Blockchain Bridges Part 2: Cross-Chain Communications - LayerZero, Chainlink CCIP, Cosmos IBC

What is L0 technology and Layer Zero as part of this technology; Chainlink's CCIP and comparison with Layer Zero; IBC Cosmos; comparison and difference of all these protocols.

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Introduction
1. Definition of the technology called “Layer 0”
2. LayerZero as a part of “Layer 0”
3. Chainlink CCIP and Comparison to LayerZero
4. IBC and Cosmos IBC in particular
5. Key Features and Differences
Conclusion

Introduction

In our previous exploration into the realm of blockchain bridges, we delved deep into the foundational knowledge that surrounds this domain. From understanding what these bridges are and how they operate to discussing the various types and inherent risks associated with them, the intricacies of this cross-chain technology were laid out for readers eager to grasp the future of interconnected blockchain networks. A brief glimpse into the world of Inter Blockchain Communication (IBC) set the stage for our next deep dive. As the ecosystem of blockchains grows and diversifies, the pressing need for seamless, secure, and efficient intercommunication becomes crucial.

In Part 2, we will shift our focus to three leading technologies in the cross-chain domain: Cosmos IBC, LayerZero, and Chainlink's Cross-Chain Interoperability Protocol (CCIP). Each of these platforms brings its unique approach, capabilities, and vision to the table. This article isn't about which technology is superior since each varies based on different parameters. Instead, it focuses on the benefits that each technology brings to the table to address the challenge of operating assets across different blockchains, and risks associated with that.

1. Definition of the technology called “Layer 0”

The main problem the industry faces is bad cross-chain communication among different blockchains. While the situation may seem better for L1 EVM blockchains, the same cannot be said for non-EVM L1s. In fact, inter-communication between EVM blockchains still has improvements left to be desired.

In order to connect L1 blockchains, we might need a foundation which we call “Layer 0”. Most of the articles will give you this definition: “A Layer 0 Blockchain is a protocol infrastructure on top of which other blockchains (particularly Layer 1s) are built.” The most common examples of such solutions are Polkadot, Kusama, Venom.

However, it doesn’t solve the problems of interoperability and communication in particular. We will just have another problem of connecting blockchains, but instead of Layer 1 Blockchains it is now Layer 0 Blockchains. You probably got it right: creating Layer -1 and so on is not a solution, since we have no goal of “digging deeper” just for the sake of it. One belief that could be addressed is that eventually one of the L0 Blockchains will become an industry standard. However, this hypothesis might be rejected as long as we have leading blockchains like Ethereum, BSC, Solana, and Tron built without relying on any Layer 0 protocols.

Hence, the interpretation of the Layer 0 solution should be slightly different if we aim to solve problems, rather than just adding new terms to a glossary. Let’s say that Layer 0 is a technology that allows seamless interaction with other chains in order to make it simpler for both users and developers to interact with multiple chains at once.

2. LayerZero as a part of “Layer 0”

Let’s kick off with exploring LayerZero as one of the Layer 0 solutions (don’t get confused with LayerZero and Layer 0, they sound the same but are written differently).

LayerZero is not a blockchain for connecting blockchains, but a communication protocol with an architecture that is similar to the blockchain for connecting blockchains. Imagine you could transfer assets from one blockchain to another in a single transaction, or borrow USDC on BSC while providing collateral on Ethereum, or staking on one blockchain and getting rewards on another one, etc. Basically, there are a lot of use cases.

The main topic you perhaps would be interested in after reading the statement above is trust. Who do users have to trust to make this all possible? Luckily, LayerZero positions itself as trustless technology. Basically, trustlessness means you don’t have to trust anything that could potentially do some fraud, if it decides to do so. However, understanding things you don’t have to trust could also be really helpful for obvious reasons, so let’s see the main technologies LayerZero uses.

Figure 1: LayerZero enables cross-chain transactions. Source: “LayerZero: Trustless Omnichain Interoperability Protocol”, Ryan Zarick, Bryan Pellegrino, Caleb Banister

1. LayerZero Endpoint — lightweight on-chain client for the blockchain. Each blockchain has a single Endpoint. This results in a fully interconnected network where each node directly connects to all other nodes.

