At the end of last year and the beginning of this year, I wrote two articles introducing ZetaChain. Several months later, I’ve developed some new insights. Reflecting on those previous articles, which largely stayed theoretical, I realize that I didn’t fully capture the essence of ZetaChain.

In these past months, ZetaChain has made significant and noteworthy progress. On one hand, ZetaChain is gradually expanding its support for Solana, Ton, and Base, progressively embodying the concept of chain abstraction. Regarding its support for BTC, ZetaChain has reaffirmed its commitment to decentralized methods in the wake of increasing discussions about the over-centralization of WBTC, emphasizing its dedication to enhancing the adoption of native Bitcoin.

On the other hand, exchanges like OKX, Coinbase, and Crypto.com have either started or plan to introduce staking support for ZETA. Additionally, platforms such as Alchemy, Ledger, Tenderly, MintScan, and Keplr are gradually integrating support for ZetaChain.

In terms of protocol development, ZetaChain has upgraded its Universal L1 Blockchain Gateway, UniversalKit, and introduced new Localnet and Devnet networks. The Gateway allows Universal Apps to natively connect to any blockchain, including Bitcoin, enhancing user experience. UniversalKit offers ready-to-use React components for Universal App interfaces, while Localnet and Devnet accelerate development processes. ZetaScan data shows that ZetaChain has already drawn in over 3.6 million unique wallets.

After reviewing Delphi’s report on ZetaChain, I believe the market may be underestimating ZetaChain’s potential to become a universal infrastructure in the chain abstraction space.

What Exactly Is ZetaChain?

In my previous article, “How to Add Omnichain Interoperability to Bitcoin? ZetaChain Offers a New Answer,” I summarized ZetaChain’s cross-chain mechanism as “essentially using the chain itself as a reliable intermediary for cross-chain message transmission, where blocks containing relevant messages are confirmed as soon as they are packed. The large number of validators and their widespread distribution, as well as the assets staked by these validators, serve as the main security guarantee.”

At that time, I perceived ZetaChain as a relay for cross-chain message transmission. While this interpretation wasn’t entirely wrong, it wasn’t entirely accurate either. Interestingly, ZetaChain’s actual mechanism is even more intriguing.

Delphi’s report describes ZetaChain as a more advanced version of THORChain, or as Delphi puts it, “THORChain with smart contract functionality.” This smart contract capability alone expands the possibilities significantly.

THORChain operates by using its token, RUNE, as a medium of exchange. It facilitates transactions by swapping token A for RUNE on the THORChain, then swapping RUNE for token B. Tokens A and B come from two different chains, such as Bitcoin and Ethereum, but are represented as cross-chain assets on THORChain. While this model may seem less convenient compared to many modern cross-chain solutions, it does provide strong price support for the RUNE token. ZetaChain adopts a similar model, where the exchange between two tokens is not just about handling cross-chain information but involves the minting of ZRC-20 tokens on ZetaChain for conversion.

As for why this model holds so much potential, I’ll leave that explanation for a later discussion.

Data Comparison: ZetaChain Offers Lower Cross-Chain Costs Than LayerZero and Wormhole

In the Omnichain/chain abstraction sector, comparisons with LayerZero and Wormhole are inevitable. After conducting my own tests, I found that ZetaChain’s seemingly more complex mechanism actually results in lower slippage for certain cross-chain transactions.

LayerZero and Wormhole are fundamentally cross-chain bridges, supporting only single-token transfers across different chains, such as USDT or ETH transfers between Ethereum and various L2s. In contrast, ZetaChain uses its blockchain as a hub, enabling the exchange of native assets across different L1s through its liquidity pool. For example, native ETH on Ethereum can be swapped directly for native BNB on the BNB Chain or for native SOL on Solana, all with a single click. I’ll explain the process in detail later, but from a user experience perspective, ZetaChain truly achieves “one-click trading.”

