Background

In this weekly edition of the Future-Proof, the Cross Chain Coalition covers ZetaChain (ZetaBlockchain) – the public layer one blockchain that looks to agnostically connect blockchain networks and facilitate interoperability between chains. Our host is Taariq Lewis. The Founder of Volume (volume.finance) and Paloma chain. Today, he sits down with The ZetaChain Head of Communications, Jonathan Covey @DAOist_JC, and the ZetaChain CTO and Founder, Panruo.

Founded in 2021, the ZetaChain objective is to build the world’s first public, decentralized blockchain facilitating the most secure, affordable, and simple way to move value and information across blockchain networks and layers. This network-agnostic protocol supports omnichain smart contracts that connect blockchains without exposing users to the risks of bridges and token-wrapping. Within 90 days of its testnet launch, ZetaChain has already amassed 1,500,000+ cross-chain transactions from over 400,000 users.

Definitions

• Testnet - for testing purposes, an instance of a blockchain supported by the same or similar version of the underlying software

• Bridge – A blockchain bridge connects two blockchains facilitating the transfer of assets from one chain to another

• Wrapped Token – allows unsupported assets to be traded, lent, and borrowed on DeFi platforms

• DeFi – Decentralized Finance

• Layer one/L1 – the base level of a blockchain architecture

• Consensus – a blockchain procedure through which all peers of the blockchain network reach a common agreement about the present state of the distributed ledger

• Validator – users that volunteer a computer’s computing power to maintain a blockchain’s integrity by computing or tracing the origins of a block to its present state

• TSA – Time Stamping Authorities

• TSS - Threshold Signature Scheme, a cryptographic primitive for distributed key generation and signing

• ECDSA - Elliptic Curve Digital Signature Algorithm, a cryptographic algorithm used by Bitcoin to ensure that funds can only be spent by their rightful owners

• dApp - Decentralized Application

• LayerZero - an omnichain interoperability protocol

• NFTs - Non-fungible tokens

• Smart Contract – a computer program or transaction protocol that will automatically execute when predetermined conditions are met

• EVM – Ethereum Virtual Machine, a virtual component that is contained in every Ethereum node

• Liquidity Pool - a digital supply of cryptocurrency that is secured by a smart contract

• Curve - a decentralized exchange for trading cryptocurrency that focuses on efficient stablecoin trading

• Virtual Machine - the virtualization/emulation of a computer system

Timestamps

• ZetaChain Inception (5:19)

• Connecting to Legacy Chains (9:08)

• Multiple Validator Roles (15:56)

• Usage on ZetaChain Testnet (20:39)

• Setting ZetaChain Apart (24:28)

ZetaChain Inception

Jonathan shares a brief background on ZetaChain’s origins:

“I think it all starts with the need for this kind of technology and better interoperability in the space for us. The team behind ZetaChain got together last summer and basically, since the creation of Ethereum, we've all seen a lot of growth in alternative layer one blockchains out there. And it's pretty safe to say we're operating in this multichain environment. Both users like you and me and everyone on this call, but also builders as well. And our founder and Panruo, who's also with us, our CTO, noticed that there's no public blockchain out there with full interoperability and a sort of futureproof connectivity to all chains and layers. You have various patchy solutions out there known as cross-chain bridges that will wrap and lock tokens in a parking lot if you will. And that's created all sorts of serious vectors of attack.”

In 2022 alone, according to Chainalysis, around $2 Billion worth of tokens have been siphoned from bridges. Attacks on bridges account for almost 70% of cryptocurrency-stolen funds in 2022 alone. Major bridge exploits in 2022 include The Sky Mavis bridge hack for $625 million, The QBridge hack for 80$ million, The Wormhole hack for 325$ million, the Harmony bridge hack for 100$ million, and the recent Nomad bridge hack for 190$ million. It is one of the biggest, if not already, security vulnerabilities in the entire blockchain space.

There is a concerted effort, mainly in the cross-chain space to solve the glaring vulnerability negatively affecting the integrity of cryptocurrency. ZetaChain looks to build foundational tools to address it.

“…some of the other big layer ones have software modules like the Polygon Parachains or Cosmos IBC, and they promote pretty tight interoperability among chains that adopt those standards. But they're still limited because they don't connect with legacy chains like Bitcoin and devs have to adapt to those standards. And so basically the team at ZetaChain was asking what if we could offer a truly chain-agnostic blockchain that's public and decentralized and specifically one that extends Cosmos IBC and acts as a generic omnichain smart contracts platform.”

