Recently, the news of an upcoming airdrop from Layer Zero has once again made it a hot topic in the crypto community. Although the official statement in the community denies any token airdrop or listing plans at the moment, Bryan Pellegrino, the Co-founder of Layer Zero, publicly mentioned in a recent funding interview that they might consider a governance token airdrop once the protocol development is complete. This keeps Layer Zero as a star project of interest for users.
1. What is Layer Zero?
Layer Zero is a universal foundational protocol for data and information communication. It securely and simply transmits information across chains to enable cross-chain communication between applications. By providing a powerful set of communication primitives at the foundational layer, developers can build various cross-chain applications such as cross-chain DEXs or multi-chain yield aggregators without relying on trusted custodians or intermediary transactions.
2. Technical Advantages of Layer Zero
Layer Zero utilizes Oracles and Relayers to communicate between Layer Zero Endpoints on the target chain. Oracles are third-party services that provide a mechanism to read block headers from one chain and send them to another chain. The Layer Zero team has chosen to use Chainlink and Band Protocol as their official oracles, but theoretically, any Oracle service provider can be part of this mechanism. Relayers, on the other hand, are off-chain services that work similarly to Oracles but retrieve proofs for specified transactions. Oracles publish block headers from the source chain to the target chain, while Relayers publish transaction data and validate transaction proofs. Oracles and Relayers operate independently.
By combining the low cost of third-party verification networks with the high security of lightweight nodes, Layer Zero's proposed super-light nodes offer higher security at a lower cost. This cost-effective solution saves developers significant learning and operational costs, ultimately reducing user fees and providing strong cost advantages for cross-chain applications built on Layer Zero.
Scalability has always been a challenging obstacle for blockchain-based solutions, but Layer Zero overcomes this issue. Furthermore, it brings broader applications to the blockchain ecosystem, such as data verification, personal reward structure setup, and token wrapping. As the foundational layer, Layer Zero can achieve cross-chain interoperability with Layer 1 protocols like BTC, ADA, and ETH. Operators can deploy relay networks between multiple nodes (such as Bitcoin and Ethereum) using Layer Zero. Compared to patching the underlying protocols of existing blockchain networks, Layer Zero is modular and scalable, allowing the addition of new chains and functionalities without modifying the core protocol. This makes it a more flexible and scalable solution.
3. Security of Layer Zero
As a foundational protocol, the security of Layer Zero is independent of external protocols. Even if there are security issues or attacks on external protocols, it will not affect the security of Layer Zero, ensuring the stability of the entire protocol consensus. Additionally, the unique design of Layer Zero's oracles and relayers maximizes the security of information transmission. Oracles and relayers maintain independence from each other, and even in the worst-case scenario where they are operated by the same entity colluding with each other, the risk remains isolated, with a very low probability of success, and the cost of such an attack would be very high. Furthermore, to further reduce risk, Layer Zero allows user applications to choose different oracle/relayer combinations, and users can even run their own relayers. These measures provide the highest level of security for information transmission.
4. Funding Status of Layer Zero
As of today, Layer Zero has completed three rounds of fundraising, raising a total of 315 million US dollars. In March 2022, Layer Zero secured 135 million US dollars in Series A funding with a valuation of 1 billion US dollars, with participation from a16z, Sequoia Capital, and the now dissolved risk investment division of FTX Ventures.
On April 4, 2023, Layer Zero Labs successfully raised 120 million US dollars in Series B funding, with a valuation of 3 billion US dollars. This round of funding is the largest in the cryptocurrency and blockchain industry since the explosive growth in November of the previous year. Nearly 36 institutions participated in this funding round, including a16z crypto, Circle Ventures, OKX Ventures, OpenSea Ventures, Samsung Next, and Sequoia Capital.
5. Ecosystem Deployment of Layer Zero
Currently, Layer Zero has launched various ecosystems, including cross-chain bridges, NFT platforms, DEXs, and decentralized wallets. As developers continue to explore new use cases, Layer Zero will be able to build more applications, including NFTFi, yield aggregators, full-chain wallets without changing RPC, games, social platforms, and DID solutions. Layer Zero has already integrated with over 40 chains, including Aptos and Solana. Moreover, Layer Zero has proven its product-market fit and efficient implementation through projects such as Sushiswap, Trader Joe, and Pudgy Penguins.
6. Conclusion
To truly achieve Web3.0, there must be a foundational network that enables full-chain interoperability. As a strong competitor in this field, Layer Zero will undoubtedly continue to contribute to the progress and development of the blockchain industry. However, it is worth noting that while Layer Zero has a compelling narrative, there are still many details that have not been fully disclosed, which entails certain risks. Additionally, Chainlink's CCIP (Cross-Chain Interoperability Protocol), already in existence, may become a favorable competitor to Layer Zero based on available information.
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