If LayerZero or Wormhole wants to facilitate cross-token exchanges, like swapping ETH on Ethereum for BNB on the BNB Chain, they would still need to rely on a DEX on the corresponding chain.

For now, if you’re only looking to transfer stablecoins or ETH across EVM chains and L2s, LayerZero is a solid choice. Of course, this assessment is based on ZetaChain’s current limited chain support. However, for direct cross-chain token swaps, ZetaChain’s advantage is clear. Let’s take swapping ETH on Ethereum for BNB on the BNB Chain (ETH > BNB) as an example.

ZetaChain Transaction Fees

When using ZetaChain’s cross-chain pathway (e.g., with Eddy Finance), the cost of transacting 1 ETH is approximately $0.30. This includes both the on-chain gas fee for ZetaChain and the gas fee required for executing the transaction on Ethereum, as shown in the image below.

LayerZero and Wormhole’s Transaction Fees

For the same transaction at the same time, using OmniSwap integrated with LayerZero incurs costs of around $3.70. This includes the fee for swapping ETH for USDC on Uniswap on Ethereum.

Even though I had only 0.03 ETH in my wallet, this didn’t significantly affect the actual gas fee incurred on Ethereum. The cross-chain fee using LayerZero is about $1.50. Given that LayerZero currently supports converting some tokens into gas fees on the destination chain, I assume that OmniSwap’s fees for transactions on PancakeSwap are included in the cross-chain fees. This assumption is based on the fact that the fee shown on Stargate is slightly less than that shown on OmniSwap.

Therefore, the total cost of the same transaction via LayerZero is around $5.20, significantly higher than the cost of executing the transaction through ZetaChain.

For Magpie, which integrates Wormhole, the gas fees are even higher, approaching $10. When I took the screenshot of Magpie’s transaction data, the gas price on Ethereum was 2 GWei—double the 1 GWei used in the earlier comparison between ZetaChain and LayerZero. The transaction fees on Uniswap nearly doubled as well. The transaction path is almost identical to OmniSwap’s, except for the difference between using LayerZero and Wormhole for cross-chain stablecoin transfers, so I won’t go into further detail.

Fee Disparity Analysis

Why is there such a significant difference in fees? Let’s dive into the specifics of each pathway.

Before explaining the transaction path through ZetaChain, it’s essential to understand how Eddy Finance represents tokens.

For native assets, Eddy uses their original names, such as ETH and BNB, representing native ETH on Ethereum and native BNB on BNB Chain, respectively. \

For ZRC-20 assets on ZetaChain, which are assets bridged from different chains, Eddy uses an x.y format. For example, USDC.ETH represents “USDC bridged from Ethereum to ZetaChain,” while USDC.BSC refers to “USDC bridged from BNB Chain to ZetaChain.”

When trading ETH for BNB via ZetaChain, the transaction follows this path:

ETH is bridged from Ethereum to ZetaChain through a cross-chain contract, labeled as ETH.ETH.

ETH.ETH is traded on ZetaChain’s liquidity pool for BNB, represented as BNB.BSC on Eddy. The trade path is ETH.ETH → ZETA → BNB.BSC.

Finally, BNB.BSC is bridged from ZetaChain to BNB Chain, and the user receives native BNB on BNB Chain.

The fees incurred in this process can be broken down into three parts:

1. The cost of bridging ETH from Ethereum to ZetaChain, which is low since it only involves creating a “wrapped” token on ZetaChain.
2. The transaction fee on ZetaChain, which is negligible, similar to most EVM-compatible Alt L1s.
3. The cost of bridging BNB from ZetaChain to BNB Chain.

Overall, the fee consumption is very low.

In contrast, the same transaction via LayerZero follows this path:

ETH is swapped for USDC on Uniswap on Ethereum.

USDC on Ethereum is bridged to USDT on BNB Chain via Stargate.

USDT on BNB Chain is swapped for BNB on PancakeSwap.

This process incurs fees from the Uniswap trade, the Stargate cross-chain transaction, and the PancakeSwap trade.

