What is LayerZero? What does it do?

Introduced in 2008 thanks to Satoshi Nakamoto, blockchain technology still faces some problems today. The most important of these problems is that the blockchain cannot be secure, decentralised and fast at the same time. Different solutions have been proposed so far to overcome these problems. One of the most ethical suggestions is "interoperability". After a brief information about interoperability, we will start to examine the LayerZero project in detail. Interoperability is the technology that enables all blockchains to work together, as the name suggests. The purpose of this technology is to provide communication between chains and to transfer data in a secure and irresponsible manner. In other words, interoperability technology enables blockchains to "talk" to each other. Well, can't they talk without this technology? No, this is because blockchain networks have different consensus. Thus, we have understood why interoperability technology is necessary. One of the developers of this technology is the LayerZero project. In our article, we will try to understand LayerZero technology and tell you what steps should be taken against the airdrop expectation.

What is LayerZero?

LayerZero is an interoperability protocol designed to transfer messages between chains. It is also a configurable user application. This application transfers using endpoints (endpoints). So when a chain X wants to "talk" to chain Y, it will use these endpoints. LayerZero will provide endpoints to these chains. But endpoints alone do not undertake this task. LayerZero uses Oracle and ReLayer technologies for this.


Endpoint operates in both the X (sending information) and Y (receiving information) chain. It only receives the information and transfers it by showing the destination (Y) chain to Oracle and ReLayer. You can see this from the image above. But what happens if chain X is attacked and tries to pass inaccurate information to chain Y? This is where Oracle and ReLayer come into play. Oracle transmits the information it receives from chain X to the endpoint in chain Y. ReLayer provides evidence about the correctness of the information to this chain. After the Y chain verifies the proof, the transaction is verified. In other words, the other network is not affected by an attack on one network. You can use the image below to understand what is explained. It is recommended that you also use this image while reading the working principles of the protocol.

Which Components Does It Have?

LayerZero protocol transfers messages through 3 main components: 1. Endpoint; 2. Oracle; 3. ReLayer We have learnt how these 3 components work in the previous section. Let's go into a little more detail about them. Endpoints are the interface that the user sees. In other words, users will interact with endpoints. There are 4 types of endpoints: Communicator, Validator, Network and Library. Each time the protocol "meets" a network that has not been added before, the Library stores information about it. Oracle is a third party service provider. During the transfer of information, Oracle "reads" the block header and sends it to the other network. The use of Oracle is, by their own admission, in partnership with Chainlink. The reason is that they are the leader in decentralised oracle technology. ReLayer is an off-chain service provider component. Its functions are almost identical to Oracle. ReLayer only provides evidence to the second chain and completes the transaction.

Application Types on Protocol

Cross-Chain Decentralised Exchange;

Using the LayerZero protocol, this exchange will be completely decentralised. That is, users will connect to the protocol with their own wallets and use the exchange built on it. This exchange will be designed to be compatible with Wrapped Tokens. You may be interested in: Common language of blockchains: Wrapped Token When trading assets through this DEX, 1:1 pricing will be applied. In addition, as stated by the team, a model similar to the Curve DAO pricing model will be used for pricing.

Multi-Chain Yield Aggregator;

Before moving on to the topic, let's briefly understand what Yield Aggregators are. Yield Aggregator is a platform that offers cryptocurrency traders the opportunity to generate passive income. These platforms use staking protocols to do this. According to the LayerZero vision, today's blockchain ecosystem limits yield aggregator platforms. The reason is that these platforms serve only one ecosystem. For example, yield aggregators on the Ethereum network are only available to users of this network. In this regard, the team announced in its WhitePaper that it is working with leading yield aggregator Yearn Finance. As a result, what the LayerZero project wants to do in this area is to remove the single ecosystem limitation of these platforms. It aims to achieve this through transfers between chains.

Multi-Chain Lending;

Traditional on-chain lending does not allow users to work with multiple ecosystems at the same time. As mentioned at the beginning, this is due to the inability of blockchains to understand each other. Thanks to the cross-chain communication offered by the LayerZero project, users will not be limited to performing lending operations only on the Ethereum network. At the same time, they will be able to do this with MATIC on the Polygon network, ETH on the Ethereum network, and BNB on the BSC network.

Is LayerZero Necessary?

In fact, what the LayerZero project does is not innovation. Innovation is on its technical side. LayerZero is a protocol that allows blockchains to work together in general. But even before this project, blockchains could understand each other. Wrapped tokens are available for this. ETH, Polygon, Avalanche or other networks belonging to the Ethereum network are not recognised by the ERC-20 standard. Wrapped Tokens solved this problem. We explained this in detail in our blog about Wrapped Tokens. But the problem was not solved only with this. Let's give an example to understand this. Bitcoin created a network that solved the money transfer in 2008. But with the establishment of Ethereum, blockchains have now become a place where you can develop your own applications just for money transfer. Likewise, the LayerZero project was created to make much better use of the performance of blockchains. Previously, it was only possible to perform transactions on a single network. Now it will be possible to do these transactions simultaneously and without paying commission fees to each network individually. This is why LayerZero is a necessary project. It is also easy to develop, which makes it different from all other projects born in the history of blockchains.

Is LayerZero Safe?

LayerZero Labs has been audited by more than 35 auditors. In addition, according to their own statements, all codes belong to LayerZero Labs. All audits have been conducted over the past 3 months. The results of all related audits have been published publicly.

What is our Airdrop Expectation?

The project has not yet made a statement on this issue. Also, when we look at CoinMarketCap data, we cannot see a coin. But this does not reduce the possibility of airdrop. LayerZeron's own token may be released in the future in line with the decisions taken by the team. One of the factors that will affect the possibility of the project's airdrop is the community. As the community reaches huge amounts, this possibility decreases. Because token distribution cannot be made to such a large audience. While this is a good idea from a marketing perspective, it may not be so good from a tokenomics perspective. Even if there is vesting (unlock time), it may be a possible situation to make big sales. In this case, one of the most important things to do is to look not at LayerZero itself, but at the dApps that use its technology. The examples given above will help you in this regard.

See you...