Over the years, blockchain and distributed ledger technology’s journey to decentralization has been plagued by interoperability issues. For perfect blockchain interoperability, projects have to implement standardized data formats, common consensus mechanisms, secure communication channels, and interoperability protocols that are secure and scalable.
The LayerZero protocol enables interoperability across multiple blockchains regardless of their architecture. But how does this solution work, and where is it being used today?
What Is LayerZero?
LayerZero is a cross-chain communication protocol that enables direct, trustless communication between blockchains. LayerZero supports multiple blockchains, including SUI, Aptos, EVM Chains, and Solana. Projects can implement interoperability to other blockchains with LayerZero.
LayerZero has the potential to revolutionize blockchain interaction, thereby eliminating the need for centralized intermediaries, such as bridges anddecentralized exchanges, through direct communication. With LayerZero, there could be a more decentralized and secure blockchain ecosystem and new possibilities for cross-chain applications.
How LayerZero Works
LayerZero enables interoperability with a unique approach called “Ultra Light Nodes” (ULNs). These are lightweight blockchain clients that can validate transactions on other chains without downloading the entire blockchain state.
ULNs allow LayerZero to achieve high throughput and low latency during inter-chain communication with different architectures andconsensus mechanisms.
ULNs are deployed on each chain that wants to communicate. ULNs maintain a partial view of the state of the chain they are deployed on, and they use the view to validate transactions from other chains.
Off-chain services known as relayers are responsible for relaying messages between ULNs on different chains and are incentivized to relay messages reliably and quickly. Relayers are compensated for each message transmitted.
A third-party service known as an Oracle then passes on the block header to the destination chain’s endpoint. After this, the Relayer submits the transaction proof. The destination chain will then validate this proof using its consensus mechanism, and the message will be sent to the target address.
Blockchain oraclesand Relayers are somewhat similar, yet they exist entirely separately from one another in this process to avoid collusion.
Here’s a simplified explanation of how LayerZero works:
LayerZero utilizes the security properties of established oracles (like Chainlink and Band) with an additional layer of security via the open relayer system. This means that the worst-case security of this new network still reduces to being as secure as the oracle.
Projects can use LayerZero for various purposes, including state sharing, unified liquidity bridging, cross-chain swaps, and lending and borrowing across chains.
Who Uses Layer Zero?
Here’s an overview of some popular projects currently using LayerZero:
LayerZero’s Function
Omnichain NFT trading, bridging, and launchpad features
Pudgy Penguins
Cross-chain bridging for NFTs
StarkNet, Ethereum
Cross-chain swaps and margin trading
Cross-chain liquidity pools
Cross-chain messaging and token transfers
Cross-chain liquidity and staking
Clover Finance
Clover Network
Cross-chain DeFi and NFTs
BSC, Polygon, HECO, Fantom, Arbitrum, Avalanche, Moonriver, Moonbeam
Cross-chain bridging
The multiple LayerZero applications across various blockchains give it an edge over other interoperability solutions.
5 Ways LayerZero OutShines Other Blockchain Solutions
Many blockchains and decentralized apps are implementing LayerZero for different reasons ranging from scalability, efficiency, security, and ease of use.
1. Scalability
LayerZero is scalable since it doesn’t require additional infrastructure to support cross-chain transactions. Instead, LayerZero uses the existing infrastructure of the blockchains connected to LayerZero. This means LayerZero can scale as the scale of the underlying blockchain.
2. Efficiency
LayerZero is efficient because it does not require additional data storage on connected blockchains. LayerZero uses a cryptographic proof system to verify the validity of cross-chain transactions so that transactions are very cheap and do not require additionalgas fees.
3. Security
LayerZero is secure because it uses decentralized Oracle and Relayer systems. The Oracle keeps track of the state of all the blockchains connected to LayerZero. Ideally, oracles are decentralized, making compromise difficult for third-party actors. Relayers are also incentivized to be transparent and rewarded for completing transactions.
4. Ease of Use
Projects can easily integrate LayerZero into their apps for users to transfer assets between different blockchains with a LayerZero-enabled wallet easily.
5. Cost Effectiveness
LayerZero achieves cost-effectiveness with low transaction fees, high throughput, and low latency. LayerZero’s transaction fees are a few cents, which is significantly lower than the fees charged by other interoperability protocols.
LayerZero’s Limitations
While LayerZero has some good features, it also has certain limitations:
Despite these limitations, LayerZero’s focus on modularity and flexibility is attractive to developers, especially if you’re looking for customizable security options and the ability to build native multi-chain DApps. The project’s success will depend on its ability to address these challenges and adapt to the evolving needs of the blockchain ecosystem.
There are Many Projects Advancing Blockchain Interoperability
Blockchain interoperability is essential for the future of blockchain technology. As blockchain adoption skyrockets, so will the need for interoperability. Projects like Chainlink, Polkadot, and Cosmos are setting the pace in the journey to decentralization through interoperability. Projects can achieve interoperability through multiple mediums, with LayerZero paving the way for many.
