LayerZero: Technical Principles and Evaluation of the Cross-Chain Interoperability Protocol

Introduction

In just one year, the full-chain interoperability protocol LayerZero has once again raised $120 million at a valuation of $3 billion, three times its previous valuation. This article will comprehensively outline the technical principles of LayerZero and analyze its advantages and disadvantages.

1. LayerZero Technical Principles

1.1 Overview

LayerZero is a trustless cross-chain communication protocol. It utilizes a lightweight node mechanism to split the intermediate trust link into two parts through relayers and oracles, achieving better security at a lower cost. LayerZero focuses on message cross-chain, rather than asset cross-chain, serving as a foundational protocol with asset cross-chain applications being a subset.

1.2 Introduction to Light Nodes

Cross-chain communication is mainly completed through external verification or on-chain light nodes. Light nodes only save historical block headers and do not store specific transaction information. The Merkle Root of the block headers can verify whether a transaction exists in the block. Using light nodes can achieve a high degree of decentralization, but the cross-chain cost is relatively high.

1.3 Ultra Light Node

Ultra-light node (ULN) performs the same validation as an on-chain light node, but does not retain all block headers in order; instead, they are streamed on demand by decentralized oracles. This reduces costs but also results in a certain loss of security. It is a desirable trade-off for certain scenarios, such as social protocols, provided that application layer isolation is adequately maintained.

2. The Core Role of LayerZero in Cross-Chain

2.1 Positioning of Oracle and Relayer

Oracle( oracle) informs the target chain contract when to verify and what the verification answer is. Relayer( relayer) provides the proof process and cross-chain information needed for validation.

2.2 The division of labor between Oracle and Relayer

The oracle transmits the Blockhash and Block Receiptsroot of the cross-chain request from the source chain to the target chain. The relayer transmits the Receipt and Merkle Proof path information of the cross-chain message to the target chain contract for verification.

2.3 LayerZero's cross-chain lifecycle

The cross-chain process begins with the user application initiating a transaction, which is then decomposed through oracles and relays, and executed upon verification on the target chain. The specific steps include: sending a request, data packaging, notifying the oracle and relay, passing verification information, verifying transaction validity, executing target chain functions, etc.

3. Evaluation of the advantages and disadvantages of LayerZero protocol

3.1 Risk Assessment of Dependency on Oracles

LayerZero allows applications to customize relayers and oracles, forming a many-to-many selection pattern. Even if individual oracles or relayers encounter issues, the overall risk remains controllable. The protocol itself does not store funds or data, reducing the possibility of being attacked.

3.2 Advantages over other protocol layer cross-chain products

• Stronger general extensibility: no need to deploy expensive light nodes on each chain.
• Lower complexity for developer integration: Simple design, easy to integrate
• Break the multi-chain fragmentation: support non-wrapped assets, unify the liquidity layer

3.3 Summary

As an important infrastructure in a multi-chain landscape, LayerZero has advantages of high determinism and a clear business model. Its low cost and high compatibility characteristics make it expected to become one of the key protocols for cross-chain communication.