Author: Babywhale, Techub News
If we talk about the most anticipated airdrops in the first half of this year, LayerZero must have a place. As a "hotshot" that has promoted the concept of "omnichain" and has reached a valuation of several billion dollars in the private financing stage, the news of LayerZero's token issuance has added fuel to the fire in June, which is about to enter summer.
Although LayerZero has received unlimited optimism from investors, it has been experiencing many setbacks along the way. From the initial valuation that was considered inflated, to the questioning of the security of the mechanism, to the defeat to Wormhole in the official cross-chain protocol competition for BNB Chain on Uniswap, and the wetETH OFT (full-chain token) that was not supported by Lido, the three-year entrepreneurial journey of LayerZero has always been controversial.
A talented Texas Poker player and AI master joins Web3
LayerZero announced the completion of a $2 million seed round in April 2021 during the last bull market, but did not disclose the investors. In the market environment at the time, $2 million in financing was not "good enough", which may be the reason why many people did not pay attention to it at the first time.
From left to right: LayerZero co-founder Caleb Banister, co-founder and CTO Ryan Zarick, co-founder and CEO Bryan Pellegrino
Bryan Pellegrino, Ryan Zarick, and Caleb Banister, three top students who graduated from the University of New Hampshire with a degree in computer science and were also colleagues in the university's computer network research lab, together formed the core team of LayerZero. Among them, Sequoia Capital once invited senior journalist and producer Sam Eifling to write a special article about the legendary story of CEO Bryan Pellegrino:
Bryan Pellegrino is a poker prodigy who started playing Texas Hold'em at the age of 15. He is also a math genius who has won a total of more than $500,000 in prize money in the World Series of Texas Hold'em alone. When Bryan Pellegrino was young, he was addicted to playing Texas Hold'em online, which inadvertently sparked his interest in computer science.
In 2013, Bryan Pellegrino overheard his brother and brother-in-law discussing Bitcoin. Interestingly, the way Bitcoin is mined is somewhat similar to the "probability" in Texas Hold'em. It was this similarity that attracted Bryan Pellegrino and his brother and brother-in-law to buy computers to mine.
Later, due to the collapse of Bitcoin, the closure of Bitcoin exchanges, and the arrest of Bitcoin Foundation board members for money laundering, Bryan Pellegrino temporarily parted ways with cryptocurrencies. Instead of continuing to persevere until the bull market, Bryan Pellegrino also adhered to the principle of "a gentleman should not stand under a dangerous wall" and continued to play his favorite Texas Hold'em game, but gradually, he began to feel a little bored...
Bryan Pellegrino at the poker table
Bryan Pellegrino believes that Texas Hold'em is an endless game, and "eternal profit" can no longer make him happy. In 2015, seven years after graduating from college, Bryan Pellegrino was already considering retirement. After traveling for a year, Bryan Pellegrino returned to his home in Vancouver and was attracted by the concept of "baseball artificial intelligence". He developed an AI based on analyzing the pitcher's past data to predict the way he pitches against different batters, and sold it to several baseball clubs. But this is still not the happiness Bryan Pellegrino is looking for. He wants to do something more important and hopes to be the best in the new field.
If we were to ask what the new field was at that time, Web3 would naturally be the best choice.
Perhaps due to his experience in Bitcoin mining a few years ago, Bryan Pellegrino refocused his attention on Web3. At the end of 2016, he regained his confidence in cryptocurrencies and bought Bitcoin. In 2017, Bryan Pellegrino and Daniel Chen from a16z co-developed and launched OpenToken in 2018 to help ordinary people issue tokens. After that, the project also experienced transformation and acquisition. Bryan Pellegrino still did not really settle down in this industry, but returned to the field of AI.
In 2020, Bryan Pellegrino, Ryan Zarick, who later co-founded LayerZero, Caleb Banister, and Noam Brown from Facebook AI published a paper introducing a Texas Hold'em AI product "Supremus", which defeated the world's best poker AI and some of the world's top professional players. A key point of this paper is that players do not always make the best choice, but may play the game in a way that makes them least regretful. Their paper was later cited in game theory research published by Alphabet AI Lab DeepMind.
