The Cardano Community Podcast - Stake Pool WEQNT

Cardano Governance Hours This time, we’ll take a deep dive into the proposal Cardano DeFi Liquidity Budget - Withdrawal 1 together with the proposer. 📅 Tuesday, 24 March 16:00 - 17:00 (UTC) 🧵 Open thread for details

Cardano's integration with LayerZero will bring seamless interoperability with other chains. LayerZero is essentially a messaging layer that allows different blockchains to communicate directly with each other in a secure, decentralized way. LayerZero deploys endpoints on each blockchain that act as standardized messaging connectors. Deploying an endpoint for Cardano is a necessary part of the integration. Oracle and the Relayer are two independent controllers that ensure cross-chain messages are valid and secure. This lets protocols send arbitrary data (not tokens) from one chain to another. Without interoperability, Cardano, Ethereum, Solana, Avalanche, and others essentially act like an island. - Liquidity is trapped on one chain. - DeFi applications cannot easily coordinate across ecosystems. - Users must use bridges to swap assets and interact across chains. LayerZero operates with lower trust assumptions than old bridges like Wormhole. The term omnichain refers to a system where an application or asset exists natively across multiple blockchains and behaves as one unified thing, not as separate copies on each chain. How does it differ from current implementations? Multichain applications mean that the same app is deployed separately on multiple chains, each as a separate application with its own liquidity. For a multichain future, it was necessary to implement transfers between chains. This gave rise to cross-chain bridges that move assets between chains. Omnichain allows you to build one logical app that spans many chains simultaneously. An important difference between omnichain architecture and cross-chain bridges is that it uses standardized cross-chain messaging instead of a lock-and-mint mechanism that requires trust in a third party. Traditional bridges lock assets in their own smart contract. Then, they mint a wrapped version on other chains. If a bridge is hacked, collateral is gone. The Omnichain model offers "native" burn/mint across chains without large honeypot collateral vaults. It is a more modular security design. LayerZero bypasses the traditional bridge and leaves the responsibility for cross-chain interactions to the applications. The bonus is more control over the cross-chain state. This will allow the team to create applications that can coordinate two-step execution across chains using messaging. So, initialize a swap on Cardano and finalize, for example, on Solana. This requires 2 executions, the first on Cardano and the second on Solana. The team must deploy contracts on both chains, i.e., Cardano and Solana. Then they must connect these contracts through LayerZero endpoints, i.e., use cross-chain messaging to coordinate state and executions. Let's show this with the example of a Cardano DEX on which a user wants to swap ADA for SOL. 1) The user initiates a swap on Cardano. 2) He deposits ADA and provides a Solana address. 3) ADA is locked on Cardano. 4) The Cardano contract sends a message via omni protocol to Solana. 5) Oracle and Relayer verify the message (decentralization). 6) Solana contract receives a verified message. 7) The Solana contract can execute instructions, i.e., unlock SOL from the pool that belongs to the same DEX. Application must have its own pool on Solana, or use another mechanism. For example, have a pool with stablecoins that it uses to buy SOL that it sends to the user's address. Note that DEX is not just a "Cardano DEX", but can be seen as a cross-chain DEX. All major blockchains, including Ethereum, Solana, BNB Chain, Avalanche, and many others, are connected to LayerZero. Reportedly, up to 160 chains are connected to this protocol. Integration with LayerZero will allow Cardano to access assets that exist on all other chains. This is, of course, already possible through cross-chain bridges. LayerZero is the next evolutionary step in interoperability, as it allows for more functionality than bridges. This allows for the transfer of: - Function calls - Arbitrary data - Governance instructions - Liquidation triggers - Swap instructions - Mint/burn commands - etc. Omnichain applications can coordinate state and execute cross-chain contract calls. This is not just cross-chain asset movement, which at first glance seems most interesting, but above all, cross-chain state coordination. This can be used for cross-chain lending, margin calls, liquidations, liquidity routing, etc. Integration with LayerZero is extremely important for Cardano. It is necessary to add that integration alone is not enough. Someone has to take advantage of this integration, including providing liquidity. This remains a challenge.