Stop trying to build the whole stack, stick to your core competency: LayerZero founder
Suggesting that all value will flow through a particular chain is “a really great way to sell a token,” Bryan Pellegrino says, but it’s not realistic
Rost9/Shutterstock modified by Blockworks
Crypto people are recycling the same years-old mistakes, Bryan Pellegrino says.
“It’s kind of insane to me,” says the LayerZero founder in conversation with the hosts of Blockworks’ 0xResearch podcast (Spotify/Apple).
LayerZero is an “on-chain interoperability protocol,” according to the company website, offering the ability to “transfer messages between on-chain endpoints.”
“The whole reason we built layers here in this method,” Pellegrino says, is that “you’re just not going to have one single chain that can secure a hundred billion dollars.”
Suggesting that all value will flow through a particular chain is “a really great way to sell a token,” he says, but it’s not realistic.
“How many models of that have we seen?” Pellegrino asks. “Probably 30 different models — and I don’t think a single one of them has ever scaled past a billion dollars of crypto economic security.”
“It’s not even remotely close to the order of what needs to be secured. And that’s in the current set of where the space is, let alone five years out,” he continues.
During the podcast appearance, Pellegrino talks about the need for companies to stick to their “core competency” and specialize rather than striving for one-stack-fits-all solutions.
Not everything can be your core competency, and that’s okay
Bridging is a related problem that has repeatedly encountered serious failures, according to Pellegrino. “How many people need to roll their own bridge and get hacked before people stop trying to roll their own bridge?”
“Look at all of the native bridges that have got hacked,” he says. “This might not be your core competency. That’s okay.”
With LayerZero, Pellegrino says the technology is “as agnostic as humanly possible,” comparing its functionality to the most basic layers of the internet. The internet at its most primitive, he says, is essentially a stack for moving state data around.
“Do some compute here,” says Pellegrino. “Take the bytes, move the bytes, do some compute there. That, itself, is massively valuable. Ninety-nine percent of all compute in the world still happens on a local computer, but the internet is still the internet.”
Pellegrino explains that LayerZero aims to do the same for blockchains. Some networks, he says, “are very good at throughput” while others are “very good at storage” and others are “very secure.” But there’s no way to move state data between them, he says.
“We don’t really care if it’s a thousand orthogonal layer-1s or Ethereum-only as a settlement layer and a thousand layer-2s,” he says. “You are still going to need to move state data between those.
Pellegrino says the company has “no thesis” as to which way the industry will develop, admitting he has been surprised with the way things have progressed.
“I thought the most used pathways, by far, would be layer-2s coming back to layer-1s,” but this hasn’t been the trend, according to Pellegrino.
Layer-2 protocols Arbitrum and Optimism are LayerZero’s most used nodes by a large margin, he says, “but their most used connections are to each other,” rather than answering back to the layer-1 network, Ethereum.
It appears that once users have made the decision to leave layer-1s for cheaper transactions on layer-2s, they generally don’t want “to go back and pay a [layer-1] fee,” he says.
Pellegrino says even the highest profile “maxis of their own ecosystems,” like Solana’s Anatoly Yakovenko and Ethereum’s Vitalik Buterin don’t believe in a singular dominant blockchain solution.
“Neither of them are like, everything is going to live here.”
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