LayerZero Labs’ cofounders. From left to right, Caleb Banister, Ryan Zarick and Bryan Pellegrino.
LayerZero
‘The future is multichain’ has become crypto’s latest favorite refrain.
As opposed to the mantra of ‘one chain to rule them all’, many enthusiasts are now starting to believe that the blockchain industry will consist of many different networks communicating with each other in much the same way that Android users can now make FaceTime calls.
However, until recently this was not possible. The moats between many of the leading blockchains such as Bitcoin, Ethereum, Solana, Avalanche, and others forced users to essentially pick a team. “Those decisions should not have to be made,” thinks Ramnik Arora, head of product at FTX and an investor at FTX Ventures.
To that end, along with Sequoia Capital and Andreessen Horowitz, FTX Ventures co-led a $135 million Series A+ investment in LayerZero Labs. The Vancouver, Canada-based company is developing a protocol that aims to connect decentralized applications across multiple blockchains.
“Our mission is to connect every [smart] contract on every chain,” says Bryan Pellegrino, LayerZero Labs’ CEO and cofounder.
Revealed exclusively to Forbes, the round values the year-old firm at $1 billion. Other investors include Coinbase Ventures, PayPal Ventures, Tiger Global, and Uniswap Labs. The company had previously raised $2 million in seed funding and $6 million in Series A financing from Binance Labs, Multicoin Capital, and Sino Global Capital, among others.
Most cross-chain communication today takes place on the so-called bridges, which solve interoperability by locking assets from one chain and issuing an equal value of tokens on another. According to data aggregator DeFi Llama, some $33 billion worth of cryptocurrency is currently locked in bridge protocols.
However, these bridges create added levels of centralization and security vulnerabilities that can and have been exploited to the tune of nearly $1 billion in recent months. Just yesterday the world found out about a $600 million hack of the Ronin bridge, a specialized Ethereum-compatible network supporting popular online game Axie Infinity. This follows the February attack on the Wormhole bridge between Solana and Ethereum, which resulted in $320 million losses (eventually reimbursed by Wormhole’s sponsors, Jump Crypto, as a form of bailout).
Asked for a response to the Ronin hack and its implications for LayerZero, Pellegrino declined to comment at this time.
However, investors feel that LayerZero will not fall victim to these kinds of thefts. “We had conviction in a cross-chain future, but the technology to enable it was insufficient—until we met LayerZero,” says Michelle Bailhe, partner at Sequoia.
Ryan Zarick, LayerZero Labs’ CTO and cofounder, describes the firm’s key offering, the LayerZero protocol, which currently operates in beta version, as a messaging layer enabling direct cross-chain communication. Think of it as a decentralized form of SWIFT, the dominant banking communications platform used to route $5 trillion worth of daily transactions across its 11,000 member network. For example, with LayerZero’s technology, Ethereum applications will now be able to access liquidity on Serum, a popular decentralized exchange built on Solana.
LayerZero still has a bridge, called Stargate, but unlike prior projects it relies on a namesake token to handle asset transfers, currently trading at $3. In less than two weeks post-launch, the bridge has sent over $264 million in transfers and accrued over $3 billion in total value locked.
LayerZero currently supports seven networks, including Ethereum, Avalanche and Fantom, but that number is bound to grow. “In the next four weeks or so we’ll be on Solana and Terra,” says Pellegrino.