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Layer Zero Combines the Cost-Effectiveness of Middle Chains with the Security of a Light Node.

Layer Zero Combines the Cost-Effectiveness of Middle Chains with the Security of a Light Node.
Image Source: Twitter (@LayerZero_Labs)

Layer Zero, an interoperability protocol, on September 16th announced that it is bringing a cross-chain solution, Ultra-Light node. It aims to combine the light node’s security with the middle chains’ cost-effectiveness.

Notably, Layer zero is a new protocol that aims to connect disparate blockchains. Recently, Layer Zero has led the Series A funding to arrange $6 Million with Binance Labs and Multicoin Capital.

#Binance Labs and Multicoin Capital co-led $6M Series A for LayerZero, an omnichain interoperability protocol that unites decentralized applications across disparate blockchains.

Twitter (@binance), September 16

Let us dig into the role of interoperability in blockchains:

We can see that the blockchain industry is growing like never before. There are plenty of promising blockchains that claims to be better than the previously existing ones. But, one thing is to be noted is that these blockchains are running parallel and cannot communicate with each other. Interoperability is actually the ability of different blockchain networks to communicate with each other.

Every blockchain uses different consensus protocols and hosts various applications. Hence, it creates a system that is not interoperable. Now, the main point is that without interoperability, the adoption of blockchain is highly restricted. 

Think of any two blockchains, and you will find that both have some unique characteristics, which are lacking in the other one. For instance, Ethereum and Bitcoin are the two biggest blockchain networks. Now, the Bitcoin network supports the BTC, and Ethereum endorses the majority of the DApps. Without any interoperability, the users of BTC cannot use their funds within the DeFi ecosystem supported by Ethereum. Now, this thing can potentially restrict the broader adoption of crypto and Decentralized Finance.

So, many blockchain networks aim to offer interoperability solutions to the various blockchain networks, such as Cosmos, Harmony and Polkadot. The current solutions achieve interoperability using the middle chains or the on-chain light nodes. Now, the middle chains, such as Polkadot, allow cheap transactions because they centralize the security around one hub. On the other hand, the on-chain light nodes, such as Cosmos, can achieve the highest security but are capital intensive.

What makes Layer Zero protocol unique is that it actually brings together the middle chains and on-chain light nodes to build a novel on-chain Ultra-light node, which has the highest security just like a light node and the cost-effectiveness just like the middle chains.

How does Layer Zero achieve interoperability?

Now, we know that the middle chains are cheap, and the on-chain light nodes are highly secure. So, the Ultra-Light Node performs the same validation as that of an on-chain light node and keep the block headers streamed on demand by the decentralized oracles, and the block headers are not supported sequential.

It depends on two parties for the purpose of transferring the messages between the on-chain endpoints, i.e., Oracle and Relayer. When a User Application (UA) sends a message from one chain to the other, it is routed via the endpoint of the first chain. That endpoint informs the Oracle and Relayer of the message and the destination chain.

The oracle helps in transferring the block header to the endpoint of the second chain, and the relayer submits the proof of transaction, which is later validated on the destination chain and the message is forwarded.

Layer Zero leverages the security of established oracles and has an extra security layer through the open relayer system. Besides bridging the assets, layer Zero can help enable cross-chain bridging, sharing, lending, borrowing and swapping.