Notice: I use a bunch of strong comparative metaphors here to help draw comparisons, this technology is still new and there are still risks so this is not financial advice — I just wanted a better way to explain things.
Quick simplified TLDR:
Currently doing multi-chain activities is like sending messages to people through the postal system in the early 1900s. Let’s say a chain is a country, and transactions are messages. In the 1900s, you would need to write a letter and then use service A to stamp it, Service B to send it, the letter would then go on Ship C, and arrive at Country D and will be sent to the recipients address by Postman E. Quite a long process, but some decades later, we invented something that would allow these messages to be transmitted in basically one single step…we invented email.
Currently there are many steps for people to send transactions (messages) across chains. With LayerZero, this is all done in one step. The email comparison is pretty strong and we still need time, but this is definitely a step in the right direction for innovation within the space, and I’m pumped to see what happens next.
Okay now for some more specifics..
If you have spent any time on Crypto Twitter over the past week, you may have heard of this thing called $STG (Stargate Finance). Stargate is a piece of infrastructure built on top of layer zero that allows users and dApps to transfer native assets (not synthetic), by accessing the protocols unified liquidity pools with instant finality. Basically it will let you move assets across most chains in a matter of seconds… but it’s not technically a bridge. All of this is built on top of LayerZero, so let’s see what it is.
Problem
Cross Chain Interoperability is hard, tedious and just not great really. This issue has fragmented innovations within the space to be siloed into individual chains. At this point, most will tend to agree that the future will be multi-chain, but what about the present? Its nice to talk about a multi-chain world, but without the right infrastructure to provide seamless chain to chain communications, and transfers, its all a dream.
Currently transfers are dominated either by CEXes or bridges:
Option A: Send ETH from your MetaMask wallet to Coinbase, Swap ETH/SOL on Coinbase, send SOL to Phantom Wallet.
Option B: Bridges: largely offer a wrapped version of the original asset on another chain versus the actual asset itself.
For both levels, you are putting your trust in a third party. One with a CEX, which presents you with extra fees; the other, with a bridge that requires you to trust a side-chain, prompting a security flaw as the process involves a series of steps. This tedious process has, for the longest time, forced builders to choose one chain and stick with it; you see some dApps going cross chain but there’s still a hurdle in transferring assets etc. It’s like we all work in siloed countries, and haven’t really hit the start of globalisation yet because planes haven’t been invented so every chain just has its own unique dApp but this is not really able to be spread across the world (other chains) since its so hard to import/export.
devs at LayerZero did something and have put out a fix. In a sense, they may be like the Wright Brothers? Ok bullish enough metaphors.
Proposed Solution
LayerZero comes forth as a communication layer. It is essentially a messaging protocol. Chains that support the Layer Zero Endpoint gain access to the protocol. The LayerZero endpoint smart contract will exists on participatory chains (and subnets!) and has an oracle and relayer. The oracle reads the unique block identifier and sends it to the other chain. The relayer gets proof of a transaction. All of this is to reach ‘Valid Delivery’ — where every message across chains has a transaction on the sender chain, and the message is only delivered to the receiver chain if the transaction is verified first.
Stargate, the protocol used for the token swaps allows users to bundle large series of transactions e.g unstake → swap → initiate bridge → claim bridge → swap → stake all in one transaction across chains. You just need to be connected to the sender chain — this works as an invisible bridge so activity across chains becomes as simple and fluid as actions within a single chain. Moving from Fantom, to ETH, to Avalanche will feel the same as moving funds across ETH wallet A to ETH wallet B.
What does it mean?
Imagine a large DEX like SushiSwap having just one interface and code base for all cross chain pairs.
Imagine being able to LP for an asset across all chains - you receive fees from all incoming transactions to Chain B regardless of the source chain.
Imagine swapping from AVAX to SOL from Avalanche to the Solana blockchain in one transaction.
Imagine multi-chain lending. Have your entire asset on one base chain, and directly lend it out or use it to borrow on another chain — again, all in one transaction.
But most of all: Imagine cross chain transactions being so easy that it doesn’t even feel like you’re switching chains.
Pretty cool eh? Check it out anon.
Stargate.Finance