On May 2, the cross-chain interoperability protocol LayerZero officially announced on X that the first snapshot (Snapshot #1) has been completed. On May 3, LayerZero issued an announcement stating that multiple rounds of witch screening activities are required before the token is issued. LayerZero's "airdrop cleansing" is different from other projects. The methods of "self-explosion" and "mutual explosion" are quite similar to the "rumor-mongering" of ancient Chinese censors. This move has caused controversy as soon as it was launched. So, what is LayerZero? Can LayerZero solve the wool party? What other projects and potential opportunities are worth paying attention to in the LayerZero ecosystem? How will LayerZero develop in the future?
"Self-explosion" and "mutual explosion", LayerZero airdrop cleansing campaign caused controversy
In the crypto industry, wool pulling has become the main means for many people to get rich. Many crypto industry practitioners have set up studios and started professional "wool pulling". The devil is always stronger than the good, and many project parties have also begun to vigorously increase airdrop cleansing campaigns, hoping to airdrop tokens to long-term supporters of the project as much as possible. This is also the reason why LayerZero co-founder Bryan Pellegrino introduced "self-explosion", "censorship" and "mutual explosion" this time.
According to the description in the official document, a key factor that LayerZero needs to consider when formulating a token distribution plan is how to determine the best user cluster. In LayerZero's view, the best users should be the most "persistent" users, and the so-called "persistence" is defined as those who are most likely to continue to use LayerZero in the future or follow their past usage habits. Specifically, LayerZero's witch cleansing activity is divided into three rounds.
The first round is the "self-exposure" stage, which will last for 14 days. Users who think they are suspected of being a witch can "expose themselves" through the window provided by LayerZero during this stage to retain 15% of the airdrop allocation. It is worth mentioning that in order to facilitate the studio's "self-exposure", LayerZero also "thoughtfully" provides an API tool for large-scale submission of addresses. The second stage is the "trial" stage. LayerZero officials will conduct witch screening in accordance with specific rules during this stage. The screening results will be announced on May 18, and the addresses found during this stage will not receive any airdrop allocation. The third stage is the "mutual exposure" stage, which will last from May 18 to May 31. LayerZero encourages community users to report witch behavior to each other. Successful reporters can obtain 10% of the airdrop share allocation of the reported address.
LayerZero's move has sparked heated discussions in the market. Before LayerZero, many well-known projects mainly hired professional teams to screen wool; LayerZero's move to introduce "self-explosion" and "mutual explosion" is innovative, but may not be satisfactory. First of all, how many people will self-explode because of 15% of the short shares? Judging from the current market situation, whether this 15% share can recover the cost of brushing airdrops needs to be carefully calculated. In addition, how to verify whether there will be "malicious attacks" in the "mutual explosion" move? This kind of mutual investigation is like the "rumor and report" adopted by ancient emperors for fear of blocking the way of speech. Judging from many lessons in history, this move may not be perfect. Will some long-term holders be wrongly corrected and leave LayerZero? Will some malicious people use this opportunity to make a lot of money? On the whole, LayerZero's original intention is good, but its results may not be very satisfactory.
What’s new in LayerZeroV2?
This year, too much attention in the crypto market has been focused on inscriptions, AI, Bitcoin Layer 2, and re-staking tracks, while new entrants to the crypto 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 have?
LayerZero improves chain compatibility through full-chain design (Chain-AgnosticDesign), Gas payment options, and specific library defaults, helping OApp (full-chain application) developers design a unified single application architecture across EVM and non-EVM chains. According to the LayerZeroV2 white paper, there are four components in V2, including an immutable endpoint that can achieve anti-censorship, an additional collection of on-chain verification modules (MessageLib registry), a set of decentralized verification networks (DVN) for cross-chain verification data without permission, and a permissionless executor (independent of the cross-chain message verification context execution function logic).
From the official introduction, the highlights of LayerZeroV2 include: 1) Universal messaging: Any type of message can be sent and written between chains, including arbitrary data, external function calls and/or tokens; 2) Modular security: Developers can choose from a preferred combination of more than 20 decentralized verification networks (DVNs) 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 V2 with endpoints; 5) V1 compatibility: There is a migration option for V1 applications. If already deployed on V1, the application can take advantage of the new security and execution model through ULN301.
What are the mainstream projects in LayerZero ecosystem?
As LayerZero is about to issue a token, its ecological projects have also begun to gain some attention. From the perspective of TVL, Stargate developed by LayerZeroLabs and the cross-chain lending protocol RadiantCapital; from the perspective of the investment team behind them, the decentralized stablecoin protocol AngleProtocol (mainly the Euro stablecoin) led by a16z is worth paying attention to.
Stargate: StargateFinance is a multi-chain cross-chain bridge protocol based on LayerZero. It was created by LayerZeroLabs in March 2022. It is the core of OmnichainDeFi and the first DApp based on the LayerZero protocol. It is a protocol that can realize asset transfers between multiple blockchains.
AngleProtocol is a decentralized stablecoin protocol based on LayerZero. It has currently launched the Euro stablecoin agEUR and the Euro savings solution stEUR. The latter is mainly supported by the real world assets (RWA) owned by the protocol in the agEUR reserve. The initial yield is set at 4% and paid in euros. Previously, AngleLabs completed a $5 million seed round of financing led by a16z.
RadiantCapital (RNDT for short) is a full-chain liquidity lending platform built through LayerZero cross-chain technology, which means that users can deposit and borrow across chains.
Hashflow is a cross-chain DEX that focuses on zero slippage and MEV protection. It uses LayerZero to achieve cross-chain messaging. It currently supports Ethereum mainnet, BNBChain, Avalanche, Polygon, Arbitrum and other networks
StarProtocol is a full-chain domain name protocol built on LayerZero, which supports cross-chain domain name functions of 25 blockchain networks.
MugenFinance is a yield management protocol based on LayerZero that aims to create a more transparent and diversified set of yield strategies.
How to view the future development of LayerZero
In the blockchain industry, there has always been an island effect. The key part of the infrastructure for exchanging data and assets between different blockchains is the cross-chain interoperability protocol. LayerZero is a full-chain interoperability protocol used for lightweight information transmission between blockchains, providing secure, reliable and trustless information transmission. However, it also faces competition from many cross-chain interoperability solutions.
Chainlink is developing the Cross-Chain Interoperability Protocol (CCIP), an open source standard that supports cross-chain communication, including sending messages and token transfers. The goal of CCIP is to enable universal connectivity between hundreds of blockchain networks using standardized interfaces, which is expected to reduce the complexity of building cross-chain applications and services. The Wormhole Protocol is a universal interoperability protocol that enables the transmission of tokens and messages across different blockchain networks. Network guardians monitor information on the source chain, verify it, and facilitate its transmission to the target chain. The Inter-Chain Message Transfer Protocol (IBC) is a standard protocol for blockchain interactions in the Cosmos network, designed to achieve interoperability between different blockchains. Judging from the current development momentum, applications developed based on the Inter-Chain Message Transfer Protocol (IBC) are already in the leading stage, especially the emergence of modular blockchains such as Celestia, which are quietly changing the development landscape of the crypto market.
Overall, LayerZero has strong technical advantages and a strong user base. So far, LayerZero has supported more than 20 chains including Ethereum, BNBChain, Aavalanche, Polygon, Base, etc., with a user base of nearly 6 million. However, whether LayerZero can continue to develop after the token issuance remains to be further tested.