While the majority of the crypto space is still hyping around Layer 2 blockchains, a group of developers at LayerZero Labs are working on a completely different level. They are building a layer 0 protocol that will help do away with the interoperability problem of blockchains.
Let’s dive a little deeper and see how a layer 0 works and the implications it has on decentralized finance.
What is Layer 0?
Layer 0 is a protocol that underlies all the Layer 1 blockchains and connects them together in a seamless manner. The network runs beneath the public blockchains, like a sewer line, making sure that all the Layer 1 blockchains have to access it.
Layer 0 is important for data validation such as what Chainlink (LINK) does, wrapping of tokens and much more. Consequently, with Layer 0, you can move assets from the Bitcoin network to Ethereum or Cardano seamlessly.
What is the Interoperability Problem?
Public blockchains (Layer 1’s) cannot communicate with each other because each blockchain is like an independent house with everything it needs to fully function. Currently, many DApps and layer protocols exist on top of public blockchains (Layer 1).
For example, Optimism, Arbitrum, and Polygon are layer-2 blockchains built on top of layer 1 ethereum. The problem is to use the Cardano blockchain, you have to sell assets on whatever chain you’re on and convert them to ADA. There is no way to directly move these assets. This is the interoperability problem.
LayerZero Labs solve this problem.
Layer 0 Omnichain DApps
The solution presented by LayerZero Labs leads to the creation of a new breed of DApps that are omnichain. “Omni” means “all things” and hence these DApps will be able to operate on most, if not all blockchains.
What this means is that if you have some USDT on Ethereum, you can spend it on Bitcoin, Solana, Polkadot or whatever other public or layer 2 blockchain you want to invest in. LayerZero Labs made this possible by developing the LayerZero Bridge which Stargate Finance, a DeFi protocol is using. The protocol was built by the LayerZero team and currently has over $500 million in total locked value (TVL). it is worth noting that this is a drop from $1.8 billion TVL courtesy of the entire crypto market crash.
Things are ramping up in the crypto space. Developments happen so quickly if you take a vacation you might come back a noob. Stargate was and is a massive success because it is fast and scalable. Perhaps the future of DeFi is layer zero, not layer 2.