It was also in this year that the launch of Binance Smart Chain (BSC) attracted the attention of Bryan Pellegrino, who planned to develop a game on BSC, but the game NFT would be placed on Ethereum, where NFT is more popular. At this moment, Bryan Pellegrino suddenly realized that transferring NFTs between chains is a very troublesome and risky thing with the current infrastructure. At that time, many "cross-chain bridges" only issued packaged assets on the target chain, and what the blockchain needs is an underlying infrastructure that can connect various chains.
After seeing the isolation of various chains in the Web3 field and the high risks of cross-chain bridges, Bryan Pellegrino intends to develop a protocol to achieve true interconnection between chains, and this is what we see as LayerZero.
From Texas Hold'em to cryptocurrency to AI, from AI to Web3 for a short time, then back to AI, and finally to LayerZero, there is no myth of hitting the jackpot, nor is there an unreasonable belief in Crypto for ten years. Bryan Pellegrino, who graduated from college in 2008, did not find a goal worth devoting his life to until 2021, when he was about 35 years old. He may be a genius, but geniuses have also been confused, just like you before writing now.
$3 billion valuation, over $250 million in total funding
Later in May 2021, the LayerZero team released the first version of the white paper, titled "LayerZero: Trustless inter-chain transactions", which did not mention "omnichain" in the entire text. After verification by the author, although the word "omnichain" was not original to LayerZero, according to searchable information, LayerZero is likely to be the first project to give omnichain a "new interpretation of Web3". Its blog "LayerZero- An Omnichain Interoperability Protocol" published on Medium on September 16, 2021 officially wrote a template for omnichain in the Web3 field.
On the same day, LayerZero announced the completion of a $6 million Series A round led by Multicoin Capital and Binance Labs, with a valuation of $50 million. From being inspired to create LayerZero by developing games on BSC to being invested in by Binance Labs, LayerZero and Binance can be said to have a "deep connection".
By the way, another omnichain concept project, ZetaChain, which announced the completion of $27 million in financing in August last year, also published its first Medium blog in December 2021, and mentioned the omnichain concept in the article. Perhaps at that time, Web3 had not stopped cheering for Bitcoin, which hit a new high of $69,000, and the discussion on NFT and the metaverse was still heated, just as the market had not discovered DeFi, which later became "popular" in 2018 and 2019.
Don Valentine, who founded Sequoia Capital in 1972, once said that it is important for founders to tell stories. When Web3 entered the cooling-off period in 2022, when no phenomenal concept took over the baton from NFT and the metaverse, Omnichain was pushed to the forefront.
On March 30, 2022, LayerZero announced the completion of a US$135 million Series A+ financing round, led by FTX Ventures, Sequoia Capital and a16z. Participating investors included Coinbase Ventures, PayPal Ventures, Tiger Global and Uniswap Labs, etc. The lineup is very luxurious.
On March 18, before the official announcement of this round of financing, LayerZero launched its flagship cross-chain product Stargate and started selling the token STG. At that time, some investors in the market believed that LayerZero's token was likely to be STG, so the STG tokens used for public sale were directly bought out by two whale users. After that, LayerZero provided new investment opportunities for investors who authorized the contract but did not grab a share. Stargate's TVL exceeded US$2 billion a week after its launch, and exceeded US$3 billion two days later. A week after the official announcement of the A+ round of financing, TVL exceeded US$4 billion.
How terrifying are these data? The star DeFi in the last bull market, including Uniswap, Curve, Aave, Compound, and MakerDAO, took at least one month to increase their TVL from $2 billion to $4 billion. Lido also took nearly a month, while Stargate took only 12 days. Although Eigenlayer took 9 days faster than Stargate, its TVL growth is not without the appreciation of Ethereum itself. After Stargate went online, most of the liquidity was only stablecoins such as USDT and USDC.
It can be seen that although the market had been falling for a while, the market was still hot. If we compare the speed of TVL from 0 to 2 billion US dollars, Stargate might want to say:
On May 25, less than two months after the official announcement of the A+ round of financing, The Block quoted sources as saying that LayerZero Labs had recently held talks with various investors about financing at a valuation of $3 billion. A person familiar with the matter said that LayerZero’s latest financing will be in the form of stocks, LayerZero token warrants and Stargate native tokens. At this point, everyone has confirmed that LayerZero will issue tokens other than STG.
