LayerZero’s Full-Chain Narrative Security Prospects and Ecological Opportunities

LayerZero's Security Prospects and Ecological Opportunities

Author: Kyle Liu, Investment Manager at Bing Ventures

Key Points

• LayerZero has a high processing throughput. As long as the cross-chain throughput is sufficient, the middle layer will not be a limiting factor.
• The design concept of LayerZero is very much in line with the current trend of lightweight development, providing developers with a simpler, more efficient, and flexible development experience. For liquidity providers and applications, the development prospects of LayerZero are very optimistic.
• Because end users cannot recognize the security of cross-chain transactions, “user-oriented” projects need to be cautious when accessing protocols like LayerZero to avoid being contaminated by malicious applications within the same ecosystem. This to some extent creates a situation of “sharing prosperity and sharing loss” in ecosystem construction.
• Bridging should eventually be abstracted from the user experience, which is a larger market. Existing bridges require multiple wallet changes, custom processes, and multiple clicks, while Stargate is a wrapper contract that allows users to obtain the assets they want on the target chain with just one click, without any gas or other steps on the target chain.
• Looking at the rankings of LayerZero ecosystem projects, DeFi infrastructure, NFT, GameFi, and cross-chain bridge projects are currently the main focus. The “whole-chain” scenario provides a more unified and collaborative blockchain ecosystem. We are more optimistic about the introduction of zero-knowledge proof-based cross-chain message relay protocols, which will promote secure and free flow of liquidity and trustless interaction between different blockchain networks. DeFi and NFT are expected to benefit greatly from this transition, with greater liquidity and flexibility in yield farming and lending protocols, as well as better investment strategies for on-chain derivatives and more asset management applications.

LayerZero is a developer-friendly, highly usable, and highly scalable full-chain development framework. Its technical architecture provides certain security guarantees, effectively decentralizes risks, and has a high degree of flexibility to meet the needs of different types of blockchain applications. Therefore, LayerZero has a very broad prospect in full-chain applications.

LayerZero is moving towards a trustless cross-chain framework, which is currently the most dangerous and fascinating area in the blockchain world. Can LayerZero withstand the security challenges? What opportunities should we explore in this wave of full-chain narratives? This article will explore the development space of LayerZero based on the trend of cross-chain evolution.

I. Technical Architecture of LayerZero

LayerZero is a protocol aimed at achieving comprehensive cross-chain interoperability. Its technical architecture includes Ultra Light Nodes and Block Header Relays (Oracles). LayerZero is committed to creating a simple, easy-to-use, and secure blockchain development framework, which has the following two important characteristics:

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1. The worst-case security of this architecture is equivalent to the best security of the selected Oracle. For example, if Chainlink is chosen as the Oracle, even in the worst-case scenario where the Oracle and Relayer are the same entity and reach a consensus, whether malicious or not, the basic security is still equivalent to that of Chainlink.
2. Even if the Oracle becomes malicious and conspires with Relayer A to launch an attack, only user applications that use Relayer A will be affected, while applications that use other relayers or other Oracles will not be affected at all. This feature can effectively distribute risks and exponentially increase the cost of an attack.

Source: LayerZero

From a security perspective, this is a feature that existing solutions do not possess. Therefore, LayerZero’s technical architecture is very attractive, which is reflected in the following aspects:

Improved Cross-Chain Efficiency

The biggest advantage of LayerZero is the improvement in the efficiency of cross-chain transactions. In the transmission process of the middle layer, there is no consensus formation or validation process, which means there is no additional complexity. Compared to other solutions, LayerZero’s middle layer is very lightweight, and the Oracle and Relayer can efficiently forward transaction proofs. Therefore, LayerZero has a high processing throughput, as long as the throughput of the crossed chains is large enough, the middle layer will not be a limiting factor.

LayerZero ensures the security and reliability of transactions through direct verification on the chain, and has great scalability, providing a better user experience for cross-chain transactions. However, there are still some limitations, such as the capacity limit of blocks, which is caused by the characteristics of the underlying chain itself. The design goal of LayerZero is to minimize additional burdens while maintaining the trustworthiness of cross-chain transactions.

