LayerZero: The De Facto Standard for Cross-Chain Messaging | KBW 2023

thank you so much thank you all so much for having me here today this is actually my second time in Korea last year I was here spending about a week in Busan with a community of Korean developers and also the upbit team and since then I've been wholly convinced that this Korean Community is absolutely critical for the growth of consumer applications gaming for sure and also the blockchain space at large and a lot has changed since then last year the zeit guys question was is the future of crypto multi-chain and uh what occurred over the course of 20122 were uh Bridge hacks that extorted nearly a billion dollars of value out of the ecosystem numerous alt layer ones which had raised in the hundreds of millions launching going live on mainnet uh and then also just Landmark moments uh in the ecosystem which have shaken in a lot of ways the entire space to its core and have raised questions about uh the best ways to build projects on on chain and on multiple chains so we're going to go back in time to 2021 and uh back in 2021 it was actually a really novel concept to move assets between chains and the interest in moving value between chains was uh simply for uh money transfer and what was Radical at that time was this concept of wrapped asset Bridges uh in addition to wrapped asset Bridges there were some other models which included middle chain cons consensus mechanisms and models that relied on thirdparty services and so that was how users moved their tokens from chain a to chain B but these designs had profound security and fragment ation issues associated with them and led to a lot of the the issues in 2022 or sort of teed us up for many of these hacks that occurred no one was using the word Omni chain at this time so now today in 2023 uh we have seen that we are absolutely in a present that is multi-chain there is no question about it in large part because of the prolif proliferation of l2s and rollups the ambitious visions of teams like optimism and Avalanche and arbitrum and poly gone with their super chain uh concept subnets supernets orbit chains and uh we're also seeing really notable projects like maker Dow and dydx choosing a sovereign chain model and launching their own app chains even dilc in right now which stack they'll be using for this and the concept of omni chain became mainstream in fact this this phrase was first used to self-describe the layer zero protocol when we first launched Omni chain being distinct from multi-chain and that rather than uh simply deploying isolated instances of a protocol on multiple chains without there being communication between smart contracts in essence actually entirely different protocols and this was the way that projects went on different chains throughout 2021 and early 2022 Omni chain is the concept of chain abstraction through communication between smart contracts on disperate chains the end experience is simply the application maybe it's a game that's fun or it's a dii protocol where you lend and borrow it's not a salon based game or a polygon based uh lending and borrowing protocol it's now just that app and in this way we're getting much closer to uh a web2 like experience in which users are less likely to churn and more likely to actually get the value that they want from the project that you've built and so I'm going to tell a quick story here uh so you understand why uh layer zero and its Advent and launch in the ecosystem played such a huge role in getting us to where we are today uh there were three developers who were from small towns in New England and they met studying at an interoperability Research Center at uh their University and uh they went on to hack on experiments I together over the course of 10 years conducted AI research uh one of them went on to become one of the best poker players in the world two of the others would build and sell software companies and they eventually all came back together United around their interest and uh like Maxi usage of crypto and because they were lifelong Gamers they wanted to build a game that was deployed on both ethereum and B&B and at this time this was around three years ago the fact that BMB or binance smart chain at the time was garnering a lot of adoption was pretty radical too because uh there was a lot of coalescence around ethereum and there simply was not uh straightforward way to communicate across these two and so as these three developers started diligen in different Bridges the only way to move value between chains at that time as developers with uh expertise in security they realized they would never trust any of these Bridges and as they went under the stack and started figuring out how they would build what they needed to create this game they realized what was a lot more interesting was the underlying cross-chain communication layer so how might we send packets of information from one chain to another and so the problem of interoperability isn't actually that new their question was the same question that people asked in the late 1980s when the internet was just the inonet uh there were isolated research institutions like Stanford and UCLA and MIT who did not yet have a way to uh transfer information the work that they were doing from one server to another uh tcpip was the Internet Protocol or a suite of rules which were invented to enable efficient routing of information from one server to another when we use YouTube today or your brother sends an email your grandmother uh is shopping online tcpip is the underlying decentralized protocol that for the test of time has enabled the internet to scale and uh be used and we don't think about tcpip when we're using YouTube or Amazon uh this is just simply the Internet it's uh like watching a show on a flat screen TV you are enjoying it because because it's the flat screen TV not because of all the wires hanging down and tcpip was essential for that mass growth of the internet and So within uh our space here we now have all these different blockchains and uh the interoperability between them is incredibly crucial for building uh applications that actually can uh retain users so why again is interop important I the best principles of web 2 software building can uh Point towards some of these reasons the first thing is because we are in a present of many many chains I meet maybe three to five well-funded teams launching rollups and l2s every single week this means that right now to build a project on multiple chains there's the