In addition to financing, the first full-chain NFT series based on LayerZero, "Gh0stly Gh0sts", appeared in April. This NFT can be minted on the 7 chains supported by LayerZero at that time, and the floor price soared to 1 ETH within 24 hours of its launch. Although this NFT was only a flash in the pan, it also allowed Bryan Pellegrino to achieve the goal of seamless cross-chain NFT.
In April last year, the B round of financing revealed by "sources" a year ago was settled. The amount of this round of financing was US$120 million, and the valuation reached an astonishing US$3 billion. Investors not only included frequent investors of large Web3 projects such as a16z and Sequoia, but also gathered investors who have hardly appeared in the Web3 field, such as Christie's auction house and Franklin Templeton.
It can be said that as a non-public chain Web3 native infrastructure project, there are very few that can reach a valuation of 3 billion US dollars in the private financing stage, not to mention that its investors cover various fields, almost including all the familiar faces I have seen in Web3 project or institutional financing news in the past. Here is also an interesting story. A friend in the circle shared with me that at that time, LayerZero’s last round of financing was very popular. FA desperately CX to some domestic investors. As a result, some investors were fooled into investing some. After calming down, they complained to their friends: "Why did I invest in such a high valuation?"
Of course, I haven’t verified this, so you can just take it as a story. However, with this story spreading, combined with various circumstances, we can only say that LayerZero has been in the spotlight for quite a long time, and if nothing unexpected happens, an accident will quietly happen...
LayerZero's security debate and the "highest" bug bounty ever
LayerZero's first public opinion crisis came from a report by L2BEAT. In fact, the content of this report was not a vulnerability at the code level, but pointed out the unreasonableness of LayerZero's mechanism design. However, as a protocol that has locked up a large amount of funds, the risks mentioned by L2BEAT did make many people sweat.
In a report released in early 2023, L2BEAT pointed out that there are two security models in the Web3 field. One is shared security such as Rollup, where all Rollups use the same set of security mechanisms; the other is the independent security model commonly used by omnichain, represented by LayerZero.
L2BEAT pointed out that the biggest problem with using the LayerZero cross-chain communication mechanism is that LayerZero cannot restrict users from modifying the contract themselves, which means that users need to evaluate the security of each protocol.
How to understand this problem?
Suppose I deploy a token A and use LayerZero's full-chain token model, which means I need to deploy oracles and relays by myself (friends who don't know the LayerZero V1 mechanism can refer to "SushiSwap founder 0xMaki's blessing, what is the imagination space for LayerZero and Stargate?"), and once the oracle and relay are controlled by the attacker, the attacker can steal the tokens locked on the original chain without the token holder knowing. L2BEAT said that the only way to avoid this situation is to set it so that the oracle and relay cannot be modified, but no project did so at that time. And this is the problem of so-called independent security, that is, you may need to examine whether each project that adopts this mechanism has similar security settings to avoid attacks.
As the content of L2BEAT's article continued to ferment, LayerZero also responded to its views.
According to The Defiant, Ryan Zarick, co-founder and chief technology officer of LayerZero Labs, responded that LayerZero is just a protocol and how to use it is the user's own problem. In addition, Ryan Zarick also believes that the author has ulterior motives. He did not check the security of projects using the LayerZero protocol one by one, but generalized that all projects are risky.
Although this discussion ultimately did not lead to any substantial progress, it may have made the LayerZero team realize the importance of security. Four months after the report was released, LayerZero launched a bug bounty program on Immunefi with a maximum bonus of $15 million. The program's maximum bonus surpassed MakerDAO's $10 million, becoming the highest-paying bug bounty program in the Web3 field. At the same time, LayerZero co-founder and CEO Bryan Pellegrino also publicly stated that LayerZero will spend about $5 million on audits in 2022 alone.
In addition, the release of LayerZero V2 at the end of last year completely corrected this vulnerability. Its message passing mechanism has been iterated from the original "oracle + relayer" to "decentralized message passing + executor". In the V2 version, LayerZero introduced multiple trusted "DVNs" to be responsible for message passing.
Projects can choose multiple DVNs according to their own needs to ensure support for message transmission loads, and set up executors to execute the messages transmitted across chains. Its essence is, as the author said, to complete the message transmission process through multiple trusted "intermediaries" to ensure that the transmitted messages are not likely to be tampered with.