There are two critical points to consider here. First, when simply bridging stablecoins, such as USDT from Ethereum to BNB Chain via LayerZero’s Stargate, the amount of USDT you receive on BNB Chain depends on the liquidity in the USDT pool. The higher computational demand of this process partly explains the high initial cross-chain fees on Stargate.

For ZetaChain, by contrast, it only needs to lock USDT in a contract on Ethereum and mint an equivalent amount of USDT on ZetaChain. The subsequent steps, such as trading USDT.ETH for USDT.BNB on ZetaChain and then bridging it to BNB Chain, involve locking and releasing tokens, consuming minimal resources despite the more complex process. Therefore, I speculate that if ZetaChain supports similar tokens in the future, its cross-chain fees might also be lower, or at least not higher than Stargate’s.

The fee difference may not seem huge from the above examples, as $5 in cross-chain fees might still be acceptable for most users. However, these figures are based on Ethereum gas prices in the single digits. If network activity surges, as it did in 2021, the fee disparity between the two cross-chain methods could become exorbitant.

Additionally, most cross-chain projects, including LayerZero, require a certain cross-chain fee to ensure the protocol’s sustainability. This fee structure limits smaller cross-chain transactions, as the fees might exceed the value of the transaction itself, which is why projects like Axelar do not support small-scale cross-chain transfers. However, since ZetaChain operates as its own blockchain, its protocol revenue can come from gas fees rather than cross-chain fees, significantly reducing the cost burden on users.

The Positive Flywheel Effect of Token Empowerment

Delphi’s report on ZetaChain is quite comprehensive, and I encourage you to read it in detail. I want to highlight one aspect that seems largely overlooked by the current market: the potential positive flywheel effect that can be generated by empowering the token.

I rarely use the term “positive flywheel” because it is often exaggerated. However, ZetaChain genuinely deserves this description. In most cross-chain and Omnichain projects, tokens do not bring significant benefits to the project itself; holders typically gain value only through staking and receiving a share of cross-chain fees.

ZetaChain’s token design breaks out of this conventional framework. As mentioned earlier, ZetaChain’s mechanism partially mirrors THORChain, so when you look at the liquidity pools on ZetaChain, you’ll notice that they are not formed solely with two tokens but always involve ZETA.

This is the brilliance of ZetaChain’s design. The actual cross-chain process involves bridging tokens to ZetaChain, completing the transaction on ZetaChain, and then bridging to the target chain. The cross-chain process itself is “lossless” because it does not involve liquidity; it’s merely a “wrapping” process. On ZetaChain, all tokens must form liquidity pools with ZETA. Essentially, token A is traded for ZETA, and ZETA is traded for token B. ZETA becomes an indispensable part of the cross-chain process. Therefore, as ZetaChain’s cross-chain transactions increase, so does the demand for ZETA, which drives up ZETA’s price. A higher ZETA price, in turn, enhances liquidity on ZetaChain, reducing transaction slippage.

Thus, ZetaChain’s fee advantage will generate more cross-chain demand, which increases ZETA’s price. This, then, decreases transaction slippage, creating a completely positive feedback loop. Even if market conditions deteriorate, ZetaChain’s fee advantage remains, mitigating the impact of reduced demand.

This slippage issue circles back to my initial point about being “undervalued by the market.” Despite the low fees, when trading 1 ETH for BNB, the amount of BNB obtained through ZetaChain is noticeably less than what you’d get using LayerZero. The reason is that ZetaChain currently has relatively low liquidity, which can lead to higher slippage and potential losses during large cross-chain transactions.

However, this liquidity shortfall presents a goldmine of opportunities on ZetaChain. Moreover, ZetaChain’s support for blockchains that don’t have smart contract capabilities, like Bitcoin and DOGE, adds to its potential. While the current market environment may not showcase the full power of ZetaChain’s positive flywheel, if the on-chain market sees the rise of high-value applications like DeFi, ZetaChain could truly reveal its worth as on-chain activity picks up.

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