LayerZero: The Secret Behind the $3 Billion Valuation of the All-Chain Interoperability Protocol

In just one year, the full-chain interoperability protocol LayerZero has raised $120 million at a valuation of $3 billion, three times the valuation of the previous funding round. This article will comprehensively outline the mainstream models of the cross-chain track, the technical principles of LayerZero, the cross-chain lifecycle, and provide a comprehensive analysis of the advantages and disadvantages of its protocol.

1. LayerZero Technology Principles

1.1 Overview

LayerZero is a trustless cross-chain communication protocol. It utilizes the principles of lightweight node technology to design an ultra-light node mechanism, dividing the intermediate trust element into two through relayers and oracles, achieving better security at a lower cost. LayerZero focuses on message cross-chain rather than asset cross-chain, serving as a foundational protocol with a containing relationship to asset cross-chain applications.

1.2 Light Node Technology

Cross-chain communication is mainly accomplished through external verification or on-chain light nodes. Light nodes only store historical block headers and do not retain the specific transaction information within the blocks. The authenticity of transactions can be verified through multiple Merkle Roots of the block headers. On-chain verification running on light nodes can achieve a high level of decentralization, but cross-chain costs are relatively high.

1.3 Ultra-Light Node Technology

Ultra-light nodes (ULN) perform the same verification as light nodes, but do not retain all block headers in order; instead, they are streamed on demand by oracles. This reduces costs but also sacrifices some security.

2. The Cross-Chain Core Role of LayerZero

2.1 Positioning of Oracle and Relayer

Oracle( oracle) enables contracts on the target chain to know when to verify and the answers to be verified. Relayer( relayer) provides the proof process required for verification and the specific content of cross-chain information.

2.2 The division of labor between Oracle and Relayer

The oracle transmits the Blockhash and Block Receiptsroot of the cross-chain request from the source chain to the target chain. The relayer delivers the Receipt and Merkle Proof path information of the cross-chain message to the contract on the target chain for verification.

2.3 LayerZero's cross-chain lifecycle

1. The user application initiates a transaction
2. The communicator sends data to the validator.
3. The validator sends the information to the network layer
4. The validator forwards the information to the relay.
5. The network layer sends information to the oracle.
6. Oracles and relays obtain and transmit the required information.
7. Validator confirms transaction validity
8. The communicator sends the information to the target chain application.

3. Evaluation of the Advantages and Disadvantages of LayerZero Protocol

3.1 Risk Control of Oracle Dependency

LayerZero allows applications to customize relayers and oracles, forming a many-to-many selection pattern and achieving decentralized mutual supervision. The protocol itself does not store funds and data, reducing the risk of attacks. LayerZero has undergone multiple security audits and offers high bug bounties.

The advantages of 3.2 compared to other protocol layer cross-chain products

• Stronger general extensibility: supports cross-chain interactions between various public chains.
• Lower complexity for developer access: simple design, easy integration
• Eliminate multi-chain fragmentation: Support for non-wrapped assets, unified liquidity layer

3.3 Summary

Cross-chain is an important track in the multi-chain ecosystem, characterized by high determinacy and clear business models. As a fundamental communication protocol, LayerZero is expected to become one of the key infrastructures in the blockchain ecosystem.