After the V2 version is launched, can the criticized centralization and security issues be solved?
Interviewee: Irene Wu, Head of Strategy at LayerZero
Interviewer: kit, flowie, ChainCatcher
Editor's note: The crypto asset data platform RootData and ChainCatcher jointly released the " 2023 Web3 Industry Development Research Report and Annual List " (click the link to view the full report and list). The report provides a detailed analysis and interpretation of the development of the Web3 industry in the past year. Covers four major sections: the overall trend characteristics of the Web3 industry, Web3 asset development characteristics and sector trend analysis, Web3 capital flow characteristics and trend analysis, and the 2023 RootData List.
In the fourth section, the report selects multiple lists based on the annual performance of Web3 projects and investment institutions, including the Top 50 projects in the Web3 industry, the Top 100 investment institutions, and the Top 20 projects in subdivisions such as infrastructure, DeFi , and games. .
In the field of cryptocurrency, unicorns are being created faster than in any previous industry, and LayerZero is one of the representatives.
In 2020, the BNB chain had just been launched. Three game enthusiasts wanted to build a multi-chain game that could be on both the Ethereum and BNB chains, but failed. A year later, they jointly entered the cross-chain track, and a future unicorn project, LayerZero, was born.
By deploying "ultra-light nodes" on various chains, supplemented by innovative models using oracles and relays, LayerZero has quickly become a rising star in the cross-chain field, and has been favored by many first-tier companies such as a16z Crypto, Sequoia Capital , and Binance Labs. Favored by investment institutions. Since its establishment, LayerZero has raised nearly US$300 million in three rounds of financing. After completing US$120 million in financing in April 2023, its valuation will reach US$3 billion.
But almost at the same time, LayerZero ushered in troubled times. In March 2023, LayerZero was strongly recommended by a16z in the cross-chain bridge vote and was accused of excessive centralization; the following month, LayerZero's official cross-chain bridge Stargate was criticized as a "cross-chain assassin" due to high fees and opacity; October 2023 In August, LayerZero’s newly launched wstETH encapsulation function was jointly boycotted by Connext, Connext, Across and other peers.
In November 2023, the mystery of the "SSL certificate" that symbolized the airdrop caused LayerZero to once again arouse community dissatisfaction with management. In addition, technically, LayerZero has been facing multiple tests in terms of decentralization and security.
After being questioned, in January 2024, LayerZero announced that the V2 version would be online, with the intention of solving the criticized issues of decentralization and security.
On February 1st, ChainCatcher interviewed Irene, the strategy director of LayerZero Labs, in an attempt to answer the above questions.
After graduating from Computer Science majoring in counter-surveillance and law enforcement agency technology, Irene joined a start-up men's clothing company, where she was exposed to Bitcoin through two Gemini angel investors, and then joined LayerZero Labs in 2021 as the head of strategy. Established business development and integration teams.
In addition to talking about LayerZero itself, Irene also hopes that more outstanding talents from the Web2 industry will join the Web3 industry to jointly promote the development of the industry.
What problems does LayerZero V2 focus on solving?
1. ChainCatcher: LayerZero recently announced the technical white paper for the V2 version. What problems does the new version focus on solving? How will the latest V2 version solve the centralization and security issues that LayerZero has been criticized for? How is the current deployment of V2 going?
Irene: LayerZero V1 version has transmitted hundreds of millions of messages, transferred more than 50 billion US dollars, and integrated thousands of applications. Its design and architecture have always been based on three principles, namely permissionless, censorship-resistant and immutable.
By running LayerZero V1, we did get some of the feedback you mentioned, and we are also thinking about how to continue to develop and serve developers. In the past, we used Oracles and Relayers to complete verification and message execution between different chains. However, such off-chain entities do have security risks, which is very difficult for our team.
We hope that these oracles and relays can ensure security through the verification method of ZK proof.
To lower the barrier to entry, we needed a LayerZero V2 to build a new architecture that would make it easier for developers to run one of the components and enable out-of-the-box verification.
In the white paper of LayerZero V2 version, you can see that we are trying to solve various problems of decentralization, security and downtime.
LayerZero V2 is a messaging protocol, not a blockchain. LayerZero utilizes smart contracts deployed on each chain, combined with a decentralized verification network (DVN) and an executor (Executor), to enable interaction between different blockchains. It also introduces a very lightweight approach that allows teams to run their own DVN or use native bridges. Third-party bridges such as Arbirum, Layer2, Wormhole, Axelar, and even MPC wallets can all serve as DVNs.
In addition, a series of optimizations have been made to the developer experience.
2. ChainCatcher: You just mentioned many types of cross-chain interoperability protocols such as Connext, Wormhole, and Axelar. In comparison, what are the positioning differences, advantages and disadvantages of LayerZero? What are the common challenges faced by the industry in solving cross-chain interoperability?
