LayerZero's currency issuance plan has caused controversy. What 'risks' and 'opportunities' will it face in the future?

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 announced that it would need to conduct multiple rounds of witch screening activities before issuing tokens. LayerZero's "airdrop cleaning" is different from other projects. The methods of "self-destruction" and "mutual explosion" are quite similar to the "heard reports" of ancient Chinese officials. This move caused controversy at first. So, what is LayerZero? Can LayerZero take down the Woolies? What other projects and potential opportunities are worthy of attention in the LayerZero ecosystem? How will LayerZero develop in the future?

"Self-explosion" and "mutual explosion", the LayerZero airdrop cleaning movement caused controversy

In the encryption industry, fleecing has become the main way for many people to get rich. means. Many practitioners in the encryption industry have set up studios and started to "comb their hair" professionally. As the path is higher, the devil is higher, and many project parties have also begun to vigorously increase the airdrop cleaning campaign, hoping to airdrop tokens to long-term project supporters as much as possible. This is also the reason why LayerZero co-founder Bryan Pellegrino introduced "self-destruction", "censorship" and "mutual explosion".

According to the description in the official documentation, a key factor that LayerZero needs to consider when formulating a token distribution plan is how to determine the best quality user cluster. In LayerZero's view, the best users should be the most "persistent" users, and the so-called "persistence" is defined as those users who are most likely to continue to use LayerZero in the future or follow their past usage habits. Specifically, LayerZero’s Witch Purge event 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 witches can "self-expose" through the window provided by LayerZero at this stage to retain 15% of the airdrops Allocation amount. It is worth mentioning that in order to facilitate the studio's "self-exposure", LayerZero also "thoughtfully" provides API tools for large-scale address submission. 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. Addresses detected in this stage will not receive any airdrop allocation. . The third phase is the "mutual exposure" phase, which will last from May 18 to May 31. LayerZero encourages community users to report witch behavior to each other. Successful whistleblowers can receive 10% of the airdrop share of the reported address. .

LayerZero’s move triggered heated discussion in the market. Before LayerZero, many well-known projects mainly hired professional teams to screen wool; LayerZero introduced "self-destruction" and "mutual detonation", which although innovative, may not be satisfactory. First, how many people will blow themselves up over a 15% short position? Judging from the current market situation, whether this 15% share can recover the cost of the airdrop needs to be carefully calculated. In addition, how to test whether there will be a "malicious attack" in the "mutual explosion"? This kind of mutual picketing is like the "rumor report" adopted by ancient emperors to avoid blocking the way of speech. Judging from many lessons in history, this may not be perfect. Will some long-term holders be wrongly corrected and leave LayerZero? Will some malicious people use this opportunity to make profits by causing corruption? Overall, LayerZero has good intentions, but its results may not be very satisfactory.

What innovations does LayerZeroV2 have?

This year, the encryption market has focused too much attention on inscription, AI, Bitcoin second layer and re-staking track, etc., while new users entering the encryption 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 LayerZeroV2 have?

LayerZero can improve chain compatibility through full-chain design (Chain-AgnosticDesign), Gas payment options, and specific library defaults, helping OApp (full-chain application) developers design unified solutions across EVM and non-EVM chains. Single application architecture. According to the LayerZeroV2 white paper, there are four components in V2, including an immutable endpoint that enables censorship resistance, an append-only collection of on-chain verification modules (MessageLib registry), and a set of decentralized verification for cross-chain verification of data. Network (DVN) permissionless collection, and permissionless executors (executing functional logic independently of the cross-chain message verification context).

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 choosing a security stack to verify cross-chain messages; 3) Permissionless execution: Anyone can Run executors; 4) Unified semantics: OApp and OFT contracts enable developers to build applications and tokens in the same way across every V2 blockchain with endpoints; 5) V1 compatibility: Migration options exist for V1 applications. If already deployed on V1, applications can take advantage of the new security and execution model through ULN301.

What are the mainstream projects in the LayerZero ecosystem?

As LayerZero is about to issue its currency, its ecological projects have also begun to gain some attention. From the TVL perspective, Stargate developed by LayerZeroLabs and the cross-chain lending protocol Radiant Capital; from the perspective of the investment team behind it, the decentralized stablecoin protocol AngleProtocol (mainly Euro stablecoin) led by a16z deserves attention.

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 is also the first DApp based on the LayerZero protocol. It is a A protocol for asset transfer between multiple blockchains.

AngleProtocol is a decentralized stablecoin protocol based on LayerZero, which has currently launched the euro stablecoin agEUR and the euro savings solution stEUR, the latter mainly consists of real-world assets owned by the protocol in the agEUR reserve ( RWA), with an initial yield set at 4% and paid in euros. AngleLabs previously 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 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 the domain name cross-chain function of 25 blockchain networks.

MugenFinance is a revenue management protocol based on LayerZero that aims to create a more transparent and diversified revenue strategy.

How to view the future development of LayerZero

In the blockchain industry, there has always been an island effect. A 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 transfer between blockchains, providing safe, reliable, and trustless information transfer. But it itself 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, hopefully reducing the complexity of building cross-chain applications and services. Wormhole protocol is a universal interoperability protocol that enables the transmission of tokens and messages on different blockchain networks. Network Guardians monitor information on the source chain, verify it, and facilitate its transmission to the target chain. The Inter-Chain Information Transfer Protocol (IBC) is a standard protocol for blockchain interaction in the Cosmos network, aiming to achieve interoperability between different blockchains. Judging from the current development momentum, applications developed based on the cross-chain information transmission protocol (IBC) are already in the leading stage, especially the emergence of modular blockchain Celestia, which is quietly changing the development pattern of the encryption 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’s challenge can continue to develop after the currency is issued remains to be further tested.

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