Source: LayerZero

More Than Asset Transfer

In the current blockchain ecosystem, most of the focus is on asset transfers, such as decentralized exchanges and asset cross-chain bridges. However, with the emergence of LayerZero, developers can use it to build applications such as shared-state applications, which can achieve cross-chain profit aggregation and rebalancing. At the same time, through unified governance, voting can be decentralized from a single chain to the entire protocol. In addition, LayerZero can also play an important role in scenarios such as lending and gaming, making cross-chain operations simpler and more efficient.

LayerZero can also be seen as a new type of data messaging protocol, rather than just a tool for transferring digital assets. It can provide developers with a completely new design space to build applications that cannot be achieved on a single blockchain in the past. It can be foreseen that with the popularization of LayerZero and the continuous expansion of application scenarios, it will bring about a completely new transformation.

Source: LayerZero

Developer-Centric

The design philosophy of LayerZero is developer-centric. Applications only need to implement two functions: sending and receiving. They send a generic byte payload and parse the byte payload when receiving. Developers can use languages such as Solidity and Rust to write any application that can be built on the chain and can operate across multiple chains with a high degree of modularity. This design philosophy is in line with the current trend of lightweight development and can provide developers with a simpler, more efficient, and flexible development experience. Compared to existing solutions such as middle chains and IBC-style cross-chains, LayerZero’s ultra-lightweight nodes have the following advantages:

1. Higher security: Compared to the intermediate chain solution, LayerZero does not rely on the intermediate chain for communication, thus avoiding the security risks of the intermediate chain;
2. Lower cost: Compared to IBC-style cross-chain, LayerZero only needs to request a single block and does not need to synchronize the entire blockchain, thus reducing costs.

However, we also note that LayerZero needs to use an Oracle to forward block headers for cross-chain communication, which may increase complexity and centralization. Although LayerZero adopts a layered architecture and an open relay network to ensure security, it still needs to cooperate with Oracles and relay providers. In this process, LayerZero adopts a decentralized risk structure. Applications can choose suitable Oracles and relays according to their own needs to avoid potential risks.

In addition, LayerZero adopts a modular implementation approach, which allows different relays to be integrated and combined, further improving security and reliability. The security of LayerZero is built on multiple factors, including a decentralized risk structure, user application control, and modular implementation, which together constitute the security architecture of LayerZero.

Source: Dune

II. Security Controversy and Prospect Analysis

The security model of LayerZero is based on two independent participants, Oracles and Relayers, who work together to ensure the security of the protocol. Whenever a message is sent from one chain to another, the Oracle waits for the transaction on the sending chain to complete, then writes relevant information on the receiving chain, and finally the Relayer sends a proof to the receiving chain to prove that the stored block header contains the message. The security foundation of LayerZero is as follows:

• The independence of Oracle and Relayer is the basis of security.
• Users can choose different combinations of Oracle/Relayer to diversify risks.
• Users can run their own Relayer to protect their assets.

Customized Risk Structure

LayerZero adopts a layered architecture to solve the interoperability problem between blockchains. One of the core security features is a decentralized risk structure, where any operating entity needs to bear its own risks. This means that user applications and liquidity providers have different trust assumptions. Another key feature is an open relay network, where anyone can run a relay, and user applications have full control over all security levers, including the selection of Oracles and relays they want. User applications can also have confirmation numbers from the source chain to control risks. Such a decentralized design ensures the security of user applications and avoids potential risks of centralized control architecture.

However, LayerZero assumes that Oracles and Relayers are independent and honest participants. If they collude, it may lead to message verification failure. Although LayerZero claims that its design eliminates the possibility of collusion, in practice, each application can define its own Relayers and Oracles. Therefore, LayerZero itself cannot guarantee that these components are independent and cannot collude, but it is up to the application provider to provide these guarantees. If an application chooses to undermine them, LayerZero has no mechanism to prevent it. By default, all user applications can change Relayers and Oracles at any time, thereby completely redefining security assumptions. Therefore, it is not enough to only check the security of a given application once.