2. Oracle — technology to extract block headers from one chain and transmit them to another chain.

3. Relayer — off-chain service that functions like an Oracle, but its primary task is to retrieve the proof for a designated transaction.

Connecting Oracle and Relayer: Two distinct entities confirm the authenticity of a cross-chain transaction: the Oracle supplies the block header, while the Relayer offers the transaction-related proof. For the Oracle component, LayerZero incorporates Chainlink Decentralized Oracle Networks (DONs). The Relayer is an off-chain service presently operated by LayerZero, although the framework permits the use of any specific relayer, giving individual dApps the flexibility to select any preferred relayer or even establish their own. The sole stipulation is that these two entities remain independent of each other in order to stay trustless.

Endpoint: For every supported blockchain, an on-chain lightweight client exists (optimized to minimize the costs of running smart contracts on L1 chains) that serves as the gateway to the LayerZero messaging protocol (termed LayerZero Endpoint). Essentially, these smart contracts enable users to engage with the protocol and transmit messages.

Figure 2: LayerZero ensures the validity of cross-chain communication by requiring that two independent entities, the Oracle and Relayer, corroborate the transaction. Source: “LayerZero: Trustless Omnichain Interoperability Protocol”, Ryan Zarick, Bryan Pellegrino, Caleb Banister.

Endpoint is not intermediary, since every blockchain has its own Endpoint. So they’re decentralized and they don’t have a single hub which you have to trust (unlike Cosmos and Polkadot). Rather than employing a wrapping system to transfer assets, Layer Zero transmits native assets using specialized oracles and modules tailored for blockchain and crypto applications. So your assets stay the same, they’re now called omnichain tokens.

Figure 3. Source: Layer Zero Medium

3. Chainlink CCIP and Comparison to LayerZero

Chainlink CCIP is another communication protocol that allows the blockchains to “talk to each other”. The architectures of LayerZero and CCIP are quite similar in the following ways:

• On-chain smart contracts on both sides of the used blockchains

• Off-chain nodes as relayers

• Can be applied to existing blockchains

• CCIP also relies on oracles

Figure 4: Send messages between Chain X and Y via CCIP. Source: “Introducing the Cross-Chain Interoperability Protocol (CCIP) for Decentralized Inter-Chain Messaging and Token Movements”, Chainlink Blog

High-level overview of how CCIP works:

• A smart contract from the source chain invokes Chainlink's Messaging Router.

• Router leverages Chainlink DONs to securely send the message to the destination chain.

• Another Messaging Router validates it and sends it to the destination smart contract.

Chainlink CCIP even seems simpler than LayerZero due to the last one having three main components which are oracles, relayers, and endpoints. CCIP only has two – Decentralized Oracles and Messaging Router Smart Contracts. Chainlink’s solution definitely has some advantages as they’re using their own technology of oracles, allowing for more seamless integrations. This definitely gives Chainlink CCIP a bonus since the native infrastructure can be leveraged way better. However, the main concern associated with CCIP is the nodes themselves, whether in the area of node availability or erroneous data feeds.

4. IBC and Cosmos IBC in particular

We've talked about LayerZero and Chainlink CCIP before and noticed they have a lot in common. We also mentioned IBC briefly in Part 1 when we discussed blockchain bridges. Now, we'll look more into IBC and Cosmos IBC in particular. It's different from LayerZero and Chainlink CCIP. Let's find out how.

For many in the blockchain community, the mention of IBC often immediately brings to mind Cosmos IBC. It's a testament to how well the Cosmos ecosystem has implemented and popularized the Inter-Blockchain Communication (IBC) Protocol. However, it's crucial to know that IBC itself is an independent technology, designed for fostering interoperability among various blockchains. While Cosmos might be its most renowned user, offering a robust implementation, IBC's foundational principles can be, and have been, applied across various other ecosystems and platforms.