Uniswap's "designated cross-chain protocol" dispute and "unofficial" wetETH
This incident can be said to be a small episode in the development process of LayerZero. Although it has little to do with LayerZero itself, it is still worth a brief discussion.
One month after L2BEAT published an article "complaining" about LayerZero, Uniswap launched BNB Chain and the issue of which cross-chain protocol to choose to implement cross-chain governance and message transmission once again put LayerZero at the center of the vortex.
The cause of this incident is that the commercial source code license applied by Uniswap in 2021 will expire in April 2023, which means that anyone can directly copy the code of Uniswap v3 and launch DEX. In order to gain a foothold on BNB Chain before then, Uniswap has begun to accelerate the deployment of Uniswap v3 on multiple chains. The founder of 0xPlasma Labs released a draft proposal for the deployment of Uniswap v3 on BNB Chain in December 2022, and LayerZero and Wormhole, which are supported by a large number of institutions, have become the two most likely competitors.
In order to win votes for themselves, both parties continued to perform hard on the forum, promoting their own advantages and "attacking" each other's shortcomings. I won't go into details about the process. After a period of battle, the proposal to choose which cross-chain protocol to use came to an off-chain vote on Snapshot. The voting result was that Wormhole was the clear winner with over 60% support.
But everyone is wondering why a16z, who has 15 million UNI, didn’t vote? a16z said, “I want to vote, but my coins are hosted on Fireblocks, so I can’t vote on the proposal off-chain, but we will oppose the proposal in the final on-chain vote.”
On February 5, the final on-chain vote came, and a16z voted against it as it said. But this move caused dissatisfaction in the community, because if the proposal is ultimately rejected, going through the process again may miss the expiration date of the commercial source code license.
Fearing the deadline and discontent with a16z’s “abuse of dominance,” a large number of community members began to overwhelmingly support the proposal. In the end, although a16z’s eye-catching big red ball stood in the center, supporters including Consensys and GFX Labs still passed the proposal with a support rate of over 65%.
Although many people regard the passage of this proposal as a successful battle between the community and VC, I think it is more like a microcosm of the split between investment institutions and the community. From the perspective of a16z, it has invested in Uniswap and LayerZero. So, under the premise that there is no obvious pros and cons between LayerZero and Wormhole, it is understandable that a16z supports LayerZero. The community regards a16z as an imaginary enemy, believing that it has destroyed fairness by using the large amount of UNI it holds to vote, but is it also a kind of destruction of fairness to forcibly support Wormhole in order to prevent a16z from getting what he wants? a16z discovered the potential of Uniswap in the early days and held UNI for a long time without selling it. Is it really manipulation to use its holdings to support the projects it has invested in? Readers are left to think about it.
If this incident can be regarded as a battle between VC and the community or stakeholders, then the launch of OFT of wstETH without the consent of the Lido community is entirely LayerZero's own fault.
On October 26 last year, LayerZero tweeted that it had launched OFT for wstETH and supported BNB Chain, Avalanche, and Scroll. This good news for Lido was boycotted by nine cross-chain projects, including Connext, Across, Celer Network, ChainSafe, Sygma, LI.FI, Socket, Router Protocol, and Cross-chain Interoperability Alliance.
The point of the boycott is that LayerZero’s move did not obtain the consent of the Lido community, and if each project can launch its own cross-chain version of the token, the market will become very fragmented. Therefore, these projects call for the project to determine the cross-chain standard for issuing its own tokens to provide a healthy competition environment for the market.
Later, Lido also tweeted that LayerZero's actions were not approved by Lido DAO, reminding participants to pay attention to risks. LayerZero finally expressed its willingness to hand over the ownership of the wstETH contract on the Ethereum chain to Lido for management, and said that its decision was to support the development of the LSD project and there was no malicious intent. But it has to be admitted that LayerZero's move was indeed biased, and it did not clearly state that this was just a token standard launched by LayerZero without the permission of Lido DAO. In connection with the previous incident related to Uniswap, the market did have a lot of complaints about LayerZero for a period of time.
After this incident, announcements of new chains and tokens supported by LayerZero were jointly released with the corresponding projects, and were kept a lot more low-key until the airdrop news came out.
The birth of the most complete witch library: the founder's ideals and persistence
LayerZero’s airdrop was opened for inquiry yesterday, and discussions about its airdrop began a month ago.
