LayerZero is a blockchain interoperability startup offering a new generation of crypto bridge that opens up possibilities for cross-chain swaps and sending arbitrary messages across blockchains. LayerZero came out of stealth mode in September, 2021 with the announcement of a $6M Series A raise led by Binance Labs and Multicoin Capital.
LayerZero's protocol allows apps to transmit messages between blockchains. A message can be a transaction, bridging an asset, swapping assets, etc. LayerZero can handle cross-chain transfers and cross-chain swaps, where both assets are on their native blockchains.
How it works:
- A user performs a transaction on the source chain. The transaction's payload is a message.
- Off-chain relayers send the message and proof that the transaction was mined to the target blockchain.
- On the target side, Chainlink oracles push source transaction info to the target blockchain.
- LayerZero validates that Chainlink's provided transaction data is valid, then accepts the transaction on the target blockchain.
The previous generation of crypto brides is expensive, slow, and under-featured. For instance, you might buy Polygon (MATIC) on a centralized exchange that is on the Ethereum network. In order to use that MATIC on the Polygon network, you'd first have to use an Ethereum-to-Polygon bridge. So if you wanted to buy KLIMA using MATIC tokens on the Ethereum network, you'd have to bridge the MATIC from Ethereum to Polygon, then go to a decentralized exchange (DEX) and swap your new Polygon-native MATIC for KLIMA. Stargate, LayerZero's first DEX and bridge, eliminates several of these pain points.
Stargate (STG), the first bridge and DEX built on LayerZero, allows investors to bridge and swap stablecoins across L1s Ethereum, Binance Smart Chain, Avalanche, Polygon, Fanton, and Ethereum L2s Arbitrum and Optimism. This means you can swap USDC on Arbitrum for USDT on Fantom without any middle steps. In the future, Stargate will integrate cryptos that are not stablecoins.
"It works by having the contract on each chain maintain the balance of assets on other chains, along with the credits owed to the destination chain. Regularly, outstanding credit info is propagated." - Nico Deva
Stargate can facilitate these cross-chain swaps in part because it has deep liquidity pools for each token on each network. Currently, Stargate has over $3.3B total value locked across its pools. To attract investors, Stargate offers APYs on farmed stablecoins ranging from 15% to 21% with liquidity in each pool ranging from $34M to $672M.
Stargate also offers competitive gas fees on cross-chain transfers and swaps. When these Stargate gas fees were recorded, Ethereum gas cost 42 gwei and ETH was worth $3,100.