Irene: Let me answer the second question first. LayerZero was inspired by games. Our three founders were gamers. When the BNB chain was just launched, they were thinking about how to build a game based on both Ethereum and the BNB chain so that the two chains could communicate with each other. The only cross-chain facility available at that time was through off-bridge asset packaging.
In 2023, many users may suffer from PTSD (post-traumatic stress disorder) due to MultiChain. All the hacking attacks in the past few years have been caused by this bridging model of wrapped assets, which was the most popular method 3 years ago and was the first step in blockchain interoperability.
Therefore, Layer Zero does not just want to be a simple cross-chain bridge, it is an infrastructure for cross-chain communication. In fact, the layers under the cross-chain bridge can achieve more functions, and the cross-chain bridge is actually one of its use cases.
Furthermore, achieving cross-chain interoperability is like building the Internet of the past. Upper-layer applications and security issues are constantly being innovated, and there is an ever-growing code base. How do you ensure open innovation at the upper level while also achieving a stable "foundation"? This is a very difficult matter.
The difference between us and protocols such as Connext, Wormhole, and Axelar is that they are solving the problem of the verification layer, while we are solving the problem of the message transmission layer in the immutable framework.
We are not opinionated about the verification layer and forcing developers how to verify their own messages because there are millions of different use cases for blockchain technology and each one requires a different level of security and we want to keep it open source , open ecosystem.
“We are often misunderstood because of governance issues”
3. ChainCatcher: In October 2023, LayerZero launched the encapsulated stETH (wstETH) function of transferring Lido Finance on Ethereum, Avalanche and other chains. wstETH integrated the LayerZero full chain token (OFT) standard. The original intention of launching this function at that time was What? How do you feel that this move has encountered joint resistance from many peers, as well as community doubts about governance? Does LayerZero have any reflection and improvement plans on this?
Irene: First of all, we at LayerZero believe in and want to protect this spirit of permissionless deployment, which is one of the reasons why we want to build in the Crypto space. Developers should be able to use the technology and create what they like, edit already existing protocols, and do so without the permission of "banks" and the permission of social oligarchs.
Lido, like LayerZero and Uniswap, enables permissionless deployment. I don't think this should be blocked. The reason for the misunderstanding is because of our governance issues. Community users thought that we did not make any statement before deployment, which seemed malicious. But in reality it has been a no-brainer, and we are grateful for more than a year of positive collaboration with the Lido team.
We are also excited that many tokens on Ethereum , Avalanche and other chains use the LayerZero full-chain token (OFT) standard, which has been adopted by hundreds of top protocols. As V2 is upgraded, they can inherit new security specifications.
In addition, I also need to emphasize that LayerZero does not compete with Connext, Across and Celer Network. If there are teams that want to use Connext, Across and Celer Network as part of their validation layer, they can do so within LayerZero and are welcome.
4. ChainCatcher: Stargate, the official cross-chain bridge of LayerZero, has been criticized for being expensive and opaque. How does LayerZero view this? Is there any adjustment plan?
Irene: About 6 months ago, LayerZero founder Bryan Pellegrino announced the idea of launching Stargate V2, a huge upgrade to Stargate that was coming.
Regarding the fee issue, Stargate handles many unique features on the chain and is one of the most commonly used native cross-chain bridges in the cryptocurrency field. It is also the main way for crypto users to enter and exit Base, Optimism , and Arbitrum . These contracts have always been in the top ten most expensive contracts for Gas. And if you want to cross from Ethereum to other chains or from other chains back to Ethereum, it is usually more expensive.
Although some cross-chain bridges have low gas, they may have low security, and their functions are basic and only process fewer quotes on the chain.
I can't say much about the upgrade just yet, but Stargate is working hard and we'll see, it will be incredibly optimized based on all this feedback.
5. ChainCatcher: LayerZero announced in December that it would complete token release in the first half of 2024, but has not announced a more specific airdrop snapshot time and token distribution plan. Is there a clearer time point now?
Irene: We have announced on the official X platform that there will be a token launched this year, and it will be launched on June 30 or July 1 at the latest.
6. ChainCatcher: LayerZero has received a lot of dissatisfaction from the community due to its progress in tokens and airdrops. How do you deal with this dissatisfaction from the community? What factors will you focus on when deciding on airdrop and coin issuance time?
Irene: We have been sharing information about tokens as soon as possible. Frankly speaking, we are a team composed of mostly engineers who have focused on construction in the past two years. While trying to build complex facilities, we also hope to design an excellent token launch, but this often encounters some problems. hinder. We focus on developing the product to meet the needs of developers, ensuring its exceptional quality so that when the token is launched, it does not pose any challenges. Instead, it became a source of pride for us.
I want to be clear, this is very important to us, the way tokens are issued is critical to any crypto project and we want to get it right, which is why we take the time to do this.
