Cross-chain Bridges LayerZero: The Evolution from "Super Intermediary" to "Business Genius"

Introduction

The importance of cross-chain bridges in the current blockchain ecosystem cannot be ignored. Although the frenzy of infrastructure coins has subsided, during this period of market calm, we can more objectively examine the development history of this field and explore the profound insights it contains.

In 2023, LayerZero rapidly emerged as a star project in the cross-chain space thanks to its unique "ultra-light node" architecture, with a valuation once reaching $3 billion. The V2 version launched in 2024 further facilitated 30 million on-chain cross-chain transactions, solidifying its leading position in the industry.

LayerZero's omnichain vision has attracted numerous developers and garnered the favor of top investment firms. However, it has also sparked controversy due to its level of centralization and security issues, with some derisively referring to it as "technical garbage" or "super intermediary."

So, is LayerZero a pioneer of technological innovation or a genius of business models? Let's conduct an in-depth analysis from the two dimensions of technical architecture and business logic.

I. Technical Analysis: The Architectural Evolution and Security Assumptions of LayerZero

1.1 V1: Ultra-light nodes and their security risks

LayerZero V1 introduces the concept of "ultra-light nodes," deploying lightweight endpoint contracts on various chains as message interaction points, completing cross-chain message validation through oracle and relayers. This design shifts the heavy block synchronization and validation work off-chain, significantly reducing costs.

However, the "2-of-2" trust model of V1 also has significant security risks:

• Risks of collusion between oracles and intermediaries
• Responsibility boundaries are unclear
• Relies on the security of each public chain itself, lacking an intermediary arbitration mechanism.
• Centralization tendencies in actual operations

1.2 V2: DVN mechanism and its security analysis

The V2 version launched in 2024 introduces the concept of "decentralized verification network (DVN)", allowing developers to independently select and combine multiple DVNs to verify cross-chain messages. This improvement brings the following advantages:

1. The sources of DVN are diversified, bringing in more independent stakeholders.
2. Support for different cross-chain validation solutions coexisting.
3. Enhance user autonomy in choice

However, V2 still faces some challenges:

1. Security strategy fragmentation, significant differences in DVN strength.
2. Developers may tend to choose a single DVN, which poses security risks.
3. Multiple DVN combinations increase system complexity.

1.3 Technical Review

In terms of compatibility, V2 is a benchmark in the industry, easily integrating with various blockchain systems and having a complete set of supporting resources.

In terms of security, although V2 has raised the upper limit of security, it has also lowered the lower limit. There may be situations of mutual blame regarding the definition of responsibilities. The current level of "decentralization" still has room for improvement, and the actual control of the system remains concentrated.

2. The Implicit Transformation in the Cross-Chain Track

2.1 Macro trends of capital concern

In recent years, the infrastructure sector has shown the best certainty in an uncertain market. Cross-chain bridges, as key infrastructure, have the following advantages:

• Rigid demand in a multi-chain ecosystem
• Pain points coexist with innovation opportunities
• Platform network effects and moat potential
• The vast prospects of cross-chain communication protocols

2.2 The Role Transformation of Cross-chain Bridges

With the development of multi-chain application ecosystems, cross-chain bridges are shifting from independent service providers to underlying services:

• Cross-chain functionality is backend-based, service-oriented, and interface-oriented.
• Polarization of discourse power: New chains still dominate, while major chain projects require bidding.

The launch of LayerZero V2 has further disrupted the traditional division of roles, transforming it from a secondary party to a primary platform.

2.3 LayerZero's business strategy

LayerZero adopts a platform strategy:

• Security responsibility is delegated to the DVN and application layer.
• Interest binding replaces subsidies, actively absorbing resources from all parties.
• Gain recognition from the majority of on-chain ecological entities

2.4 Financing and Valuation Challenges

Despite LayerZero having completed its Series B financing with a valuation of $3 billion (, the Series C financing faces challenges:

• The annual growth rate of new transaction volume has slowed to 26.3%
• Estimated annual income between 3-6 million dollars based on the number of transactions and asset transfer amount.
• Even ignoring costs, the PE still reaches 500 times, far exceeding leading Internet companies.

![Super intermediary or business genius? A look back at the past year of cross-chain bridges LayerZero from V1 to V2])https://img-cdn.gateio.im/webp-social/moments-6b6fcbec801a8a7dba62de65019811f4.webp(

Conclusion

LayerZero has completed the leap from 0 to 1 and from following to leading in just three years. Its business model reflects the idea of establishing a universal underlying standard, leaving the specific implementation to be chosen by the market.

Technically, LayerZero demonstrates the industry's ongoing exploration between security and decentralization. The V2 version theoretically has the potential to achieve complete decentralization, but market demand remains to be seen.

In terms of business, LayerZero's platform strategy is worth noting. Through modularization and standardization, it has successfully constructed a larger ecological landscape while reducing its own risks.

Despite the current valuation challenges, considering its traffic advantages in the cross-chain field and potential innovations in its business model, LayerZero still has the possibility of achieving greater value breakthroughs in the future.

![Super intermediary or business genius? A look back at the year of cross-chain bridges LayerZero from V1 to V2])https://img-cdn.gateio.im/webp-social/moments-e8a226a8bc2528956cfd8c51c7c44693.webp(