complexity of needing multiple gas tokens having to leave your tab and go to a centralized exchange to buy them go back switch your wallets maybe 10 clicks could be 10 minutes it could be an hour at this point you've likely churned or a user that was going on your protocol is now you know going to go run and do their groceries it's not an ideal user experience the second reason is for the developer and user experience for developers uh pre- layer zero is it was incredibly difficult to do all of this under the hood and for me as uh someone who comes from an engineering background I think about different chains like different programming languages if I to ask myself I how might I build a really excellent application that enables me to share my workouts with my friends so I'm thinking of straa right now I wouldn't think to myself okay I really want to build something with C++ now how do I get to that thing I want to build instead I have this Suite of backend languages and front-end programming languages and mlops tools and figma microservices in the same way with layer zero now different chains are like different programming languages or even microservices is you can uh use file coin VM for storage or R we for storage you can uh enable settlement on ZK evm or ZK sync you can pull in liquidity from ethereum and you can also have gameplay on uh your own app chain it could be an avalanche subnet and all of this is Unified under the hood with this piping but abstracted away for the end user so they pay with one gas token it's one click and they don't need to know which chains they're interacting with they don't need to know the difference between ethereum and salana and then the last reason is security I having a cross chain messaging protocol that is actually built to enable uh deep and enduring security is incredibly important and as I alluded to before some of the most uh painful moments in our industry have been due to bridge hacks or smart contract exploits and so the core concept of layer zero I we intended to build something that resonated with our academic research backgrounds uh our three founders uh the three penguins that I showed earlier in that that photo all came from this background I personally resonate with this as someone who had done research in anti-surveillance technology and University how do you build something that will become so integral to the infrastructure stack and evolves with time so the best research uh today the best security techniques validation techniques of today should not and will not be the techniques that we use 5 years from now or 10 years from now even in this past year we've seen ZK light cines for example finally be ready for production two years ago that certainly wouldn't have been the case and so if you built a messaging protocol in a way that relied on a monolithic layer of security in order to adopt a a new best practice you would have to entirely upgrade the protocol which would reduce the security of that protocol back to square one and so the trade-off we were trying to figure out here is how do you build something that evolves with research that enables modularity and optionality for application developers and put security first and foremost these were the three design principles that informed how uh layer zero was architected first one is immutability so this means that the cor smart contract should not be upgradeable and mutability is incredibly important particularly when you think about the fact that the majority of bridge hacks were due to smart contract upgrades meaning developers who had the best of intentions but uh introduced a flaw in the code and thereby spread contagion across all of the projects built on top of it when you're building infrastructure you have to be thinking about the tail risk for all of the projects that are leveraging your stack the second principle is permissionless uh this is also in line with core ethereum ethos any application can build with layer zero they don't need permission from layer Zer Labs or even to coordinate with layer zero Labs it's entirely open uh and even in our documentation you can go in and just get started in a matter of five minutes you can be a College Dropout and have built a protocol that's Omni chain within a day it's also permissionless in the sense that developers can launch their own offchain entities and they can switch out that stack that's meant to validate how messages are are passed and secured at their own whim this means you can design a flow where a governance vote in your de uh passes and triggers a a change to your offchain stack maybe you want to run one yourself so you can own your security without unilateral control or maybe there's a new Option from this permissionless Marketplace that we have of oracles and relays which you now want to include because your protocol has also grown over time when you launched you had 100 users and you were securing $100,000 but now it's two years later and you're securing two billion dollars and a million users uh are using your project you want to price your security higher and you could do so without actually making any code changes and instead just configuring uh your your settings and then the last principle is censorship resistance and one this is incredibly important uh because when you're using uh infrastructure like layer zero or like uh you know anything else that handles value transfer you want to ensure that your end users aren't being taken advantage of and that a message can't be reordered so that uh someone else can front run and extract more me layer zero is non sort enforced every message that's sent has to be sent across in the exact order in which it was submitted additionally building an immutable primitive so that its censorship resistant is so critical in this uh unclear regulatory environment because let's say in one nation state a government decides to uh say you you have to shut down this set of validators or you cannot use this technology well because layer zero was built with entire L immutable smart contracts these end points cannot be changed at any point by layer zero Labs The immutability Preserves the permissionless and the non-order enforcement and also means that the technology can't be perverted to comply with some sort of new uh law or regulation it's simply an evergreen uh primitive that any developer can use for the test of time in fact layer zero was built so that should layer zero Labs not exist anymore every single project Leverage leveraging the protocol can do so