Preface

Hello to our Tapioca family! Since announcing our LayerZero integration, the excitement has been palpable, but the questions of what LayerZero is (and what it does for Tapioca) have been equally notable. In this article, I’d like to dive in from the perspective of someone completely new to LayerZero to help educate the masses on what LayerZero or Stargate actually are. Let’s first start with…

What LayerZero ISN’T

Firstly, just to get all of the misconceptions many have formed out of the way, LayerZero is not a blockchain. Tapioca is utilizing an optimistic roll-up as its “source chain” (more on that later). Because of this, you do not need a special wallet or need to add a new network to your Metamask. LayerZero (or Stargate) is also not a decentralized exchange (DEX) like SushiSwap. It’s also not an Oracle like Chainlink. The closest common approximation of what LayerZero actually is would be a bridge, however, it’s so much more than that*.*

What LayerZero IS

LayerZero is a messaging network built for interoperability. That may seem very simple and not as revolutionary as you may have previously thought…until you read this:

LayerZero allows for blockchains, even blockchains of completely different architectures like for example Ethereum and Solana, to communicate with one another in a completely decentralized and trustless fashion, with instant finality, cross-chain composability (combine multiple smart contracts on separate chains into a single transaction), and unified liquidity (more on that later).

In our multichain future reality, a user may have funds on Ethereum, then use AnySwap to bridge those funds to Binance Smart Chain, to then finally perform a swap on PancakeSwap. With LayerZero, the same result can occur with a single instant transaction, without needing to place trust in the AnySwap bridge (or anything for that matter). The security issues with bridges have been dire, such as Solana’s Wormhole hack in February for 120k ETH.

LayerZero also solves another huge issue with liquidity. With dozens of different blockchains, and even more protocols on these blockchains, liquidity is fractured into islands you must traverse with bridges that introduce a host of new problems. LayerZero with Stargate has unified liquidity pools, which means you can swap native FTM for native MATIC for example.

Tapioca+LayerZero=?

One of the first questions regarding Tapioca is, what is an OFT (Omnichain Fungible Token)? Stargate’s $STG is the first OFT token. OFT could be thought of as a token wrapper, that allows for any OFT token (like our $TAP) to be natively traded (or staked) on any LayerZero supported blockchain (such as ETH, MATIC, AVAX, FTM, BSC, OP, and ARBI). This means you could trade $TAP on TraderJoe and PancakeSwap natively. How is this possible? Stargate’s universal liquidity is available to settle the transaction.

What is this omnichain business you may ask? Omnichain simply means that multiple blockchains can communicate with one another. By omnichain loans, we’re really offering bridging-as-a-service (similar to AAVE V3’s Portal). This means that you could take a loan out on Tapioca from Optimism, and receive your funds onto Fantom for example. Also, regardless of what chain you are on, you can interact with Tapioca as if you’re on its source chain, and only pay Tapioca’s source chain’s gas cost. This is through the use of LayerZero and proxy contracts. These proxy contracts can interact with one another on separate chains through LayerZero.

With Omnichain Strategies, we’re offering cross-chain APY hunting. For example, Tapioca can determine autonomously that SpookySwap on Fantom is providing a higher yield than Quickswap on Polygon, and begin lending liquidity there to gain the best yield possible for our lenders.

ve0 allows you to stake $TAP for $veTAP on any of the currently supported LayerZero blockchains, and you earn a pro-rata share of the multichain staking pool. This allows stakers to earn a share of the total revenue of Tapioca, versus just that one chain. (this also utilizes our partners at Gelato Network’s amazing tech, another article on that soon!)

tl;dr

LayerZero opens the doors to completely trustless, true multichain DeFi, which Tapioca is maximally exploiting.

• LayerZero is not a network, does not need a special wallet, and is more akin to a bridge, one that sends messages between different blockchains
• OFT20 tokens are like a token wrapper, that allows you to natively trade $TAP like a native token on any DEX that is on any of the seven currently supported LayerZero blockchains
• -Stargate is like an automated market maker with a universal liquidity pool to settle trades for native assets between blockchains
• Tapioca’s omnichain loans are like bridging-as-a-service. Take a loan out from any blockchain, and have the funds delivered to any blockchain

All in all, besides the wonderful LayerZero team (which includes SushiSwap legend 0xMaki), all of the tier-1 VCs in the jaw dropping $135m raise like a16z, FTX, Coinbase Ventures, and Sequoia Capital, LayerZero’s quick rise to $4b in TVL, it’s obvious to us LayerZero is the future of DeFi, which is why Tapioca will be one of the first protocols to help buidl our omnichain future.