How does the full-chain solution ZetaChain achieve cross-chain liquidity integration across all networks?

The omnichain newcomer project ZetaChain, after completing a $27 million financing last year, will launch its mainnet today and conduct an airdrop activity for ZETA tokens. What makes ZetaChain so attractive as a challenger to LayerZero? This article provides a brief overview referencing the official whitepaper.

What Problems Does ZetaChain Aim to Solve?

High Security Risks in Cross-Chain Transactions

With the proliferation of Layer2 projects and the resurgence of competing chains, liquidity in various networks is fragmented. Even with the same protocol, it is not easy to integrate liquidity from different networks, leading to low and dispersed fund utilization efficiency.

The mainstream solution currently used involves the use of cross-chain bridges, which package assets and issue them on the target chain through locking or burning methods.

However, the complexity of such cross-chain bridges will increase with the number of supported networks, and they need to bear the security risks of individual network's smart contracts. In recent years, the amount lost due to attacks on cross-chain bridges by hackers has exceeded $2.3 billion.

On the other hand, there are also centralization issues. Besides hackers, whether the multi-signature contracts of cross-chain bridges will guard against self-theft remains an additional trust assumption for their operation, which is not the most ideal practice.

Difficulty in Integrating Non-EVM Compatible Blockchains

The above situation only discusses EVM-compatible blockchains. Many times, the underlying architecture of blockchains is different. Bitcoin, IOTA, and Solana are not EVM-compatible blockchains, so in some cases, it is not easy to construct cross-chain communication and staking smart contracts, which can increase costs or potential security risks.

Especially with Bitcoin and Solana currently in the market spotlight, it becomes increasingly important to systematically integrate these network issues.

ZetaChain Building a Full-Chain Communication Mechanism

ZetaChain Architecture

ZetaChain is an EVM-supporting Layer1 blockchain built on the Cosmos SDK and Tendermint PBFT consensus mechanism, creating a PoS network where blocks cannot be reorganized and have real-time finality, with an expected TPS of up to 4000.

ZetaChain enables various blockchains to communicate with each other through a special mechanism. Its architecture consists of decentralized verification nodes that can be divided into three roles based on different functions, to achieve low-trust message cross-chain transmission:

• Validators: Nodes that need to stake the native token ZETA to participate, responsible for voting on new blocks using the Tendermint consensus to maintain network consensus. Voting power is proportional to the amount of ZETA staked, and normal operation will receive token incentives.
• Observers: Observers monitor transactions, events, and states of external networks through complete nodes on external networks. They need to become validators first to execute observer permissions, and also need to run external network nodes as sorters to submit relevant transaction data to ZetaChain validators.
• Signers: All signers collectively hold standard ECDSA/EdDSA keys for verified interactions with external chains. Keys are distributed among multiple signers, and only a vast majority of signers can sign on behalf of ZetaChain, with economic sanctions to ensure security. They also need to become validators first before becoming signers.

In practice, all the mentioned roles, except for the observer's sorter, will be configured within the same node, sharing software and certificates, and related rewards and reductions are calculated together.

Threshold Signature Scheme (TSS)

ZetaChain holds accounts on external networks to host funds, manage fund pools, treasuries, etc., and execute operations like burning, minting, fund transfers, etc.

To avoid single point failures, ZetaChain uses a special distributed signature mechanism — the threshold signature scheme (TSS) to ensure fund security and simultaneously support asset management on non-smart contract chains.

At any time, a single entity or a few validators cannot collectively compose private keys and sign messages for the entire network. Key generation and signing processes are completed through multi-party computation (MPC) without leaking information from participating nodes.

Full-Chain Smart Contracts

ZetaChain uses zkEVM as the mainnet's virtual machine.

The biggest challenge is that message passing between chains is asynchronous, and the design of virtual machines on each chain is different. To reduce complexity between different chains, ZetaChain introduces full-chain smart contracts to manage assets across chains.

Therefore, tokens on external networks are controlled by TSS addresses, while within the ZetaChain mainnet, a standard ERC20-compatible contract called ZRC20 is used as the integrated network asset.

Achieving Low-Risk Cross-Chain Transactions and Integrating Non-EVM Networks

Based on the above design, ZetaChain will be able to integrate liquidity from networks including the Bitcoin network.

For instance, a decentralized exchange constructed using ZetaChain message passing can invoke smart contracts from other networks, where cross-chain transactions use ZETA tokens for transfers, facilitating cross-chain transactions.

When it comes to cross-chain transactions involving non-EVM compatible networks, ZetaChain can manage target network assets through TSS.

ZetaChain Driving Chain Abstraction Development

After modularizing and vertically integrating within the same ecosystem, cross-ecosystem liquidity integration is increasingly gaining attention. Both require further development to enhance the user experience of using Web3 products in practice, achieving the most challenging step of chain abstraction: liquidity integration.

What is chain abstraction? Enhancing user experience more comprehensively than account abstraction

Following LayerZero, new competitors have joined to challenge the market opportunities for full-chain. ZetaChain, unlike its predecessors that use oracles and light nodes, brings different trust assumptions through economic means and TSS multi-signature, regardless of whether the market ultimately adopts it, ZetaChain has indeed successfully advanced the industry's diversity and potential.