in perpetuity and that is what was incredibly critical to us when we were thinking about building something for the infrastructure stack for the long term so who are we now uh we have secured more than 30 billion dollars in value layer zero is deployed on more than 40 EVMS and non- EVMS uh we are also integrated and used by more than 1,000 unique applications so this is unique dii protocols games nft projects tokens that have adopted our Omni chain standards uh it has been an incredible past two years and has exceeded all of our expectations in regards to growth and also uh understanding of this Omni chain thesis layer zero is a mesh network uh which means that rather than even simply bidirectional or one-way message passing uh there is message movement across all of the supported chains and selected by the app developers and so it links all of these connected chains and how the protocol enables this is through endpoints which are the immutable smart contract libraries which we Deploy on each of the supported chains EVMS and non-ms every single week now we're launching new endpoints uh today we announced that we had launched an endpoint on Zora which is a new chain uh within the optimism super chain uh we're incredibly excited to be there as well and I know a bunch of our partners are here at the conference too and excited to meet you all and talk about building on their chain using layer zero messaging is secured by designated offchain infrastructure which is selected from that permissionless Marketplace I discussed before and this is how we achieved a design which was modular put Security in the hands of application developers and also could scale with any outcome of our industry maybe actually all momentum collest around ethereum and one other chain great or maybe there was the case where we would have hundreds of l2s also great and that's actually where we seem to be trending which is really exciting this is a a diagram that shows this endpoint to endpoint uh communication and uh between the endpoints are those offchain entities so some really exciting use cases that we've seen uh come about and that we have taken in as feedback and launched products around so the first one was the very first product that we launched alongside layer zero the protocol which is Stargate Finance Stargate is the most widely used Native asset Bridge across all of crypto two weeks after launch this was in March of 2022 Stargate reached uh an organic tvl entirely bootstrapped to $4.4 billion and this is the primary way that value Flows In and Out of major ecosystems without wrapping assets uses layer zero as the underlying messaging protocol and this is a really fascinating uh graph one that surprised us too we noticed uh over the last year that layer zero has become the dominant way to move in and out of ecosystems that even have native Bridges so you can see here the the white portion shows the usage for layer zero in and out of ecosystems including Arbitron polygon optimism and Avalanche and the colored portions are the usage of their native Bridges this has further solidified the thesis of layer 2 to Layer Two communication which has become uh one of the primary reasons why developers integrate layer zero and further here shows the growth of this so in September of 2022 about a year ago this thesis was not very clear at all H and then fast forward to April 2023 all of that white bar is layer zero usage so the growth and Adoption of the protocol as de facto way to send messages cross chain and to build Omni chain applications is more clear than ever we built these Omni chain standards of which stands for Omni chain fungible token and nft uh as an outof the-box way for developers to integrate or launch their token from day one in an omni chain manner so what this means is for ofd which is the erc20 version of the Omni chain token native tokens Can now be seamlessly transferred between chains without having to go through Bridges or wrapped Asset Risk so this means the contracts are owned by the developers and these tokens can expand to move between any chain that's supported by layer zero so some of the use cases for this that are particularly compelling are for stable coins so there are some stable coin issuers that have struggled with launching their tokens very quickly on multiple chains and having a unified supply of liquidity this solves for that for cbdcs for in-game currency let's say you've launched three names and you want the same currency across all three of those of is ideal for that uh for protocol tokens governance tokens uh even your your friend Tech share can be an of and you leverage liquidity from everywhere so rather than betting on one chain let's say you're launching your token and you say today it's chain a that's really popular you future prooof your token because now it can move anywhere you could Port your entire Community to a different chain or you simply deploy an of contract on uh three new chains and now unlock the portal so that your users can uh access the utility of that token from wherever their home chain is and it also grows your community because we have users uh you know for example in South Korea Clayton is a really popular ecosystem If You Now launch your token as Omni chain on Clayton you invite a whole new cohort of users who are familiar with the native gas tokens of Clayton the wallets of Clayton and don't have to then launch a or build their own salono wallet or set up an ethereum based wallet for Defi and fintech the arbitrary contract invocation that layer zero enables has led to uh Integrations like radiant which is a cross-chain lending and borrowing protocol you can lend and borrow on multiple chains and users only have to do one click and have one gas token in their wallet we have protocols like Pendle this is a protocol that's come out of uh this region integrating layer zero for cross chain V token I and then we also have protocols like balancer using layer zero for cross chain boost and then for fintech as well or trafy Enterprise layer zero really is the only protocol that is purpose-built for their use cases because you will never find a bank that's going to trust the security of all of their value in the hands of a multisig or in the hands of a thirdparty service or a uh bridge that uh was built and uh managed by a team that runs the of the validators or all the validators use the same code with layer zero it's actually modular enough that these teams can run those components themselves in addition layer of zero is uniquely