LayerZero loses over a dozen partners and $15 billion in assets amid security concerns

LayerZero faces mass partner exits after security breach

LayerZero, a blockchain project that helps different blockchains communicate with each other, has lost over a dozen partners this year. The departures follow a security breach in April, where hackers from the Lazarus Group targeted LayerZero’s systems. Since then, companies managing billions of dollars in crypto assets have moved away from LayerZero to its competitors.

The latest exit was Nethermind, an Ethereum node service provider, which stopped working with LayerZero on Wednesday. Nethermind was one of the companies that verified transactions for LayerZero, a role important for security and trust.

LayerZero’s own token, ZRO, has also lost value. It is down 31% this year and 88% from its highest price in December 2024.

Which companies left and why

• Kelp DAO: Left in May after losing $292 million in a hack involving a bridge secured by a single LayerZero verifier.
• Solv Protocol and Re.xyz: Stopped using LayerZero’s bridges two days after Kelp DAO’s exit.
• Kraken and Lombard: Moved their Bitcoin-linked assets off LayerZero in May, including over $1 billion in Bitcoin-backed assets.
• Virtuals Protocol, Yuzu Money, and Mantle: Left between June and July.
• BitGo: Removed $7.7 billion of wrapped Bitcoin from LayerZero’s system in August.
• Huma Finance: Chose not to use LayerZero for its new product.
• Wyoming Stable Token Commission: A U.S. state government project that dropped LayerZero’s bridge on Tuesday.

LayerZero admits security mistake

In April, LayerZero revealed that hackers from the Lazarus Group had compromised its internal systems. The company admitted it made a mistake by allowing a single verifier to secure high-value transactions. This led to panic, with companies like Aave pausing transactions involving LayerZero’s services.

LayerZero’s CEO, Bryan Pellegrino, called some early criticism of the breach “untrue.” Another supporter claimed the departures only affected a small portion of LayerZero’s overall activity. However, the company has since announced it is ending support for several low-activity blockchains and warned users to move their funds before an August 3 shutdown.

Over $15 billion in assets moved away

By early July, more than $7 billion in assets had left LayerZero. BitGo’s exit in August brought the total closer to $15 billion. Most of these assets have moved to Chainlink, a competitor that offers similar services.

What this means for users

LayerZero has told users on certain blockchains to move their funds before support ends. If they do not act, they may lose access to their assets. The company is also shutting down older versions of its software, which could affect projects still using them.

Sources

• Protos
• LayerZero Blog