Source: Bing Ventures

The development prospects of LayerZero are very optimistic for liquidity providers and applications. Developers have complete control and can avoid the risks caused by malicious relays or oracles. Liquidity providers can also choose to run their own relays based on their own needs and risk preferences, further reducing risk. LayerZero’s layered architecture also ensures the isolation between different blockchains, preventing possible attacks and vulnerabilities from spreading. Overall, LayerZero’s security is built on a decentralized and open relay network, and user applications also have full control, bringing higher convenience for liquidity providers and users.

Collusion Risks

LayerZero is essentially an “ultra-light” cross-chain solution, with its architecture consisting of relayers and oracles. Relayers act as intermediaries for message transmission, while oracles oversee relayers. LayerZero’s trust assumption depends on the independent operation of oracles and relayers, making it impossible to send invalid messages. The bridging model of LayerZero includes the requirement for applications to select relayers on the target chain. Therefore, in this model, the key to the security features within the protocol lies in the relayers. Although this type of project is lightweight, has less code, and is easy to launch, it has several issues:

• It reduces node validation and decreases security;
• The trust assumption between relayers and oracles cannot always hold, and there is no fundamental guarantee that they will not collude;
• LayerZero is only responsible for message transportation and is not accountable for the security of the applications.

Opening relayers to everyone to operate cannot solve the above problems and may introduce new ones. If LayerZero nodes with configurable settings are allowed, attackers can potentially replace them with their own “LayerZero” nodes and forge messages.

Source: Bing Ventures

Curbing Malicious Behavior

Since end users cannot recognize the security of cross-chain transactions, “user-oriented” projects need to be cautious when integrating protocols like LayerZero to prevent contamination from malicious applications within the same ecosystem. This to some extent creates a “rising and falling together” pattern in ecosystem development. Therefore, the security issues of LayerZero need to be highly concerned. To address the issues of LayerZero, the following two aspects can be considered:

First, increase the number of node validations to enhance security. LayerZero reduces the dozens of node validations to a single Oracle validation, naturally decreasing the security level. Therefore, it is particularly important to increase the number of node validations to enhance security. Based on multiple node validations, further introducing consensus algorithms can increase the difficulty and complexity of on-chain validations to improve security.

Second, establish a trusted relayer mechanism. Since the security issues of LayerZero are mainly caused by the trust assumption between relayers and oracles, it is necessary to establish a trusted relayer mechanism. This can be achieved through zero-knowledge proof technology, utilizing the decentralized and immutable characteristics of blockchain to establish a trusted relayer mechanism and enhance the security of LayerZero.

Source: Way Network

III. Key Product: Stargate

Stargate is a cross-chain bridging protocol that enables assets to be transferred quickly between different chains without changing existing protocols and liquidity. Cross-chain transactions have always been a challenge in decentralized finance. The three goals of cross-chain asset transfer are instantaneity, security, and capital efficiency. Most existing cross-chain bridges cannot achieve all three goals simultaneously and must compromise in one or two aspects.

Stargate allows users and decentralized applications to transfer native assets between different blockchain networks without the need for wrapping or intermediary tokens. Stargate adopts a mechanism of “lock + mint” and “burn + redeem”, which can achieve instant guaranteed finality because the assets minted on the target chain are not exposed to the risk of reversal. At the same time, Stargate utilizes a composable design that allows for bidirectional connections between any two blockchain networks that support smart contracts, thereby improving security and capital efficiency.

Source: Ryan Zarick

Compared to other cross-chain bridging protocols, the advantage of Stargate is that it is a universal and composable cross-chain protocol. It can be applied not only to cross-chain transactions but also to various other cross-chain applications. As more and more blockchain projects emerge, the demand for cross-chain transactions will continue to grow, and Stargate can serve as a bridge to facilitate trading and liquidity provision for users on different chains.

