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Approaches to interoperability seek to facilitate the exchange of assets and data between blockchains. The problem is that a preponderance of solutions involve questionable trust models and are not truly limitless in their inter-chain connectivity (check out our extensive analysis of the interoperability market to learn more). What seems underappreciated in the industry’s approach to interoperability is rethinking the dApp development toolkit itself. At ZetaChain, we’re building the first public L1 blockchain with built-in interoperability. That is, an open chain capable of supporting omnichain smart contracts that can access and manage assets and data on any other chain from a single point of logic. Our goal in this post is to shed more light on this innovative bottom-up approach within the evolving context of web3 interoperability. We also make specific comparisons to a couple of notable layer 1 blockchains and messaging protocols.

Five Progressions of Multichain Interoperability

Demand for greater blockchain interoperability is precipitated by the growth of multichain. Most approaches in the market for users are risky, fragmented from a UX and liquidity standpoint, restrictive in chain connectivity, and in general, really confusing. In this section, we review five key advancements in interoperability to the present.

New Layer 1s & Layer2s (closed systems)

In recent years since the advent of Ethereum, we’ve seen an influx of new Layer 1 blockchains and scaling solutions (L2s). Despite greater chain optionality — each with various tradeoffs — users are left with highly fragmented apps and ecosystems across which they are unable to easily navigate.

Centralized Exchanges

These organizations emerge to build around key layer 1 and 2 blockchains and behave like centralized bridges. For example, a user that acquires an asset on an L1 can transfer it to a centralized exchange wallet, trade it for a different asset that exists on a different chain within the centralized ledger, and then withdraw it into that new L1 system to use as he pleases. This method requires total trust in the centralized exchange entity and risks a single point of failure. What is actually happening inside the exchange is opaque to users.

Pairwise Bridges with Varying Security Models

These solutions allow users to transfer assets between different blockchains using wrapped assets i.e. an issued underlying representation of the real asset, typically locked away in a vault contract. Bridges and wrapped assets have varying or centralized trust models, which can put user assets at risk and lead to bridge/vault exploits, which unfortunately has been a frequent occurrence. They’re also limited in that, for example, the Polygon bridge only supports transfer of some assets to Polygon. Read this ZetaEducation tweet thread to learn more.

Cross-chain Bridge Aggregators

On top of pairwise bridges, we’ve seen builders develop aggregators such as LI.FI and Socket. These interfaces route users to the correct bridge based on the asset they desire to transfer so that a user doesn’t have to decide and understand each and every bridge. While this improves some of the UX, these solutions do not solve the underlying security variance and associated risk with bridges itself.

Cross-chain Messaging with Native Value Transfer

Another advancement in inter-blockchain connectivity is cross-chain messaging. New protocols like Axelar, Celer, and LayerZero offer generic cross-chain messaging that lets you send or relay a specific set of data between existing smart contracts on blockchains to achieve, in some cases, native value transfer. However, building more complex apps that require more than a few assets on chains — such as a stableswap DEX or lending — is harder to achieve. This method requires deploying a contract on every chain (so you can’t support non-smart chains like Bitcoin). It also involves more contract logic (and thus attack surface) and complexity of waiting for different messages to pass and synchronize state between separate chains. This translates to more risk and time in the user experience.

ZetaChain’s Approach to Blockchain Interoperability

The next standard for blockchain interoperability combines cross-chain messaging and the advent of native Omnichain Smart Contracts. While cross-chain messaging provides an asynchronous pattern of building and makes sense for some applications, Omnichain Smart Contracts provide a more synchronous way of building, as if everything were on one chain.

Together, these systems enable the creation of true omnichain dApps. Omnichain dApps span all chains by default and can access and manage assets and data on connected networks from a single point of logic. With this toolkit, developers have full creative ability to build complex, yet (to users) drastically simplified user experiences that leverage unified access to liquidity and data. In this paradigm, all wallets, networks, and assets can be abstracted away from the end user. Transactions happen in a single-step with no wrapping, and they immediately settle as if everything were on a single chain.