IBC is an interoperability protocol for communicating arbitrary data between arbitrary state machines. It mainly consists of 2 main components:

• Transport Layer —  providing the necessary infrastructure to establish secure connections and authenticate data packets between chains

• Application Layer —  defining exactly how these data packets should be packaged and interpreted by the sending and receiving chains

IBC is also a messaging protocol like LayerZero and Chainlink CCIP, but Cosmos IBC, as most of you know, is a blockchain network architecture.

If you're keen on understanding its intricacies, you can refer to Part 1 for a breakdown. We're now shifting our focus specifically to Cosmos IBC, diving deeper into how this particular ecosystem utilizes and benefits from IBC.

Figure 5: IBC Architecture. Source: “How Cosmos’s IBC Works to Achieve Interoperability Between Blockchains”, Datachain Medium

At the beginning of the article, we said that most of the articles define Layer 0 as protocol infrastructure on top of which other blockchains (particularly Layer 1s) are built. That’s exactly what Cosmos is. It allows you to build L1 Blockchains on top of its infrastructure. Blockchains can connect to the hub which is called Cosmos Hub. So, it takes an intermediary to perform cross-chain transactions like bridges. You cannot directly connect blockchains to each other like LayerZero and CCIP can, the trust to the Cosmos Hub is required. It’s way easier to build a L1 in the Cosmos Ecosystem using Cosmos SDK than starting from scratch. Another benefit is that you can easily communicate with blockchains which are also built on Cosmos, but outside of the Cosmos Ecosystem it becomes way harder.

IBC here is the protocol in Cosmos that facilitates communication between the blockchains (zones). It allows blockchains to exchange tokens and data without the need for intermediaries, enabling true interoperability. By default, it's designed to function with chains connected to the Cosmos Hub, primarily because the Cosmos consensus algorithm, Tendermint, is optimized for chains with rapid finality.

It employs a central chain (Cosmos Hub) to oversee consensus. While each zone handles its own transaction verification and execution, transfers of tokens and/or messages between zones are channeled through the Cosmos Hub, which acts as a relay and coordinator for the zones. To keep the Hub informed, zones share their block confirmations, ensuring the Hub remains synchronized with the states of all zones.

The beauty of IBC is that it allows different blockchains with different consensus mechanisms to interact. While each zone in Cosmos uses the Tendermint consensus algorithm, IBC is designed to be versatile enough to accommodate other consensus mechanisms in the future.

Figure 6: IBC packet lifecycle. Source: ibcprotocol.org

5. Key Features and Differences

After discussing all 3 technologies, what we can do is to highlight the key features and differences among LayerZero, Chainlink CCIP, Cosmos IBC.

• Chainlink CCIP and LayerZero are Inter-chain Communication Protocols, allowing messaging between different blockchains without intermediary. Cosmos IBC is a Blockchain Network using Cosmos Hub as an intermediate chain.

• Since Cosmos IBC is a blockchain by definition, there has to be a consensus algorithm which is Tendermint and trust layer which is Cosmos Hub. LayerZero and Chainink CCIP are meant to be trustless.

• LayerZero relies on Oracles and Relayers. Chainlink CCIP relies on Decentralized Oracle Networks and Active Risk Management (ARM) networks.

• IBC upholds the security inherent to the system, though it comes at a higher cost and currently has restricted compatibility.

Conclusion

In our journey through the dynamic world of cross-chain solutions, we have delved deep into three significant players: LayerZero, Chainlink CCIP, and Cosmos IBC. Each presents unique approaches and mechanisms, underscoring the breadth and diversity in strategies to address interoperability challenges in the blockchain space. While LayerZero offers a flexible foundation for future innovations, Chainlink CCIP leverages trusted oracle networks, and Cosmos IBC uses a sophisticated hub-and-zone model to bridge disparate chains. Over these two parts, we have unpacked the intricacies of these solutions, shedding light on their potential to shape the future of blockchain intercommunication. As the digital landscape continues to evolve, these cross-chain protocols will undoubtedly play pivotal roles in ensuring seamless, secure, and efficient interactions across multiple blockchain ecosystems.

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