From: thepipeline_xyz
The first episode of “The Pipeline” Season 2 highlights a significant partnership between Monad and Layer Zero [00:00:13]. This collaboration brings together the CEOs and a co-founder from both protocols to discuss the details [00:00:19].
Understanding LayerZero
Layer Zero’s co-founder and CEO, Brian Peligrino, explains that Layer Zero functions as a fundamental transport layer, akin to the internet’s TCP/IP stack [00:04:01]. Just as the internet makes it easy to move data between distributed execution environments, Layer Zero aims to connect various blockchains [00:04:10]. Its core primitive involves sending a simple packet, or an “arbitrary contract invocation with a bytes array,” to run smart contracts and move data between chains [00:04:48]. This allows different chains to communicate seamlessly [00:05:03].
Brian recounts the origin of Layer Zero, initially driven by a desire to build a game across different chains like Binance Smart Chain (BSC) and Ethereum [00:18:34]. They discovered a lack of coordination mechanisms between contracts on different chains and found existing bridges problematic due to their reliance on “wrapped assets” [00:19:27]. Wrapped assets fundamentally shift risk from liquidity providers (LPs) to the end-user, who holds an IOU that could lose value at any time [00:19:56]. This led to the development of a solution focused on native asset bridging with instant guaranteed finality, which later evolved into Layer Zero’s transport layer [00:20:40].
Impact of the Collaboration for Monad
Keone, from Monad, emphasizes that the team is “extremely excited” about collaborating with Layer Zero [00:05:27]. He states that seamless interoperability between different ecosystems is crucial for the decentralized world to “eat the centralized world” [00:05:48]. With existing applications, capital, and data on other chains, it’s vital for these environments to communicate seamlessly and trustlessly to deliver the best user experience and powerful applications [00:05:55]. Different blockchains may excel at different things, and a single interoperability layer is essential for the future of decentralized tech [00:06:24].
For Monad specifically, which starts as a new environment, it’s incredibly important to have a robust, trustless mechanism for users and assets to move over [00:24:23]. This partnership makes it easier for users to explore Monad without worrying about logistical hurdles, enabling new kinds of applications [00:24:50].
Solving Real-World Problems
Both Brian and Keone discuss how crypto, and by extension their collaboration, addresses pressing real-world problems:
- Self-Sovereignty and Financial Disruption: Brian highlights the early crypto thesis of self-sovereignty and permissionless access to finance, viewing it as a disruption to the traditional banking and financial industry [00:07:46]. The ability to create more interesting financial primitives broadly useful to the world is a significant disruption [00:08:40].
- Payments: Keone identifies payments as a “killer app” for crypto [00:10:08]. He points out the high fees credit card companies charge (e.g., 3% per transaction), which burdens businesses [00:09:31]. Crypto offers a way for anyone with a phone to pay for services, avoiding middlemen [00:10:30]. This requires networks like Monad to transact at the scale of current payment systems, with Monad aiming for 10,000 transactions per second throughput [00:11:11].
- Personal Finance: Keone suggests that making DeFi the standard for personal finance—including banking, trading, borrowing, and lending—holds significant potential [00:11:41]. This demands systems that offer equal or better user experiences than centralized tools, requiring reduced slippage and execution costs to single-digit basis points [00:12:05].
- Reduced Friction and Centralization Risk: Brian notes the “trillion dollar business” of Visa and Mastercard, representing a significant tax on businesses [00:13:14]. He highlights unnecessary friction in current systems, such as high currency exchange fees [00:14:02]. With a shared global state and high execution for transactions, crypto can remove much of this friction and protect against single-entity failure or corruption [00:14:34].
Omnichain Fungible Tokens (OFTs)
Brian describes Omnichain Fungible Tokens (OFTs) as a solution for issuers who manage assets across multiple chains [00:21:54]. Historically, moving assets like Tether between chains was a “nightmare,” involving external bridging providers and often resulting in wrapped assets [00:22:02]. OFTs enable assets to be handled directly through the contract itself, eliminating the need for external bridging providers [00:22:31].
With OFTs, an asset issuer can maintain full security over the contract, allowing for transfers of large sums (e.g., $100 million of Tether) for the cost of gas, potentially as low as one-tenth of a penny [00:22:51]. This near-zero friction for asset movement and inventory management significantly improves capital efficiency, enabling arbitrage across chains at sub-cent spreads and fostering more efficient and fair markets [00:23:09].
Monad’s Parallel EVM and its Role
Keone discusses Monad’s technology and its parallel EVM, a feature that has recently gained significant attention [00:27:08]. The original vision for Monad was to build a more performant version of Ethereum’s execution and consensus, aiming for a “much better engine for decentralized smart contracts” [00:28:51].
Their profiling revealed that the biggest bottleneck in existing Ethereum clients was state access, primarily due to the inefficient state database (LevelDB) used by clients like Go Ethereum (Geth) [00:29:18]. To address this, Monad embarked on building a new custom database that natively stores Merkel tree data in an optimized structure and supports asynchronous reads and writes [00:32:03]. This enables parallel access to different regions of the Merkel tree, allowing many virtual machines to run transactions in parallel much more efficiently [00:33:15]. This engineering effort, driven by performance benchmarks, is what makes Monad’s parallel EVM a significant innovation [00:33:32].
Brian praises Monad’s approach, noting that technical people recognized its potential early on [00:35:23]. He considers Keone the “Godfather of the parallel EVM” for pursuing this challenging problem as a Layer 1 solution, long before it became a popular narrative [00:36:50].
Future Vision: Synergy and User Experience
Brian believes in a “multi-chain future” [00:15:47]. He clarifies that Layer Zero is agnostic to validation methodologies, focusing purely on the transport layer [00:17:00]. With its V2 release, Layer Zero allows other perceived competitors to exist within its framework as validation sets, promoting synergy [00:17:11]. Brian envisions Layer Zero becoming an invisible underlying layer, similar to how developers don’t think about TCP/IP when building internet applications [00:44:50].
Keone is excited about a “renormalization of what we think of as normal” in crypto costs [00:51:01]. He highlights current issues like high gas fees (e.g., $20 per transaction) and significant slippage (1-5% or even 10-20% for meme coins) as deterrents for new users [00:48:06]. He cites Solana’s low fees as an example of what’s possible, allowing users to make trades for fractions of a cent [00:49:29]. This reduction in transaction costs will enable a new wave of applications and users [00:51:07]. Developers will also no longer need to excessively optimize for gas, allowing them to include more defensive assertions and improve protocol security [00:50:30].