Stargate eliminates the extra steps of acquiring unwanted assets that need to be exchanged on the target chain. Instead, users can obtain what they want and save slippage and exchange fees. Existing bridges require multiple wallet changes, customized processes, and multiple clicks, while Stargate is a wrapping contract that allows users to obtain the assets they want on the target chain with just one click, without the need for gas or any other steps on the target chain. Bridging should ultimately be abstracted from the user experience, which is a larger market.

Source: Bing Ventures

IV. Introduction to LayerZero Ecosystem

Looking at the rankings of LayerZero ecosystem projects, they are currently mainly focused on DeFi infrastructure, NFT/GameFi, and cross-chain bridge projects.

Source: LayerZero.Corner

DeFi

AMM

1. SushiXSwap – SushiXSwap is a LayerZero-based cross-chain trading protocol launched by SushiSwap, supporting networks including Optimism, Arbitrum, Fantom, BNB Chain, Polygon, and Avalanche. Users can conduct cross-chain transactions between supported networks and assets.
2. Hashflow – Decentralized trading platform Hashflow announced the launch of Hashflow’s bridgeless cross-chain exchange service based on LayerZero at the end of April. It adopts the Request for Quote (RFQ) mode, with token prices set by professional market makers. It supports token transactions between Ethereum, Avalanche, BNB Chain, Arbitrum, and Polygon.
3. Cetus – Cetus is a pioneer dex and liquidity protocol built on the Aptos & Sui blockchains. It focuses on providing DeFi users with better trading experience and higher capital efficiency through the process of building its centralized liquidity protocol and a series of auxiliary functional modules. Established a new strategic partnership with LayerZero_Labs on October 22, 2022.
4. interswap – A fully composable native asset cross-chain AMM with unified liquidity built on the LayerZero network.
5. starswap – A dex in the Move ecosystem that offers asset security, stability, fast transactions, and low fees.

Lending

1. Radiant Capital – Radiant Capital is a LayerZero-based cross-chain lending protocol, where users can deposit collateral on Chain A and borrow on Chain B, integrating liquidity from multiple chains. The project has currently launched the v1 version on Arbitrum, which only supports borrowing and lending of assets on Arbitrum. The project documentation indicates that the v2 version will support cross-chain lending of WBTC, ETH, and USDC.
2. Cedro Finance – Cedro Finance is a cross-chain decentralized liquidity protocol where users can borrow and lend listed assets on multiple chains at affordable transaction fees. Lenders can deposit their assets to increase the platform’s liquidity, while borrowers can borrow liquidity by overcollateralizing.
3. Clearpool – Clearpool is a decentralized financial ecosystem that includes an unsecured institutional liquidity marketplace. Driven by supply and demand market forces, Clearpool’s unpermissioned single borrower pool allows institutions to raise short-term capital while providing DeFi lenders with the opportunity to earn risk-adjusted returns based on market consensus-derived interest rates. The fully licensed institutional-grade platform further satisfies the compliance requirements of institutional market participants for wholesale lending of digital assets.
4. Venus Protocol – A high liquidity lending protocol on BNBChain.
5. tapioca – Tapioca DAO enables users to borrow and lend across 12+ EVM and non-EVM blockchains. The core products include Singularity, an independent risk lending market based on Sushiswap’s Kashi product, and Yield Box (BentoBox V2), a permissionless token vault.

Derivatives

1. Aries – Aries Markets is a Move-based decentralized exchange. The product covers lending, swaps, margin trading, and account risk management, all centralized on one platform. Through a unified margin account, users can easily earn interest on deposits, borrow from and trade with shared liquidity pools, and access other DeFi products on Aptos.
2. Rage trade – Rage Trade is a cross-chain Ethereum perpetual contract market, supporting Ethereum, Arbitrum, Avalanche, and Fantom. Rage Trade allows users to directly deposit ETH-USD LP from supported networks’ DEXs, money markets (such as Aave, Rari, Euler), and derivative markets (GMX, Ribbon) into Rage Trade through the LayerZero-based cross-chain bridge Stargate. 80% of the TVL is allocated to revenue-generating services (Curve, GMX, Sushi, etc.), and 20% of the TVL provides liquidity support for Rage Trade’s contract trading.

