Interoperability platform LayerZero is preparing to launch Stargate, a protocol for swapping tokens across different blockchains seamlessly and efficiently. Stargate will go live following a token sale starting on March 17. The token sale will generate the required liquidity across the seven blockchains.
The Stargate protocol is an application built on top of the LayerZero protocol to enable the transfer of funds between multiple blockchains. It will compete with existing multichain token bridging projects such as Hop Protocol, Connext, Multichain, and Synapse. It’s now live on Ethereum, Avalanche, Polygon, BNB Chain, Fantom, Arbitrum, and Optimism. With the plan to add Solana, Terra, Cosmos Hub, and Osmosis in the coming 6 to 8 weeks. The LayerZero team has also enlisted the help of Maki, co-founder of SushiSwap, and his network of contacts to lead in the area of business development.
How does Stargate work?
Let’s say you want to bundle a large series of complex transactions together, possibly un stake -> swap -> initiate bridge -> claim bridge -> swap -> stake. All in a single transaction. The user only needs to be connected to the source chain and only needs to have assets on the source. More simply put, users will be able to do several actions on multiple chains in 1 single transaction.
This means token bridges will essentially become invisible for the user, and multichain activity becomes as easy as interacting with one chain. Arguably, the technology alongside better wallets with native multichain support could make the multichain experience similar to using just one chain.
Use Cases
Today cross-chain messaging is synonymous with bridging, but there is much more you can do with LayerZero than simply bridging assets. LayerZero enables cross-chain state sharing, bridging, lending and borrowing, swaps, governance, and more.
A good example is SushiSwap, which exists on twelve different blockchains, with each version running in its silo. If they want to sync with the central Ethereum instance, developers have to write code using Wormhole, Rainbow Bridge, Polygon Network Bridge, Avalanche Bridge, etc. The result is eleven code sets, with eleven unique interfaces and eleven different security properties. Since the ecosystem of bridges and new L1/L2s is constantly changing, this approach is not sustainable.
Using LayerZero, SushiSwap would have one single interface and code base for all cross-chain pairs. SushiSwap developers would then only need to implement send and receive functions.
Unified Liquidity Bridge
Bridges today compete to attract liquidity providers (LPs), which fragments liquidity between bridges and their pools. Instead of having one pool providing liquidity for an asset to all connected chains, LPs must choose a single pool that connects to one chain.
LayerZero enables unified liquidity across all chains with guaranteed finality on the source chain. When a user transfers an asset from Chain A to Chain B, the user is guaranteed the asset on Chain B, and the LP providers receive fees from all incoming transactions to Chain B regardless of the source chain.
Token Swaps
Existing token swap platforms can wrap tokens to perform cross-chain swaps from one asset to another without the need to modify any existing code. Users will swap from ETH on Ethereum to SOL Solana in one single transaction from the source chain.
Lending and Borrowing
Currently, if a user has money on chain A but wants to farm on Chain B, the user would have to collateralize on Chain A, borrow, bridge, swap, farm on the destination chain, exchange back, bridge back, repay the loan, and un-collateralize. With most steps incurring fees along the way which can accumulate. With LayerZero you can collateralize on Chain A, borrow on the destination chain, farm, repay, and the collateral is unlocked, skipping the four bridging and swapping fees.
LayerZero will connect blockchains seamlessly, to the point where users are unaware they are even using it. Moreover, it will enable dapps to expand beyond the borders of EVM or Non-EVM development, in turn creating the world’s first omnichain applications.
Is Stargate really possible?
While the premise of LayerZero and performing activities across multiple chains in one transaction is exciting to the community, others are more skeptical of the underlying technology stack. Twitter user Loi Luu, a co-founder of Kyber, was quick to try and break down the possible issues.
The co-founder and CEO of LayerZero Labs, known on Twitter as lz.Primo() was fast to reply to concerns on finality. Stating in a reply that Loi Luu had confused instant finality with an instant guarantee of finality. Further adding, there is no scenario where a transaction won’t settle on the destination chain or where it will ever not have enough capital to fulfill the request from the source chain.
The multichain paradigm is something DappRadar has advocated and believed in for some time. Now, the idea that users will perform complex cross-chain transactions without the headaches attached to using multiple blockchains could bring the industry another step closer to mass adoption. It will be fascinating to observe the success of LayerZero and Stargate. Moreover, it will be interesting to watch how the token sale goes starting March 17.
Learn more about LayerZero and Stargate
The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your research. The writer holds positions in various cryptocurrencies including BTC, ETH, and RADAR.