Today, ZetaChain is the only decentralized, public L1 blockchain that supports this complete toolkit for generic omnichain programmability. Developers can build using both synchronous (Omnichain Smart Contracts) and asynchronous (Cross-Chain Messaging) architectures, or a combination of both. ZetaChain is chain and layer agnostic, meaning ZetaChain can even enable Bitcoin smart contracts. This capability looks and feels much like Ethereum where a smart contract can be trusted to manage assets according to predetermined rules. The difference with ZetaChain is that a smart contract can do this for any data/asset on any blockchain. For a more in depth technical & security overview, check out this ZetaEducation thread.

Solution Comparison

In the following side-by-side feature comparison table, we share good examples of solutions to which ZetaChain can best be compared. Below the table, we categorize and describe how specific solutions approach interoperability in relation to ZetaChain. A key takeaway is that no public, decentralized solution exists today that has omnichain smart contract capabilities.

• Blockchain of Blockchains (BoB) (Cosmos & Polkadot): The most prominent of these interoperability focused ecosystems are Cosmos and Polkadot. While each handles security and consensus requirements differently, the underlying central difference they share from ZetaChain is that they require certain integration standards to join their ecosystems: Inter-blockchain Communication (IBC) protocol for Cosmos; Parachains for Polkadot. Requiring blockchains to be built on some common ground rules out connection with legacy chains such as Bitcoin and new blockchains with their own consensus models. From an ethos standpoint, ZetaChain takes a more general, open approach supporting native cross-chain smart contracts that directly interact with any external blockchain. This agnostic, connecting layer design promotes less fragmentation — you might say ZetaChain is a blockchain for blockchains instead of a BoBs. For a more in depth comparison with Cosmos IBC, check out this post.

• Application-Specific Cross-Chain Blockchain (THORChain): THORChain is a decentralized liquidity network capable of native value transfer with external blockchains, but it does not have generic message passing needed to build broader applications interoperable with other L1s. In other words, THORChain is application specific for a DEX. ZetaChain was in part inspired by the design of THORChain and can be thought of as an operationally simpler and more generalized platform which enables not only native asset swapping, but also a generic message passing and smart contract platform for easy creation of arbitrary cross-chain applications. For a more in-depth comparison, check out this thread here.

• Bridges: Described earlier in the Progressions of Multichain Interoperability section, bridges can be thought of as older tooling and an earlier version of native value transfer solutions like THORCHain. This is because they involve wrapped assets, which increases interdependency risks for users holding such assets. They also tend to be chain/asset specific and limited to the value transfer use case.

• Messaging (LayerZero & Axelar): A key difference between ZetaChain and pure messaging solutions such as LayerZero and Axelar is that it supports Omnichain Smart Contracts which can orchestrate assets/data on all chains, including non-smart contract solutions like Bitcoin and Dogecoin, on top of its messaging capabilities. This is important in many cases that require building and managing state of more sophisticated dApps. We talk about some impracticalities of messaging and advantages of Omnichain Smart Contracts in this ZetaEducation thread. As per differences in messaging capabilities alone, ZetaChain’s messaging not only supports general data passing and contract calls between chains, but also incorporates the ability to transfer native value between chains where ZETA functions as an intermediary token and universal gas on all chains. In contrast, pure messaging solutions like LayerZero and Axelar generally require some form of wrapping to transfer value, which can foist more risk on developers and users over time. Beyond this, a more extensive comparison requires deeper investigation into technicalities such as security, trust, decentralization, ease of development, and minute details like how reverts and subsidization for crypto payments are handled, Etc. For example, an important point of contention is that LayerZero relies on a 3rd party relayer/oracle so it’s not trustless [Source:Circumventing Layer Zero]. In any case, ZetaChain’s distinguishing factor in its toolkit for generic cross-chain programmability is its omnichain smart contract system.

About ZetaChain

ZetaChain is the foundational layer to a multichain future. The novel blockchain enables multichain functionality without using bridges or wrapped tokens and the easy deployment of omnichain-dApps, or odApps. These applications can manage and connect data and value across all smart contract platforms as well as non-smart contract platforms like Bitcoin and Dogecoin.

Follow ZetaChain on Twitter @zetablockchain and join the conversation on Discord and Telegram.

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