Why LayerZero Could Be the Biggest Sleeping Giant in Crypto

Simon Baksys (0:00)

The question is, who needs 2 million transactions per second? Because you don't need 2 million transactions per second to tokenize the bond or the real estate building on chain.

John Gillen (0:09)

LayerZero is known for connecting other blockchains, but now they are building their own and launching an exchange on top of it. What does an interoperability company need its own Layer 1 for? And what do investors need to know about all this? Hello and welcome to Milk Road Crypto, the show that now runs its own 5 of 5 verifier setup on every joke and they still don't land.

I'm your host, John Gillen. Today is Simon got that one. That's good. Today we are joined by Simon Baksys, the Chief Business Officer at LayerZero, the protocol connecting more than 100 different blockchains and building a lot of things on top of it. We're going to talk about a lot of really important things going on in the market today. If that sounds good to you, make sure you like and subscribe, share this episode with somebody who needs to hear it. And as a reminder, our podcast today is free and that would not be possible without our wonderful partners at Nexo, the digital asset platform that lets you trade, earn and borrow all in one place, all in one account. We will keep an ear out for more information on them later in the episode, but for now, welcome to Milk Road Crypto. Simon, how are you, sir?

Simon Baksys (1:04)

I am doing very well. Thanks for having me, John.

John Gillen (1:07)

Well, thank you for your patience with some of the technical issues we've had this morning. I wanted to start this conversation just at a high level. For those who don't know LayerZero, just give us a 30-second overview of what you would describe the company as, what you're focused on, and what people should know about LayerZero.

Simon Baksys (1:22)

Yeah, absolutely. So LayerZero has been around since 2021, so roughly five to six years now.

And we were initially founded on solving the problem that is blockchain interoperability, right? How do you streamline communication across the different code bases and different ecosystems that exist? We were very fortunate to raise a total of $280 million at a $3 billion valuation on the latest Series B in 2023, all co-led by A16Z and Sequoia, with participation from PayPal, from Franklin Templeton, from a variety of institutions, and most recently Citadel Securities, Tether, and ARK Invest. And so fast forward to now, we're the market leading interoperability provider with roughly 90 percent market share. I'm sure we'll talk about that in a bit, and really have become not just an interoperability company, I would say, but an sort of on-chain technology company, right? So we sort of define our mission as infrastructure powering the global movement and exchange of value.

John Gillen (2:28)

So talk to me about the interoperability piece of this, because for people who have been in crypto for a while, they know interoperability is important, and they may have heard of Chainlink as an interoperability solution, and Circle has their interoperability play as well, and so do many other players in the market.

LayerZero, you say, is the leader in this. Talk to us about what the product is that you're offering for interoperability, and why you think you're in such a leadership position in the market.

Simon Baksys (2:53)

Yeah. Interoperability is a big buzzword, and it depends how you define it. And most people in, frankly, any industry, not just blockchain, would say interoperability is important. Everyone wants things to work together, that is natural.

Where we have spent most of our time and energy is on-chain, cross-chain interoperability. What that means is actually connecting one blockchain to another, standardizing that across the EVM world versus the non-EVM world, et cetera. You mentioned a couple of the other folks in the industry. We really have a first mover advantage since 2021 We've been living and breathing interoperability since the day we founded this company. And what we built and what the LayerZero protocol is, is really a messaging protocol. So think of it as infrastructure that transfers packets of data from one application on one blockchain to another.

You can do a lot of different things with that, but sort of the largest use case and sort of product market fit, if you will, for interoperability has become value transfer. So how do you take a tokenized asset, be that cash, be that an RWA, be that a bond or an equity and transfer that natively without the need of wrapping of assets, which is kind of how originally people approached the interoperability problem from one blockchain to another. So we've been building that business for over five years now. We have the most performance technology, we connect the most blockchains. When we talk about a market leader position of, I think, in September 91.5 percent market share, we measure that in two ways. One is the amount of value transferred from one blockchain to another, or sorry, across public blockchains, if you will. And then the second is cross-chain transactions or messages, right? So on any given month, we do roughly $10 to $15 billion a month of cross-chain value transfer. And we power exclusively some of the biggest asset issuers in the world, folks like PayPal's PYUSD, the Global Dollar Network, Paxos, all of Athena assets, all of EtherFi assets, Tether and USDT Zero and a variety of others. And so if you take sort of the combination of all public blockchain cross-chain volume, LayerZero accounts for roughly 91% of that volume.