Aggregators

1. mugen.finance – RealYield based on LayerZero.
2. Cashmere – Cashmere Labs aims to be a fully interoperable anti-MEV DEX aggregator. The product is not yet launched, but according to the official description, Cashmere Labs consists of two main products: stablecoin trading and an anti-MEV cross-chain DEX aggregator. The stablecoin trading improves slippage and liquidity issues through single-sided liquidity and incentives. The cross-chain DEX aggregator combines LayerZero’s cross-chain interoperability and 1inch’s liquidity. Due to the inability of arbitrageurs to access order information during inter-chain message transmission, they cannot engage in front-running attacks, sandwich attacks, and other MEV-related attacks.
3. OmniBTC – OmniBTC is a LayerZero-based cross-chain DEX aggregator, supporting Ethereum, BNB Chain, Avalanche, Polygon. The team states that they will focus on the new public chains Aptos and Sui in the future.

Stablecoins

1. Circle – USDC issuing company
2. Angle Protocol – Angle Protocol is a decentralized stablecoin protocol that announced its integration with LayerZero in August, enabling cross-chain transfers of its euro stablecoin agEUR between Ethereum, Polygon, Optimism, and Arbitrum.

Bridges

1. Stargate – Stargate is a fully composable liquidity transfer protocol. With Stargate, users and dApps can transfer native assets across chains and access the protocol’s unified liquidity pool with instant finality. Stargate is the first project built on LayerZero and aims to build a fully composable native asset cross-chain bridge protocol.
2. AptosBridge – LayerZero Aptos Bridge enables seamless asset transfers between Aptos and the blockchain world. Outbound transfers of Aptos require 1 million block confirmations and are expected to take approximately 4 days.
3. Bloctoswap – Blocto is a cross-chain wallet that provides a seamless experience through a developer-friendly SDK, a built-in decentralized exchange called BloctoSwap, and its non-custodial NFT marketplace BloctoBay.
4. LianGuairakeet.dao – LianGuairakeet.dao is a LayerZero-based cross-chain bridge that supports Ethereum, Polygon, Arbitrum, Optimism, BNB Chain, Avalanche, and Fantom. Currently, the project is still in the testing phase and only supports cross-chain transfers of NFTs on the testnets of the aforementioned networks. Users can submit applications for the cross-chain support of their desired NFTs.

Tools

1. Lz Domain – Lz Domain is Layer Zero’s domain name service. Through LZ, users and businesses can replace computer-generated identifiers (e.g., wallet addresses) with human-readable and easily memorable names, such as LayerZero.lz.
2. Notify – Notify allows Web3 developers to integrate communication into their applications without building the infrastructure themselves. Notify will soon launch the Web3 inbox Notifi Hub, which aggregates cross-chain notifications and messages into a single hub. Notifi currently supports Solana, NEAR, and Ethereum, and will expand to Polygon, Avalanche, Aptos, and Sui. Notifi has completed a $10 million seed funding round led by Hashed and Race Capital, with participation from Struck Capital, HRT Capital, Wintermute, Superscrypt, and others.
3. LayerZero.scan – With LayerZero Scan, users can dive deeper into what happens on-chain and cross-chain.
4. Reunit – All-in-one wallet.

Infrastructure

1. Chainlink – Oracle
2. zokyo – Audit company
3. Zellic – Audit company
4. dlab – Omnichain Interoperable Payment Protocol (OIPP). Building decentralized NFT AMM protocol on LayerZero.