Source: https://blog.zetachain.com/introducing-zetachain-85d71f289f78

Connecting to Legacy Chains

Taariq confirms that ZetaChain is a Cosmos SDK chain utlizing IBC for communications with IBC-enabled networks. He asks how the chain connects to legacy chains such as the all-mighty Bitcoin. Panruo gives an in-depth answer:

“So, we're a Cosmos chain, but we are not exactly relying on IBC to connect to other chains. Not every blockchain supports IBC sort of a like internet over TC/IP needs support on both sides. So, what we are trying to do instead is to have the functionality of IBC by reaching out to those other block-forward chains or external changes in our terminology. So, we'll actively monitor the foreign chains and we will interact with foreign chain with some kind of threshold signature scheme accounts or model.”

Source: https://www.zetachain.com/whitepaper.pdf

The host asks about the signature schemes ZetaChain utilizes for non-IBC cross-chain communication. Panruo answers:

“I think we can categorize the communication between blockchains into two directions. First is what we call an incoming message. So, the incoming message is something that is some kind of event or transactions that are relevant to ZetaChain which are observed by our observers that will get reported to our blockchain. And it gets verified there either by counting votes of the observers, so obviously relying on the honest, the majority of them, or by client-style verification of Merkle group let's say. And that's part of the outgoing part is once something triggered we would like to do something on another blockchain.

So, a typical user wants to… let's talk about a slightly general use case on-chain. Some user wants to call some small contract functions on chain B. So how do we facilitate that? So we'll observe, that the user will leave a specific event on chain A, which will be picked up by the ZetaChain, it will be parsed and a message will be forwarded to the destination chain B and the ZetaChain will make a transaction on behalf of the user on chain A to chain B for the smart contract which is specified. So, in order to do that chain B is to authenticate the message for the transaction to make sure that it actually comes from ZetaChain. So, we're using quite recent and complicated cryptography.”

Source: https://www.zetachain.com/whitepaper.pdf

The founder goes on to state that ZetaChain uses a large number of Time-Stamping Authorities (TSA) to generate a valid signature. This is done so that Chain B can authenticate a single TSA’s address. Without the use of smart contracts, the Bitcoin network will be able to authenticate transactions and addresses by ECDSA signatures.

Multiple Validator Roles

Panruo shares that there are three roles for validators on ZetaChain. These are regular validators common in blockchain networks, they have Observers and TSAs. All three roles are non-exclusive. One can play two or more roles simultaneously. He shares his thoughts:

The Cosmos blockchain has a very mature consensus for block production, like the normal blockchain tower. So you proposed you what's the word? I think perhaps verify the box and with the consensus algorithms. But for observers, and TSS signers, it's not as mature and there are some performance limitations, but TSS has gotten very, very fast in recent years to the point that it's credibly used as a hot wallet, but still performance is not up to the speed of Tendermint consensus. So, we divide the roles in we divide those three roles so that you know, don't have to be an observer or TSA signer, you can be a normal validator. So that part of the networking scale, as well as they cost no pains.

Taariq touches base to check if they are on the same page:

“So, just to confirm, make sure we understand because we covered a lot of ground there. What you're saying is that you have three groups, you’ve got the validators essentially for block validation, and you have observers for observing transactions that happen across other networks. And you have TSA signers, which are the threshold signature signers that are a separate group from all three, and all three can be the same or all three can be distinct. And then lastly, you have a bonding requirement for each of these. You have a bonding requirement for the validator and you have a separate bonding requirement for the observer and yet a third bonding requirement for the threshold signature sign. And did I get that correct?

Panruo confirms the host’s impressive recount. Taariq asks about validator incentives. The founder answers that the incentives for observers and TSA signers come from a different pool from normal validators. ZETA, ZetaChain’s native currency, has a fixed supply. The details are still being worked on, but the direction is to set validator rewards for observers and TSA signers apart from traditional validators.

Usage on ZetaChain Testnet

The host commends the guests on the massive user activity on ZetaChain. He inquires about what users are doing in the ecosystem. Jonathan, the chain’s Head of Community answers:

“We released the testnet actually around April time, but only about 90 days ago did ZetaChain release the first test dApp and that's a native asset, cross-chain swap. And what we wanted to do is demonstrate that users now have the ability to achieve any-to-any token or chain trades without wrapping or locking tokens. And we have a number of supported testnets. It's all on testnet. And so, users are able to do a few different actions to earn Zeta points, which is a sort of gamification reward system in the app which has been really successful in helping bring in new users and educating them on this new primitive. So they earn points by doing daily swapping and testing the protocol you can earn points providing feedback and discord on the UI and just general experience and bugs. And you can also through an app-referral mechanism, invite friends with a unique code. And so as we build new features, there will be new ways to earn points.

