LayerZero is a full-chain interoperability protocol that focuses on data messaging between chains. In the industry, such protocols are called "Arbitrary Messaging Bridges (AMBs)", which means arbitrary messaging bridges that allow any data (including tokens, chain status, contract calls, NFTs or governance votes, etc.) to be transferred from chain A to chain B. Traditional cross-chain bridges mainly focus on cross-chain assets, while LayerZero explores the field of data transmission, which is significantly innovative.
Project Highlights
Abundant assets: The LayerZero Foundation holds assets worth a total of US$261 million, which is sufficient for long-term development and operation of the project.
Innovative design: Using oracle networks to replace traditional cross-chain continuous streaming makes the protocol lighter and has low operating costs.
Rapid expansion: Remarkable results have been achieved in DeFi, NFTs, and stablecoins, and 50+ projects have integrated or used LayerZero technology.
First-mover advantage: There are few well-developed and unattacked AMBs projects in the market, and LayerZero has a certain first-mover advantage.
Risk points
Insufficient security verification: The trust assumption that oracles and relayers need to operate independently is questionable, and the security risks behind the relay mechanism need to be vigilant.
Unclear economic model: The economic model has not yet been launched, and attention should be paid to its ability to capture token value in the cross-chain bridge field.
Overall, although LayerZero still faces some problems, its overall fundamentals are good and worthy of attention.
Basic overview of the project
1. Project introduction: LayerZero is a full-chain interoperability protocol designed for cross-chain lightweight information transmission, focusing on chain-to-chain messaging, and can send messages to any smart contract on any supported chain.
2. Team: LayerZero Labs Canada Inc. was registered in Canada on November 30, 2021. The core team includes Caleb Banister, Ryan Zarick and Bryan Pellegrino, who have a long-term partnership and rich development experience. In addition, 0xMaki, a former founding member of SushiSwap, has also joined LayerZero Labs full-time.
3. Funding: LayerZero has been favored by major capitals since the beginning, and the known financing amount has reached 261 million US dollars so far. The funds are sufficient for the long-term development and operation of the project.
4. Code and development: The LayerZero code base has been updated since March 2019, with a total of 6,415 code submissions and 116 developers participating. The code base has been audited 4 times by Zellic, Ackee and SlowMist, with sufficient developers and frequent updates.
Project details
1. Technology and architecture
1.1 LayerZero framework: The core of the LayerZero protocol has three components: endpoint, oracle and relayer.
Endpoint: Directly interacts with users or applications, responsible for message transmission, verification and reception.
Oracle: Independent of the LayerZero protocol, responsible for sending the block header to another chain to verify the validity of the transaction on the source chain.
Relayer: Obtain the transaction proof on the source chain and transmit it to the target chain.
LayerZero chooses the oracle network to replace the traditional cross-chain continuous streaming transmission, and reduces the operating cost by outsourcing the verification information function.
1.2 Security: Trust assumption: Oracles and relayers need to operate independently to ensure effective information transmission.
Pre-Crime model: Allow user applications to define specific assertions, and relayers must verify based on these assertions to ensure that relayers prevent attacks before hackers attack.
Although the security of LayerZero is not lower than that of Oracle in theory, the security risks behind the relay mechanism need to be continuously paid attention to.
1.3 Operation process: User Application calls the smart contract of LayerZero Endpoint.
The message enters the Endpoint of chain A and is transmitted to the oracle and relay.
The oracle confirms the block header and sends it to the Endpoint on chain B, and the relay submits the corresponding transaction proof.
After the target chain verifies the block header and transaction proof, the message is forwarded to complete the cross-chain communication.
2. Ecosystem
LayerZero already supports 13 chains including Ethereum, BNB Chain, Avalanche, Aptos, Polygon, Arbitrum, Optimism, Fantom, etc. The ecological landscape is developing rapidly, and 50+ projects have integrated or used LayerZero technology.
2.1 DeFi field: LayerZero ecosystem includes projects such as SushiSwap, PancakeSwap and Radiant Capital.
2.2 Stablecoin field: USDC and agEUR achieve cross-chain interoperability through LayerZero technology and upgrade to multi-chain native assets.
2.3 NFT field: Projects such as Gh0stly Gh0sts, tofuNFT, etc. are trying in the direction of multi-chain NFT.
Summary: LayerZero is innovative in the field of full-chain interoperability, with sufficient funds, rich team experience, and rapid ecological development. Despite the risks in terms of security and economic model, the overall fundamentals are good and worthy of attention.