On May 2nd, the cross-chain interoperability protocol LayerZero announced that the first snapshot (Snapshot #1) had been completed. On May 3rd, LayerZero announced that before the token issuance, multiple rounds of Witch Hunt activities needed to be conducted. LayerZero’s “airdrop cleansing” is different from other projects. The methods of “self-destruction” and “mutual destruction” are similar to the ancient Chinese imperial censor’s “rumor reporting”, which has caused controversy. So, what is LayerZero? Can LayerZero solve the problem of wool farming? What other projects and potential opportunities are worth paying attention to in the LayerZero ecosystem? How will LayerZero develop in the future?
“Self-destruction” and “mutual destruction”: LayerZero’s airdrop cleansing movement sparks controversy
In the cryptocurrency industry, wool farming has become the main means for many people to get rich. Many cryptocurrency practitioners have set up studios and started professional wool farming. In order to distribute tokens to long-term supporters of the project, many project teams have also begun to vigorously promote the airdrop cleansing movement. This is why Bryan Pellegrino, co-founder of LayerZero, introduced “self-destruction,” “review,” and “mutual destruction.”
According to the official documentation, when formulating the token distribution plan, LayerZero needs to consider a key factor, which is how to determine the most high-quality user cluster. In LayerZero’s view, the most high-quality users should be the most “persistent” users, and the so-called “persistence” is defined as users who are most likely to continue using LayerZero in the future or continue their past usage habits. Specifically, LayerZero’s Witch Hunt activity is divided into three rounds.
The first round is the “self-exposure” stage, which lasts for 14 days. Users who suspect themselves of being witches can “self-expose” through the window provided by LayerZero in this stage to retain 15% of the airdrop allocation. It is worth mentioning that in order to facilitate the studios’ “self-exposure,” LayerZero also provides an API tool for submitting addresses on a large scale. The second stage is the “trial” stage, during which LayerZero will conduct witch screening according to specific rules. The screening results will be announced on May 18th, and addresses identified during this stage will not receive any airdrop allocation. The third stage is the “mutual exposure” stage, which will last from May 18th to May 31st. LayerZero encourages community users to report witch behavior to each other, and successful reporters can receive 10% of the airdrop allocation of the reported addresses.
LayerZero’s actions have sparked market discussions. Before LayerZero, many well-known projects mainly relied on hiring professional teams to screen for wool farming. LayerZero’s introduction of “self-destruction” and “mutual destruction” is innovative but may not be satisfactory. First of all, how many people will self-destruct for a 15% allocation? From the current market conditions, it is necessary to carefully calculate whether this 15% allocation can recover the cost of airdrop farming. In addition, how can the “mutual destruction” measure prevent malicious attacks? This kind of mutual reporting trend is similar to the ancient emperor’s “rumor reporting” to prevent the blocking of information. Based on many historical lessons, this measure may not be perfect. Will some long-term holders be wrongly accused and leave LayerZero? Will malicious actors take advantage of this to create chaos and profit? Overall, LayerZero’s original intention is good, but the results may not be entirely satisfactory.
LayerZero V2: What’s the innovation?
This year, the cryptocurrency market has been focused on topics such as NFTs, AI, Layer 2 solutions, and yield farming. New users entering the cryptocurrency market may not be familiar with the cross-chain interoperability protocol LayerZero. On January 30, 2024, LayerZero announced the launch of V2. So what innovations does LayerZero V2 bring?
LayerZero V2 improves chain compatibility by utilizing Chain-Agnostic Design, gas payment options, and default values for specific libraries. This helps OApp (Omni-chain applications) developers design a unified architecture for cross-EVM and non-EVM chains. According to the LayerZero V2 whitepaper, there are four components in V2, including an immutable endpoint that can resist censorship, a registry of appended collections for on-chain verification modules (MessageLib), a decentralized verification network (DVN) for cross-chain verification data, and an executor that can perform functions independently of cross-chain message verification context.