7. ChainCatcher: The expectation of airdrop has inspired users to participate in LayerZero interaction. After the airdrop, how does LayerZero plan to retain and motivate users?
Irene: LayerZero is a protocol for developers, not just a bridge for users, so it will specifically cater to the needs of developers. There are a lot of great people in the ecosystem, and we're honored to observe and brainstorm with the projects they're building on LayerZero.
We focus on how much developers love the protocol and how important end users are to the product experience, whether it’s games that integrate blockchain assets through LayerZero or LayerZero’s seamless transfer of stablecoins, cross-chain lending, etc.
In addition, contributors to decentralized protocols are also important. As testnet V2 goes live, we announce that there will be an initial release of 14 validators, including DVN (Decentralized Validation Network). The team running these networks includes Getcoin, one of Ethereum’s most famous execution clients (for years Has been a thought leader in Ethereum grantmaking and public good building). These teams are also extremely valuable to a healthy ecosystem.
Data growth exceeds expectations
8. ChainCatcher: What is the LayerZero roadmap in 2024? What is the most important work goal? What are the plans for ecological incentives?
Irene: Currently, we are actively developing some important new products. It is crucial to successfully launch these products and get feedback from the right audience. It's been a year since the V2 release, and I'm eagerly looking forward to valuable feedback from developers, users, and non-technical people.
I would also like to convey to everyone through ChainCatcher that I am always open to private messages and happy to answer questions and listen to everyone's thoughts.
Now the first integrated LayerZero product is online. It is called Cluster Canister. It was developed by Twitter's non-developer team and led by Fu Bar. In essence, it is a general area that integrates LayerZero and the second layer to integrate multiple chains. Wallet addresses are unified under one identity.
9. ChainCatcher: What do you think is the team’s biggest achievement in the past year? What did you do right?
Irene: There's only one achievement that comes to mind that far exceeded all our expectations for the amount of data. We never expected that more than 100 million messages would be generated in more than a year after the agreement came into effect in May 2022. We originally would not exceed 15 million messages. The data comes from real projects, with real users and very useful cases. They're stablecoins, games, protocols, and enterprise projects, and JP Morgan has even integrated LayerZero and used it for their project custody, and that's another thing that we're really excited about.
In addition, we launched the B2 test set in December last year, and we had 52 chains in a world with hundreds of APP chain players. LayerZero is ready to connect them all into a mesh network.
We've grown the team and hired a lot of really good people, including some great researchers.
10. ChainCatcher: So what has allowed the LayerZero team to grow and build rapidly and continue to grow in the industry?
Irene: It’s important from the product users to the teams building the infrastructure. When building critical infrastructure, there is no room for error, especially when deploying immutable contracts, and once thoroughly tested and deployed, there is no way to go back and fix problems. Therefore, it is necessary to have a hard-core team that loves solving difficult challenges to ensure continuous improvement.
I will always remember a new colleague I met when I first joined Layer Zero. He was our off-chain engineer. While everyone else left for a team dinner, he stayed alone in the office for an hour and a half and decided to run two more tests on something we planned to deploy the following week. He looked at me and said, "This is the right thing to do, so we're going to do two more tests."
For something like cross-chain interoperability, your team needs to be ready and willing to wake up at 2am, ready to solve any challenge.
11. ChainCatcher: What are the industry issues that the team is currently most concerned about? What is your judgment on the crypto market in 2024?
Irene: Personally, and not speaking for LayerZero, I think we still need additional great engineering talent, product design talent, and storytelling talent from Web 2. Even my smartest engineering friends haven't written a single line of Solidity code.
Imagine what would happen to our entire industry if some of the top product design experts came on board. They could completely change the way we approach on-chain transactions, creating something fresh and innovative rather than simply replicating traditional stock trading. That's why I think this is the most pressing issue.
12. ChainCatcher: Where do you think the breakthrough will be for the large-scale application of Web3? Which tracks currently have this potential?
Irene: Recently, I have been primarily involved in teams building and challenging traditional norms, and I am passionate about the potential of games and their ability to democratize digital assets to others. Game experience should not be limited to the chain. Blockchain technology has the potential to unlock a large number of novel game behaviors.
Additionally, the teams behind some of the games we loved playing when we were younger, primarily teams from Korea and Japan, have invested heavily in operations performed on-chain and using LayerZero to initiate operations across different chains. This is an advancement that I’m very excited to observe because it goes beyond the basic concept of NFTs.
Additionally, there are some exciting new applications emerging outside of gaming that prioritize delivering an enjoyable user experience. Interacting with these applications should not cause stress but should be an enjoyable process. Something happened to me recently, I was trying to transfer USDC from Ethereum to Solana and it took hours. This happened late at night, around 2am, and despite my keen interest in exploring bridging opportunities, I was quite nervous about the experience.