NFT

1. Omni X – Omni X is a LayerZero-based cross-chain NFT platform. According to official information, Omni X aims to connect creators and users, enabling users to mint and trade NFTs on the supported chains, aggregating users and communities dispersed across multiple chains.
2. Trantor – Trantor is a LayerZero-based NFT cross-chain communication infrastructure that supports cross-chain transfers of NFTs. Currently, it only supports the testnets of BNB Chain and Polygon and supports users in minting test NFTs for cross-chain operations on the testnets.
3. Omnisea – Omnisea is a LayerZero and Axelar Network-based cross-chain NFT launchpad where creators can issue LayerZero-compatible cross-chain NFTs. Additionally, the project has issued the token OSEA, and locked tokens can receive a portion of the platform’s revenue as a reward.
4. Omnite – Omnite offers a LayerZero-based cross-chain NFT solution. Its product has not been launched yet, but developers can use the SDK developed by Omnite to build cross-chain NFT projects.
5. Oswap – Oswap is a LayerZero-based cross-chain NFT DEX protocol developed by dLab. Its Alpha testing has concluded. The protocol is similar to SudoSwap but supports cross-chain transactions based on LayerZero.
6. Holograph – Holograph is a full-chain NFT protocol launched by CXIP Labs. The Holograph suite includes three initial products: Bridge, Core, and Mint. Bridge allows NFTs to be transferred between Ethereum Virtual Machine (EVM) blockchains. Core is a multi-chain application programming interface (API) for software developers, and Mint is an NFT minting product for creators. All three products are currently in the testing phase and only support Goerli, Polygon, and Avalanche testnets.
7. tofuNFT – Multi-chain NFT marketplace
8. AllsLianGuairk – NFT Omnichain-Liquidity aggregation protocol.
9. Trackstack – Marketplace for audio NFTs.

GameFi

1. Catddle – Catddle is a Web3 pet game, with its NFTs based on LayerZero. As of the time of writing, the floor price of Catddle on OpenSea is 0.035 ETH, with a trading volume of 11 ETH. The game content is not yet available, but according to official documentation, the game is similar to a pet-raising game and will issue tokens MEO and governance token CAT for in-game functionality. The total supply of MEO is unlimited, while the total supply of CAT is 1 billion, with 5% allocated for airdrops.
2. Beyond – Beyond is a Web3 space exploration game, with NFTs (such as planets) supporting cross-chain functionality based on LayerZero.
3. DeFi Kingdoms – DeFi Kingdoms combines the appeal of decentralized finance and the emerging Play-to-Earn economy. It is live on the Harmony ONE network.

SocialFi

1. APOLLOFI – A socialfi project based on LayerZero.

5. Opportunities in the LayerZero ecosystem

Cross-chain DeFi protocols driving ecosystem development

The DeFi protocols on LayerZero are thriving, including decentralized trading platforms, lending protocols, and derivatives exchanges. In terms of AMMs, SushiXSwap, Hashflow, interswap, and starswap support cross-chain transactions, providing users with more asset choices and trading options. In lending, Radiant Capital, Cedro Finance, Clearpool, and Venus Protocol support lending on multiple chains, increasing user liquidity and options. Meanwhile, Cetus enhances user trading experience and fund efficiency through its centralized liquidity protocol and multiple subsidiary functional modules. In derivatives, Aries and Rage Trade offer various products such as lending, futures, margin trading, and account risk management. The future trends of LayerZero will include broader cross-chain support, faster transaction speeds, lower fees, higher security, and more innovative products. As LayerZero becomes more widespread across multiple blockchains, it will continue to play an important role in the DeFi ecosystem and drive further development in the DeFi market.

The future of cross-chain bridge ecosystem

Another major feature of the LayerZero ecosystem is the construction of a series of cross-chain bridge protocols and applications, dedicated to breaking down barriers between different blockchains and providing comprehensive asset liquidity support. First is the bridge protocol. Stargate Finance on LayerZero is a fully composable liquidity transfer protocol that provides seamless cross-chain native asset transfers for users and dApps. AptosBridge, on the other hand, is a bridge protocol on LayerZero that enables asset transfers between Aptos and the blockchain world. Both of these bridge protocols are built on LayerZero and have characteristics such as speed, efficiency, and reliability. In the future, as blockchain technology continues to develop and application scenarios expand, bridge protocols will become important hubs for connecting different blockchains, and LayerZero has immense potential in this regard.