LayerZero officially launched the "Witch Hunt" in early May this year. In the first half of the month, players who specialized in "snatching airdrops" were asked to submit "witch addresses" that interacted with contracts specifically for obtaining airdrops. If the address was eligible for the airdrop, it could take away 15% of the original airdrop. The second half of the month was even more exciting, with "rewarded reporting" directly available to everyone. Successful reporting of a witch address would earn 10% of the airdrop that the address could receive.
Of course, LayerZero will also conduct reviews and provide an opportunity to appeal possible false positives.
For a while, professional “fleeting” people and studios were all worried. On the one hand, they were struggling to decide whether to report the Sybil’s address to ensure that they could get at least 10% of the rewards, or to bet that the project owner would not find their address that was specifically used for airdrops. On the other hand, some “temporary workers” in some studios were also considering whether to report it in order to get a much higher return than their hard work fee. Throughout May, reports against studios, big players, and “fleeting” KOLs emerged one after another, which made people sigh that human nature really cannot stand the test.
Yesterday, LayerZero Labs CEO Bryan Pellegrino said that a total of about 1.28 million addresses received airdrops. Compared with the initial estimate of 6 million addresses eligible for airdrops, more than 4.7 million addresses may be eventually confirmed as Sybil addresses.
I don’t know when it started, but airdrops have become a must-have program from a project owner’s choice to reward participants. We seem to have forgotten that we want to see more creative and innovative projects, rather than the daily debate of who will give out more money. When the project owner took this method of attracting users to the extreme, a very distorted atmosphere was formed in the market:
If you don’t give me money, or if I’m not satisfied with the amount you give me, you are trash.
Whether to airdrop or not, how much or how little airdrop there is, is the right of the project owner. The ultimate goal of a team on the other side of the earth to set up a project, find investment, write code, and manage a company is not to make you money. Even before ZKsync just wrote a sentence about all the rights of airdrops belonging to the project, it was considered arrogant by many so-called KOLs, which is really amazing.
"Making money" has its value in certain historical periods. For example, during the last bull market, many people who took advantage of airdrops continued to participate in the project after receiving them. In this case, it is feasible and reasonable to exchange benefits for users. However, when the era comes when a few people hold hundreds or thousands of addresses and sell out the airdrops and move on to the next project, it is an inevitable trend to send fewer airdrops or to send airdrops to those who really promote the development of the project.
If you make money by playing around, then congratulations on seizing an opportunity of the times. But when the times are over, choosing to exit magnanimously or learning how to make money in the new era is obviously more elegant than complaining about why the times did not continue. Don’t say that you contributed to the number of users and transactions, so that the project got investment. Investment institutions are not fools. They know how many users there are. How much the project is worth is not determined by the interaction of two contracts using scripts.
The protagonist of today's story, Texas Hold'em genius Bryan Pellegrino, is not perfect. He was confused and jumped back and forth between AI and Crypto. But apart from the project itself, he established the first real and effective Sybil address database, pushing Web3 forward from the era of blindly attracting users with airdrops and interacting with projects simply for airdrops.
In the future, I believe that more projects will airdrop to those who truly contribute to the development of the project rather than just airdrop hunters who traded 10 USDT tokens or minted an NFT. More projects will also focus more on how to create truly good products rather than racking their brains to design airdrop rules to satisfy a group of ungrateful people.
In the article published by Sequoia Capital on its official website, there is a point that I did not mention at the beginning, that is, Bryan Pellegrino once said that he wanted "practical returns" and wanted to be the best in a certain field when he was disgusted with simply making money. On LayerZero, Bryan Pellegrino practiced his ideals, both in the project itself and in the efforts made to develop the Web3 industry. There may be more omnichains or new concepts in the future, but the emergence of LayerZero has undoubtedly left a strong mark.
"If you can remain calm and not follow the crowd when everyone is at a loss; if you can remain confident and not argue when everyone is suspicious; if you have a dream but don't lose yourself; if you have a mind but don't go crazy..." Joseph Rudyard Kipling, a British writer who won the Nobel Prize for Literature in 1907, wrote this in a poem for his son. I would like to share this with you. After all, when you have created a phenomenal product like MetaMask, does it matter whether there is an airdrop or not?