suited to support Financial use cases because of this proprietary security module we created called pre-crime what pre- crime is it's a module that Forks every single message that goes across the protocol and runs it locally against a set of invariants defined by the application developers so that invariant might be an algorithm it might simply be a set of whitelisted addresses whatever your application is protecting users against it Che checks against that and only when it's secured does it push back and run across main net and pre- crime is what has secured Stargate since day one it's what secured Stargate when at 4.4 billion in tbll every black hat attacker in the space was trying to crack the protocol on nft is the nft parallel standard uh I just ran through of this is how nft projects can uh integrate layer zero to move seamlessly between chains or launch their project from day one on multiple chains the transfer between them involves leveraging layers Z messaging to convey State and what you see right here is a diagram showing that flow with the example of pudy penguins pudgy Penguins is a project that's really near and dear to all of our hearts because the layer zero Team all have penguins and also because uh they were a project which reached out and wanted to create a really seamless uh transfer experience for their users to open the portal from ethereum to arbitrum BNB and polygon and that was a huge success since then has led to many other notable projects launching uh onts the landscape today uh is so exciting and particularly at this Gathering we are in person with a lot of these gaming Studios that have adopted on so pudy Penguins CAD pandas was also one of the first projects to integrate uh on ghostly ghost was the original team of Scrappy developers who found the GitHub repo and decided to launch a project that enabled the artwork to mutate between chains meaning when a ghost is on Avalanche the outline of the ghost is red and if it was minted on polygon the background is purple but when a user moves it from Avalanche to ethereum then the outline turns blue that's a really simple example but it shows how powerful arbitrary contract invocation is you can mutate the metadata of your assets as it moves between chains or as actions between chains trigger those messages and then shrapnel is a game that we are so excited about it's one of the most hotly anticipated games that will launch later this year head to toe their stack leverages layer zero for movement of assets and also gameplay experiences like a user kills a boss on chain a triggers a message that gets sent from chain a to chain B that message mutates the metadata of an nft and suddenly in one second a user was rewarded for a task and their nft has a crown or their nft has mutated into a different creature this is possible with layer zero the growth of omni chain applications uh you know further cements our our confidence in this you can see right here Stargate has secured uh volumes of Beyond $18 billion uh defi kingdoms was one of the uh OG games that integrated layer zero and has sent across the protocol 3.76 million messages pancake swap integrated of for their token and the growth in the ethereum ecosystem has been profound and btcb which is a version of rap pit coin issued by Ava Labs also integrated oft and after integrated of the token Supply and velocity of usage doubled this has also exceeded our expectations this is a graph showing the monthly messages across layer zero so you can see from June of last year all the way until March or April of this year there was steady growth but then after April it's been really exponential and so now we're nearly at 20 million messages per month at the end of KBW were projected to pass 70 million messages in total and if you'd asked me about a year and a half ago given that we had just entered a bare Market I never would have guessed that we would be at 70 million this quick cumul cative contracts on mainnet are also pretty astonishing we're at nearly 13,000 contracts on mainnet and you can also see the growth here this means that there are 13,000 contracts that have integrated layer zero are calling to the endpoints sending packets of information between them and enabling end user experiences that are chain abstracted and these are contracts on testnet so we're almost at 30,000 contracts on testnet what does that mean for the next 12 months for crypto and for gaming this means that we will will see an enormous amount of established and net new projects launching as Omni chain or expanding to other chains these are all projects that are in staging mode right now sending test tokens which are ofds between different chains and also figuring out what is truly novel that you can do with this arbitrary contract invocation maybe you don't need a toggle button anymore that says you're on avalanche now and and now you're on optimism maybe it's actually just an application and under the hood it's leveraging all of this uh it's incredibly exciting to see and I think will impact a lot of the people in the space as they think about their retail engagement but also how you will be building your projects too and one more thing I am so excited to be able to share today that in September we will be announcing our deep partnership with magic Eden uh Magic Eden is uh one of the strongest nft marketplaces launchpads and uh gaming projects in the space we will be launching multiple products with them uh and use this uh as or this moment as a signal towards our commitment to gaming and also nft creators across both evm and non- evm uh you can probably glean what that might mean for non evns that we'll be supporting in the future and if there is one takeaway from this talk today it is certainly that the future of interoperability is the future of crypto and Korea plays a really huge role in this uh I want to thank Francis Kang who is the co-head of conference here today for being so gracious and inviting layer zero for the fact block team for organizing all of this and also for so many of the projects here that are integrating layer Zer right now or have already those announcements will be rolling out over the next few weeks and I urge you all to play with them experiment reach out I want to your feedback and if you're building something or if there are any developers in the audience come find me and my team members throughout the week we love sitting down and and jamming on different designs and also talking about our vision for the future thank you so [Music] much