Secondly, there are decentralized exchanges. LayerZero’s Bloctoswap is a cross-chain wallet that provides users with seamless asset trading and transfer services through its built-in decentralized exchange BloctoSwap and non-custodial NFT marketplace BloctoBay. Decentralized exchanges have obvious advantages in asset security, liquidity, and fees. In the future, LayerZero can consider adding more cross-chain asset support, improving transaction speed, and enhancing user experience in the development of decentralized exchanges.

Lastly, there are full-chain cross-chain bridges. LayerZero’s LianGuairakeet.dao is a full-chain cross-chain bridge based on LayerZero, supporting multiple blockchain networks such as Ethereum, Polygon, Arbitrum, Optimism, BNB Chain, Avalanche, Fantom, etc. The project is currently in the testing phase and only supports cross-chain transfers of NFTs on testnets, but it has great potential for future development. Full-chain cross-chain bridges can achieve seamless connection between different blockchains, greatly improving asset liquidity and interoperability, and have high application value and market potential.

Building a diverse and scalable NFT and GameFi ecosystem

In LayerZero’s NFT ecosystem, there are currently multiple NFT projects developed based on LayerZero. For example, the Omni X platform aims to connect creators and users, enabling the minting and trading of NFTs on multiple chains it supports. Trantor is an NFT cross-chain communication infrastructure that supports cross-chain transfers of NFTs. Omnisea is a full-chain NFT launchpad where creators can issue NFTs based on LayerZero’s cross-chain capabilities and receive a portion of platform revenue as rewards by locking tokens. These projects demonstrate the diversity and scalability of LayerZero’s NFT ecosystem, providing strong support for the further development of NFTs.

In addition, LayerZero also has some NFT projects in the testing phase, such as Omnite, which provides a full-chain NFT solution, and the Holograph protocol, which includes Bridge, Core, and Mint products that offer NFT cross-chain transfers, multi-chain application programming interfaces, and NFT minting products. These projects are expected to further expand LayerZero’s NFT ecosystem.

In LayerZero’s GameFi ecosystem, Catddle, Beyond, and DeFi Kingdoms are games developed based on LayerZero. Catddle is a Web3 pet game where NFTs are issued based on LayerZero, supporting the trading and governance token CAT airdrop. Beyond is a Web3 space exploration game with NFTs that support LayerZero’s cross-chain functionality. DeFi Kingdoms combines decentralized finance and play-to-earn economics, providing players with rich gaming experiences and earning opportunities.

Source: Bing Ventures

Summary: Opportunities in the era of full-chain

Based on the above data and introduction to the main ecosystem projects, we can see that besides cross-chain infrastructure, projects on LayerZero mainly include various DeFi derivatives, NFTs, GameFi, and tools such as yield aggregators related to them. The full-chain aggregation track is a diverse and broad track. Therefore, if you want to find opportunities on LayerZero, you can pay attention to the following points:

Full-Chain DeFi

The value and opportunities of full-chain lending in the LayerZero ecosystem mainly lie in solving the liquidity fragmentation problem between different chains/L2s, providing users with cross-chain lending services, and reducing the operational complexity for ordinary users, thus improving the utilization of assets. Unlike Aave, Radiant (RDNT) builds its full-chain interoperability through LayerZero’s Omnichain technology, allowing its users to deposit assets on any supported chain and borrow various assets across multiple chains without the need for asset cross-chain operations, enabling lending operations to be completed on different chains or L2s. The essence of Radiant’s full-chain money market is to integrate liquidity from different chains and provide users with more convenient and efficient lending services.

From a technical perspective, Radiant achieves cross-chain interoperability through Stargate’s routing interface, using cross-chain operations that occur after borrowing. According to Defillama’s data, the TVL of Ethereum L1 accounts for only about 60%, with the rest distributed on other different chains. Radiant’s goal is to integrate liquidity from different chains, build a full-chain lending market, and solve the liquidity fragmentation problem between different chains/L2s, thereby improving the asset utilization of users.

