businesses into Chainlink CCIP is a reflection of this belief."

Johann Eid, chief commercial officer of Chainlink Labs, called Nethermind "one of the most respected engineering companies in the industry."

Why this exit is different?

Nethermind's move joins the many players who have moved from LayerZero to Chainlink CCIP in the past few months, a migration that has now promised nearly $15 billion in value. But every name before this-BitGo's $7.4 billion encapsulated bitcoin, Wyoming's state-issued stablecoin, Kraken, Mantle, Kelp DAO, Lombard, Solv Protocol, and Re-was an asset holder who moved funds or tokens off the LayerZero orbit. Nethermind, on the other hand, has no assets on LayerZero; it runs part of the security layer on which other people's assets rely. The difference is important: when asset holders change suppliers, customers vote with their wallets; when a validator leaves the network it helped protect, it is more like an inspector resigning from an institution it audited. To date, no other DVN operator has left LayerZero in this way.

From Kelp's $292 million loss to LayerZero's apology

The exodus dates back to April 18, when an attacker stole 116,500 rsETH, worth approximately $292 million, from Kelp DAO's LayerZero-based bridge by calling a function on the LayerZero EndpointV2 contract. Kelp used only one verifier-LayerZero Labs 'own DVN-to secure the bridge, rather than requiring multiple independent verifiers to agree before releasing the transaction. LayerZero initially said its protocol worked as expected, pointing out that Kelp chose the single verifier setting. Kelp countered that LayerZero employees had approved the configuration in more than two years of discussions, and that LayerZero's own integration guidelines default to the same single-verifier setting and did not configure other alternatives. Kelp also said that at the time of the attack, approximately 47% of active LayerZero apps (representing more than $4.5 billion in value) were running the same configuration.

On May 9, LayerZero changed its stance. "We made the mistake of allowing our DVN to act as a 1/1 verifier in high-value transactions," the company said, adding: "We did not monitor what our DVN was protecting, which created a risk we didn't see at all."

$15 billion migration now includes people running validators

Nethermind's announcement comes just over three months after the admission and comes a day after the Wyoming Stability Tokens Board transferred its state stablecoins, the Frontier stablecoins, to Chainlink following a security review-the first such action by a U.S. government entity. Nethermind and Chainlink did not disclose the specific findings of Nethermind's internal review, saying only that they were "very detailed."

Enlightenment from Nethermind's own history on this change

Nethermind's own client software is not without the kind of risks it now claims to avoid. In February, security company Octane Security used AI audit tools to discover a high-severity vulnerability in Nethermind's Ethereum client that, if exploited, could cause verifiers to miss rewards and be punished. Nethermind fixed the vulnerability before it was exploited, and the Ethereum Foundation paid a $50,000 reward for it. Given that Nethermind's software still supports a large portion of Ethereum's own set of validators, it now emphasizes "responsibility for network reliability" not so much as a marketing rhetoric as a lesson learned from its own operating history and applies it to decisions about which network to protect next.