According to the official introduction, the highlights of LayerZero V2 include: 1) Universal message passing: the ability to send and write any type of message between chains, including arbitrary data, external function calls, and/or tokens; 2) Modular security: developers can choose from over 20 preferred combinations of decentralized verification networks (DVN) when selecting a security stack to verify cross-chain messages; 3) Permissionless execution: anyone can run an executor in V2; 4) Unified semantics: OApp and OFT contracts enable developers to build applications and tokens in the same way across every blockchain with endpoints in V2; 5) V1 compatibility: migration options are available for V1 applications. If an application is already deployed on V1, it can leverage the new security and execution models through ULN 301.
Mainstream projects in the LayerZero ecosystem
With the upcoming token launch of LayerZero, its ecosystem projects have also started to gain attention. From the perspective of TVL, Stargate developed by LayerZero Labs and the cross-chain lending protocol Radiant Capital are worth noting. From the perspective of the investment team, Angle Protocol, a decentralized stablecoin protocol led by a16z and primarily focused on the Euro stablecoin, is also worth paying attention to.
Stargate: Stargate Finance is a multi-chain cross-chain bridge protocol based on LayerZero, created by LayerZero Labs in March 2022. It is the core of Omnichain DeFi and the first DApp based on the LayerZero protocol. It is a protocol that enables asset transfer between multiple blockchains.
Angle Protocol is a decentralized stablecoin protocol based on LayerZero. It has launched the agEUR stablecoin and the stEUR Euro savings solution, which is mainly supported by real-world assets (RWA) held in the agEUR reserves by the protocol. The initial interest rate is set at 4% and paid in Euros. Angle Labs completed a $5 million seed round of financing, led by a16z.
Radiant Capital (RNDT) is a full-chain liquidity lending platform built on LayerZero’s cross-chain technology, allowing users to lend across chains.
Hashflow is a cross-chain DEX that focuses on zero slippage and MEV protection. It currently supports Ethereum mainnet, BNB Chain, Avalanche, Polygon, Arbitrum, and other networks through the use of LayerZero for cross-chain message passing.
Star Protocol is a full-chain domain name protocol built on LayerZero, which supports domain name cross-chain functionality across 25 blockchain networks.
Mugen Finance is a yield management protocol based on LayerZero, aiming to create a more transparent and diverse set of yield strategies.
Outlook for LayerZero’s future development
In the blockchain industry, the problem of isolation has always existed. The key infrastructure for exchanging data and assets between different blockchains is the cross-chain interoperability protocol. LayerZero is a cross-chain interoperability protocol for lightweight information transmission between blockchains, providing secure, reliable, and trustless information transmission. However, it also faces competition from many other cross-chain interoperability solutions.
Chainlink is developing the Cross-Chain Interoperability Protocol (CCIP), which is an open-source standard that supports cross-chain communication, including sending messages and transferring tokens. The goal of CCIP is to achieve universal connectivity between hundreds of blockchain networks using standardized interfaces, with the hope of reducing the complexity of building cross-chain applications and services. Wormhole is a generic interoperability protocol that enables the transfer of tokens and messages across different blockchain networks. Network guardians monitor information on the source chain and verify it for transfer to the target chain. The Inter-Blockchain Communication (IBC) protocol is a standard protocol for blockchain interaction in the Cosmos network, aiming to achieve interoperability between different blockchains. From the current development trend, applications based on the Inter-Blockchain Communication (IBC) protocol are already in the lead, especially with the emergence of modular blockchains like Celestia, quietly changing the development landscape of the cryptocurrency market.
Overall, LayerZero has strong technical advantages and a strong user base. As of now, LayerZero has supported a total of over 20 chains, including Ethereum, BNB Chain, Avalanche, Polygon, and Base, with a user base of nearly 6 million. However, whether LayerZero’s challenges can sustain continuous development after the token launch remains to be seen.