However, the update of Radiant v2 may bring uncertainties to existing lenders and borrowers. Although the update may be aimed at changing the unsustainability of current liquidity mining, it may also lead to a decrease in interest sharing, longer vesting periods, increased penalties, and the need to provide liquidity to receive mining rewards. The release time of RDNT will also be extended, which may have a negative impact on users who want to withdraw their earnings as soon as possible. However, for users who hold RDNT for the long term and are willing to provide liquidity for liquidity mining, such an update will bring longer-term returns.

In summary, Radiant’s full-chain lending market solves the liquidity fragmentation problem between different chains/L2s, improves the asset utilization of users, and provides users with more convenient and efficient lending services. Although the update of Radiant v2 may bring some uncertainties, for users who hold RDNT for the long term and are willing to provide liquidity for liquidity mining, such an update will bring longer-term returns.

Source: DefilLama

Full-Chain NFT

With the launch of Stargate Finance, full-chain NFTs have gradually become a highly anticipated area within the LayerZero ecosystem. As a full-chain interoperability protocol, LayerZero enables the transfer of data and assets between source chains and target chains through endpoints, oracles, and relays. Gh0stly Gh0sts is the first full-chain NFT project on LayerZero. Full-chain NFTs can bring opportunities to many projects and chains. They can bring significant NFT assets to other chains and act as catalysts. With the cross-chain support of LayerZero, the application scenarios of NFTs will be expanded more widely, allowing users to transfer their NFT works to other chains, attracting more users to participate in the NFT market. In addition, the launch of full-chain NFTs will also bring more opportunities in cross-chain asset management, blockchain games, social networks, digital identities, and other fields.

The whole-chain NFT also has the effect of the strong getting stronger. Over time, whole-chain NFTs may ultimately prove to be most beneficial to Ethereum, as they play a greater role in consolidating and expanding Ethereum’s already extensive influence while parallelly advancing the influence of other chains. Therefore, for other chains to gain a larger share in the whole-chain NFT market, they need to be more actively innovative and market-oriented in order to stand out in fierce competition. In the case of Gh0stly Gh0sts, the project brings innovation to cross-chain transfer of NFTs, solving the problem of high gas fees required for minting, and preserving the “nativeness” of cross-chain items. However, there are also some shortcomings, such as the high cost of frequent transfers and the inability to achieve “whole-chain universality” of NFTs. Therefore, as a whole-chain NFT project, Gh0stly Gh0sts needs to be more innovative and address these issues in order to meet the needs of more users and gain a larger share in the whole-chain NFT market.

Source: NFTSCAN

Introduction of ZKP

The cross-chain message relay protocol based on Zero-Knowledge Proof (ZKP) can improve the security of cross-chain communication to some extent. DeFi products within LayerZero can integrate liquidity from different chains, enabling DEX, cross-chain transactions, and aggregators to provide better user experience, lower slippage, and higher trading pair liquidity. In other words, profit strategies can be more flexible as more opportunities for profit can be found on different blockchains. Lending protocols can collaborate with more DeFi protocols on different chains and accept deposits of different tokens from different chains.

On-chain derivatives will benefit greatly from liquidity. Through secure cross-chain communication, the derivatives market can reach potential customers from different chains and aggregate more liquidity to provide a better trading experience. Asset management protocols can also access more assets from different chains, as well as derivatives from different chains, allowing managers to use more investment strategies.

In conclusion, the “whole-chain” scenario provides a more unified and collaborative blockchain ecosystem. We have a more positive outlook on the cross-chain message relay protocol that introduces zero-knowledge proofs, as this design will facilitate secure and trustless flow of liquidity and interoperability between different blockchain networks. DeFi and NFTs are expected to greatly benefit from this transition, with greater liquidity and flexibility in yield farming and lending protocols, as well as better access to on-chain derivatives and more asset management applications for investment strategies.

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