Layerzero: Often mistaken for a protocol-layer product across chain Bridges

In the past two-year bull market, the market not only witnessed the rapid rise of multi-chain ecology, but also directly witnessed the rapid outbreak of many cross-chain bridge products.

However, a series of hacker attacks and various defects in the use experience of cross-chain bridge began to make people wonder whether cross-chain bridge products that only solve the cross-chain problem of assets would be a wrong direction. What are the underlying protocols that will host native cross-chain applications in the future?

This article reintroduces you to a protocol-level cross-chain project you may have heard about, but still don't fully understand its full potential: Layerzero.

Why can't you simply think of Layerzero as a chain bridge?

When reading an introductory article about Layerzero, many readers' first reaction might be, "Isn't this just another chain bridge product?"

Indeed, the application of cross-chain technology in the current market is still basically on the asset cross-chain. However, asset cross-chain is actually only a small subset of the whole cross-chain technology. It can even be said that many cross-chain bridge products we used before were just transitional products developed by the project team to meet the basic needs of users at that time in order to cope with the sudden emergence of multi-chain ecology.

And if we want to get into real mature more ecological chain, realize the user only through an application, you can smoothly with all the major male chain interaction, and does not need frequent switching purse vision, then it must have more bottom, can achieve information across chain rather than simple protocol level of assets across the chain across the chain products.

As implied by the Layerzero name, Layerzero did not initially position itself as a simple asset cross-chain bridge. Instead, LayerZero wanted to be a much lower level infrastructure level protocol than Layer1 public chain, and thus completely solve the liquidity gap between many public chains in the future. Deep issues like frequent wallet switching to use an app.

So what are the essential differences between Layerzero as a protocol layer and a cross-chain bridge as a product?

What are the key differences between product-level and protocol-level projects?

1. Value capture logic

Yes, perhaps the most important difference between protocol-layer and product-layer projects in the Web3 industry is the fundamental difference in value capture logic.

According to the famous "fat protocol" theory, the protocol level projects at the bottom of the Web3 ecosystem can capture the most value in the industry by providing security guarantees for the upper applications. However, the application layer projects built on the protocol layer often need to rely on the traditional fee or service fee to obtain income, and then converted into profits to capture value.

Therefore, before deciding to deeply participate in a Web3 project, it is a critical issue to distinguish whether it is an application layer product or a low-level Web3 protocol that can host upper-layer applications.

The fact that early industry participants, whether miners or developers, gain excess returns by participating in promising public chains is the best proof that the "fat deal" theory works.

2. It's ecology that matters, not just product functionality

The way a protocol layer project is evaluated is also very different from an application layer project.

Among many smart contract public chains, the reason why Ethereum can maintain the highest market value for a long time is not because of its faster transaction speed, but because Ethereum has the most prosperous on-chain ecosystem and developer group.

Therefore, when looking at a protocol layer project like Layerzero, the focus should not be on simply evaluating how many common chains it supports and how many cross-chain currencies it is compatible with, as with other cross-chain bridge products. Rather, we should focus on the innovation that comes from the various ecological projects built on it.

At present, more representative products based on Layerzero have been built, such as Stargate and Sushiswap, etc. In the future, with the continued development of ecology, it is expected that more native cross-chain products developed based on Layerzero will be born.

However, due to space limitation, this paper will not expand here. More detailed reports on Layerzero's ecological project will be published in the future.

What are the advantages of Layerzero over other cross-chain protocols?

Although Layerzero is positioned significantly differently than a typical cross-chain bridge product, there are still a number of similar projects in the market. What are the unique advantages of Layerzero over these same protocol-layer cross-chain projects?

1. Greater versatility

The IBC protocol born out of the Cosmos ecology is also dedicated to protocol layer cross-chaining. However, to achieve IBC compatibility, you must deploy light nodes of other public chains on the public chain. Due to the high gas cost, many EVM-compatible chains, especially Ethereum, are unable to support IBC, which greatly limits the versatility of IBC and thus currently operates only within the relatively small Cosmos ecological chain.

Similar to the IBC protocol, Poca Ecology, which once championed the cross-chain concept, has developed the XCMP cross-chain protocol. However, because it can only realize the cross-chain interaction requirements between parallel chains of Polka, it can only become a relatively closed cross-chain protocol between a small circle.

Layerzero adopts the technology architecture of "ultra light node", which makes the cost of public chain integration of Layerzero greatly reduced. Almost all major public chains, especially Ethereum and various EVM-compatible chains, can afford the cost of deploying Layerzero nodes. Therefore, Layerzero is highly versatile and has the potential to become an underlying protocol to integrate various EVM public chain cross-chain functions in the future.

2. Balance safety and efficiency

Of course, Layerzero is not the only player in the race to integrate all EVM mainstream public chains and become its underlying cross-chain protocol. One of the more influential competitors is Wormhole. But if we mention Wormhole again today, many readers' first thoughts will probably be about a hack that resulted in hundreds of millions of dollars.

This leads us to a more important question: how can Layerzero achieve a better balance between efficiency and security? This brings us to the technical architecture of Layerzero's "ultralightlight nodes" that help LayerZero communicate across chains.

Layerzero's "Ultra Light Node" still uses the verification mode similar to IBC's light node, but instead of the slightly clunky solution where light nodes save all the block headers of each other, Layerzero's "Ultra light Node" mode selects the oracle to obtain the required block headers on demand and verify the transaction. Thus, the verification cost is greatly reduced under the premise of ensuring security.

As a result, the current Layerzero has a better security record and efficiency than Wormhole, which also aims to be the underlying cross-chain protocol for the EVM chain.

After all, if a developer chooses to build an application with an unsecure underlying protocol, its security assumptions may be compromised, leading to the complete failure of the application and the loss of user assets. Thus, Wormhole will likely continue to exist as a cross-chain bridge product in the future, but it is unlikely that there will ever be a chance for a thriving protocol ecosystem to compete with Layerzero.

So at this stage, Layerzero can be said to have found a relatively suitable blue ocean market. As long as the project team can work through the bear market and do their best to build their protocol ecology, Layerzero will hopefully be seeded for the next cycle when the next bull market arrives. (Remember Chainlink, the first protocol-layer project to break out early in DeFi Summer, despite being hard to read?)

Bear markets are often a critical stage in the incubation of protocol-level innovation. This article briefly Outlines the essential difference between Layerzero and the many cross-chain bridge projects in the bull market and the underlying logic that will spawn the next wave of native cross-chain applications. It is hoped that readers will not give up their continued interest in protocol layer products during the somewhat dull bear market cycle.

After all, progress in the protocol layer is the strongest driving force for the industry to move forward.

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