One of the cool things we did, was we announced a strategic partnership with Project Galxe (galxe.com/). They rebranded as Galxe - one of the big on-chain credentialing protocols. That was about a week ago. They're gonna be building omnichain identity smart contracts on ZetaChain. In any case, we brought this testnet app and built an NFT campaign around it on their platform. And so yeah, users by swapping and exploring functionality in our protocol, can earn real NFTs and that’s tied to Discord roles. And so the idea is that it's more engaging and fun. It also helps us get a sense of who's contributing and using the protocol and helps us track that.

The team seems to be pulling all the stops to engage with their community. To join the ZetaChain Discord of almost 250k users click this link:  discord.com/invite/kjQBqcZtnh.

Setting ZetaChain Apart

Blockchain interoperability is the current gold rush in the cryptocurrency space. Big players such as LayerZero, Axelar, Li.Fi Finance, and now, ZetaChain are bursting onto the scene. Taariq posits:

“Think of cross-chain communications and what you guys have learned from your testnet and where cross-chain communication is going. What's the main, number one difference that you're seeing? So currently, we've had folks from LayerZero here, we've had folks from Axelar, and we're going to have folks from Nomad. A lot of these great folks have talked about their different visions of where cross-chain communication is going. You guys have been very successful with your testnet and you now have your swap dApp. Where else do you see the trend, the number one trend for you in a ZetaChain world? Where do you see these cross-chain communications really driving the most demand and the most value?”

Panruo addresses the query:

“We’re just gonna talk about the cross-chain tech side, the sort of my vision for where it is going for that chain and what it enables. And then the applications could be limited. So I think we have two systems of doing cross chain let's call it cross-chain communication. One is the message-passing style that is similar to LayerZero. And perhaps I feel, I'm not sure about that. The functionality is the same, the implementation, the security profile, all those kinds of things may be different, but functionality is the same. So basically we just forward a message from chain A to chain B that's very useful and you can use that message-passing to build some incredible applications.

But we have a second system in development I don't know if this is a spoiler, but we haven't come up with its name, but right now we call it Omnichain Smart Contract. So basically, imagine a smart contract on ZetaChain that can manage assets on external chains, and native assets. So it's almost like an Ethereum smart contract, but it can hold native currency and all kinds of other assets, or NFTs, or whatever that a normal smart contract can hold on different chains. And then you can program it to manage those assets just in a single blockchain. So that's will open a door to more complicated applications and perhaps more comp applications that do not exist.”

Source: https://blog.zetachain.com/blockchain-interoperability-state-of-play-63ebc49c2dd

The founder shares an example of a triple-asset liquidity pool. He says it’s possible with the current cross-chain infrastructure of message-passing to write and execute a smart contract to pool in assets from different, but integrated chains. The message-passing, however, gets infinitely more complicated if it was implemented with Curve-like mechanisms because of the sheer number of back-and-forths needed in addition to maintaining the current state. It is not sustainable. He mentions The Curve Finance model is already sophisticated, but a solution to this using omnichain smart contracts will be demoed in the next ZetaChain testnet version.

Taariq goes on to ask about programming language - if ZetaChain permits developers to write their smart contracts Solidity. Panruo confirms that builders would be able to write their code in Solidity because ZetaChain has EVM virtual version running on Cosmos. The host once again commends the guests on this implementation. He asks how an omnichain contract interacts with other states on targe chains. Panruo answers:

“Right now, it is not as flexible as message passing. the next iteration of our testnet is going to support any fungible token, think Ether, Solana, this BTC, those kinds of things. And that is managed together by the virtual machine and the fungible module which is the custom module for customers. And later we can add support for NFTs and things like that to gradually expand the themes that maybe omnichain smart contracts can manage on external chains.”

Our host beautifully stamps ZetaChain as the upcoming center of omnichain computing. These are big words underlining a company that looks to launch a new, dynamic, foundational layer to interchain communication. Check out the ZetaChain app at https://www.zetachain.com/. Follow the network on Twitter @zetablockchain.

Tune in next week for another episode of Future-proof. This weekly AMA is made possible by Cross Chain Coalition sponsors Curve Finance (curve.fi) and Paloma Chain (palomachain.com).