The future of Web3 will be a multi-chain world, with a large number of modular and single blockchains forming the entire ecosystem. However, the current user experience is not smooth when performing multi-chain operations. For example, the assets of users on Ethereum must be transferred across chains before they can be used on Arbitrum; the NFTs held by users can only circulate within the blockchain ecosystem where they were minted. The cross-chain process is very painful, and many factors need to be considered, such as packaging assets, high gas fees, and waiting time.
Imagine if your assets could be interoperable between multiple chains, or if Dapps could be used on multiple blockchains without cross-chain, or if there was a way for developers to easily deploy applications that leverage multi-chain assets... The realization of these ideas is based on one starting point: assets will no longer exist in isolation in their native chains. This is the crucial full-chain future that LayerZero is building.
We believe that in the future, when users use Dapps, they don’t need to know which blockchain they are deployed on, similar to when users use Instagram, Tiktok, and Google in the Web2 world, they don’t need to know whether they are hosted on Amazon Web Services or Microsoft Azure. The base layer that LayerZero is developing hopes to achieve a true interoperability vision, connecting all Layer 1s, whether they are EVM ecosystems, IBC ecosystems, or other ecosystems. Users are no longer troubled by whether mainstream protocols such as Aave and Compound support certain chains.
TLDR: Multi-chain is just the beginning, and we hope to realize the vision of full-chain interoperability together with LayerZero.
About LayerZero
LayerZero is a universal data information communication protocol that transmits information on the chain in a secure and simple way to achieve cross-chain communication between applications. By deploying "LayerZero Endpoints" on the corresponding chain (they are lightweight clients composed of smart contracts with communication, verification and network functions), users can achieve cross-chain communication in a single trustless and secure transaction.
LayerZero uses Oracle (currently Chainlink) and Relayer to communicate information between LayerZero Endpoints on the target chain. It is worth noting that any entity can assume the role of Oracle and Relayer. The starting point of this design is independence, openness and permissionlessness. Oracle publishes the block header on the source chain to the target chain, and Relayer publishes transaction data and verifies transaction proofs. Oracle and Relayer remain independent.
Endless Possibilities
The charm of the LayerZero architecture is that it allows users and developers to execute anything they want through smart contracts across chains, whether it is transactions, cross-chain assets, transfer NFTs, games, social networking, etc. The following is an analysis of LayerZero's use cases in multiple application scenarios.
Bridge & Transaction
The common asset cross-chain model is the easy-to-implement Lock-Mint mechanism. The biggest disadvantage of this type of cross-chain technology is that it cannot send native assets on different chains, and most of them rely on intermediate packaged assets. This type of cross-chain solution also has some problems in practical applications, such as lack of liquidity, high slippage, high fees, long waiting time, etc., and the user experience is not good.
Stargate is a protocol built on LayerZero that enables transactions to be transferred seamlessly on the chain. It is the first protocol to solve the cross-chain impossible triangle. With Stargate, users and applications can use the protocol's unified liquidity pool while transferring native assets across chains and obtain instant transaction finality. In addition, based on Stargate, users and applications do not need to deal with packaged assets. Users can easily exchange USDC on Ethereum for USDT on Arbitrum. Data shows that since its launch, Stargate has processed more than 1 million transfers and more than $4.5 billion in trading volume. Applications such as Sushiswap have been deployed on Stargate, allowing users to exchange native assets. In addition, Stargate supports users to use the Gas tokens on their source chain to pay the Gas fees required for multi-chain transactions, which is also a pain point for users when trading assets on multiple chains.
Transferring Tokens Across Chains — Omni Fungible Tokens
Similar to bridging, transferring tokens on different chains usually involves wrapped non-native tokens, which not only affects composability, but also leads to fragmentation of liquidity. For example, the UNI token on Ethereum and the UNI token on Avalanche are two different assets that cannot be used interchangeably in applications, especially for long-tail tokens. Insufficient liquidity often leads to different prices.
LayerZero attempts to solve the above problems by creating Omnichain Fungible Tokens — a new type of token that can be combined across all blockchains that LayerZero integrates. For example, Trader Joe integrated with LayerZero and launched JOE as an Omnichain Token, which is a truly native multi-chain token that can be bridged across Avalanche, Arbitrum, BNB, etc.
Another interesting example is how Pendle uses LayerZero to deploy full-chain veTokenomics: Pendle users can synchronize their vePENDLE balances on Ethereum across all chains supported by the protocol (such as Arbitrum). In this way, veTokens are no longer isolated to different chains, and users can easily increase their rewards in various Pendle pools.
Transfer NFTs across chains — Omni Non-Fungible Tokens
Similar to the example above, NFTs will no longer exist in isolation in their native ecosystems — users can move their NFTs between ecosystems such as Ethereum, Polygon, and Solana. One example is that in January this year, Pudgy Penguins announced that using LayerZero's full-chain technology, its sub-series Lil Pudgys can now cross-chain between Polygon, BNB Smart Chain, and Arbitrum. This means that many NFT projects will be able to obtain liquidity and users from other ecosystems through cross-chain without having to split their user base by launching a brand new project on another chain.
Derivatives Trading
One of the important issues with DEXs is the lack of liquidity. Rage Trade attempts to solve this problem. It is built on LayerZero, generates income by bridging the ETH/USD pool of protocols such as GMX and Sushiswap, and provides circulating liquidity. In other words, Rage Trade is able to use LP tokens from other blockchains such as Polygon, Avalanche, Solana, etc. as the liquidity of the protocol on the Arbitrum chain. Taking 3CRV vault as an example, when 3CRV LP tokens are used as collateral on chain A, we can also provide virtual liquidity for Rage Trade on chain B.
currency market
LayerZero also plays a role in the lending space. Users deposit collateral on one chain and borrow other assets on another chain through LayerZero's cross-chain messaging. Using LayerZero messaging and the Stargate stable routing interface, Radiant Capital allows users to deposit any asset on the Arbitrum and BNB chains and instantly lend any asset on other blockchains supported by LayerZero. For example, users can pledge ETH on Arbitrum and borrow USDT on Avalanche. This process achieves true full-chain asset interoperability and maximizes the release of liquidity in each blockchain.
Looking ahead
As developers continue to explore new full-chain use cases, we look forward to more innovative applications built on LayerZero, covering scenarios such as NFTFi, yield aggregators, full-chain wallets that do not require RPC adjustments, games, social, DID, and more.
We are very excited about LayerZero's vision of achieving true interoperability in the Web3 ecosystem to enhance user experience. LayerZero has sent more than 3 million messages and has expanded to more than 40 public chains including non-EVM chains such as Aptos and Solana. Its appeal in Stargate and other top protocols or projects, such as Sushiswap, Trader Joe, and Pudgy Penguins, not only proves LayerZero's excellent market adaptability, but also proves the efficient execution of the star team led by Bryan Pellegrino, Ryan Zarick, Caleb Banister, Ari Litan, Irene Wu, etc.
