2021 was the year of Layer-1s, with a handful of so-called “Ethereum-killers” emerging as meaningful rivals to the original smart-contract blockchain.
However, the emergence of multiple established Layer-1s set another next narrative in motion: bridges. In simple terms, they’re a means for cross-chain communication.
At the pinnacle of cross-chain communication is LayerZero Labs, in the headlines today after raising US$135 million in a series A+ investment round, led by Sequoia Capital, Andreessen Horowitz and FTX Ventures.
Previous investors in LayerZero Labs include Coinbase Ventures, PayPal Ventures, Tiger Global, Uniswap Labs, Binance Labs, Multicoin Capital and Sino Global Capital.
LayerZero Labs has previously raised US$2 million and US$6 million in respective funding rounds.
Today, it now has a valuation of US$1 billion.
Why the hype?
Enter the Omnichain
LayerZero Labs has developed its LayerZero protocol (still in beta), which operates as a messaging layer that enables seamless cross-chain communication.
They’re calling it an omnichain interoperability protocol.
In simple terms, its role is to transmit information across blockchains – That could be a transaction or a direct token swap.
LayerZero also uses a revolutionary bridge, Stargate, harnessing the STG token, and which has seen over US$270 million in transfers in just over 2 weeks.
One bridge to rule them all
In total, the 17 major bridges currently active across all chains have approximately US$33.78 billion in total value locked (TVL), and this has many prying eyes watching.
Recent months have seen two major bridge hacks.
First was an attack to the Wormhole bridge connecting Solana and Ethereum. The hack saw the culprits make off with US$320 million worth of assets. Later, Jump Crypto “jumped” in to save the day, covering all losses.
Then, only a few days ago, an attack on the Ronin bridge saw US$600 million worth of ETH and USDC drained. Check out this recent article for the full explainer!
In total, these amounts come in just shy of US$1 billion.
With US$33.78 billion suspended in bridges across all chains, one can only assume that opportunistic hackers are plotting further exploits.
Why Stargate could be the solution
As per our recent article, Stargate sets itself apart by solving the “Bridging Trilemma”.
A bridge needs to achieve the following:
The challenge, however, has always been to achieve all three without sacrificing one for the other.
Stargate solves the Bridging Trilemma thanks to its Delta (Δ) algorithm, which enables unified native asset pools on all chains, while also providing instant guaranteed finality.
As for security, cross-chain protocols are typically riddled with potential vulnerabilities. Hence, the history of massive exploits.
Stargate aims to address these risks with its use of an Oracle and Relayer combo for dual-layer security.
There’s no doubt about it: LayerZero Labs has built something quite brilliant, and the huge funding raised and its valuation just go to show that smart money is betting (and betting big) on interoperability.
As quoted in a recent Forbes article, Sequoia partner, Michelle Bailhe, explained, “We had conviction in a cross-chain future, but the technology to enable it was insufficient — until we met LayerZero”, said Michelle Bailhe, partner at Sequoia.
Vitalik Buterin’s thesis, as the Ethereum founder explained earlier this year, referred to the inherent security flaws holding back a cross-chain future.
Only time will tell if he’s proved right, but perhaps LayerZero Labs’s omnichain protocol will be the cross-chain solution even Vitalik didn’t see coming.
Following the smart money means placing bets on both cross-chain and multi-chain communication.
We always say how Layer-1s are the safest bet in crypto, and that remains the case, but investing in the picks and shovels which will allow them to communicate is a no-brainer!
Ran is waiting to buy US$STG at or around the US$2 mark. Do you think he’ll get the chance? Or is he going to spend the rest of his life waiting?
Let us know what you think in the comments below!