11 min read
Exploring ZetaChain and the $ZETA token
A new hope for Interoperability!
Published on8 Feb, 2024
ZetaChain announced its Mainnet launch on February 1, 2024. This news is significant to the Web3 world because it ushers in a new era where users can access all cryptocurrencies from one place.
During its testnet phase, ZetaChain had more than 14 million cross-chain transactions generated by over 3 million users. Furthermore, it has already attracted over 200 partners, including notable Web3 platforms like Curve Finance and SushiSwap.
ZetaChain offers quick block time and instant finality to empower users to interact with any cryptocurrency they choose. As for developers, they can now build decentralized applications (dApps) that connect to any chain across the crypto ecosystem.
There is a lot to look at, and this article will explore deeper into ZetaChain's architecture, consensus, and where to stake ZETA tokens.
ZetaChain's mission is to build the most secure and affordable way for users to transact across multiple blockchains in the simplest way possible. Its lofty goal is to grow crypto to over a billion users, and the organisation has determined that the best way to accomplish this is by expanding accessibility. One platform is needed to unify the myriad of fractured blockchains so that users can transact with all of them in a single place and Zetachain claims to have accomplished this goal with their recent launch.
Early investors in this vision brought $27 million to the ZetaChain project in August 2023. These included Blockchain.com, Sky9 Capital, VistaLabs, and many others.
Before ZetaChain's launch, people had limited options for performing cross-chain transactions. Typically, they had to wrap their tokens or use risky bridges. While cross-chain solutions like bridges carry cluttered histories of exploits and hacks, ZetaChain differs in that it is a full-fledged Proof-of-Stake blockchain. That means all transactions are verifiable, fully transparent, and operate in a trust-minimized fashion. Further, since it's a Layer 1, it provides the foundational layer upon which other applications build.
Before examining ZetaChain further, it will help make more sense by looking at Omnichains. An Omnichain enhances user accessibility and usability by connecting different types of cryptocurrencies in one place. It represents a high level of interoperability across various blockchain networks.
A couple of Omnichain features are interconnectivity and what's called Layer 0. An Omnichain framework connects multiple blockchains, regardless of how their smart contract technologies differ. For instance, Ethereum uses smart contracts, while Bitcoin does not. Yet an Omnichain can still connect the two. Omnichains achieve this by creating a foundational layer (Layer 0) that integrates multiple networks into one cohesive system.
Layer 0 forms a base upon which Layer 1 blockchains can connect and interact. Thus, Layer 0 enables transactions and other information to flow seamlessly across various platforms. The Omnichain approach is another step towards solidifying crypto trading's future by bringing DeFi and TradFi closer together.
As a type of Omnichain, ZetaChain also seeks to unite a multitude of blockchains so that users can seamlessly interact across different networks.
ZetaChain is unique because it's the only public blockchain supporting smart contracts that can be deployed natively to read and write on connected chains. Amongst other things, this capability will enable a new model for dApp development.
Omnichain smart contracts are deployed on ZetaChain, and they can use assets on the connected blockchains and on ZetaChain itself. Omnichain contracts offer a single place of logic that can maintain the state of data and assets across interconnected chains.
Complex applications where state management between chains is essential will find Omnichain smart contracts the most useful. Some use case examples include:
DeFi applications that need liquidity on multiple chains.
Developers who want to add a smart contract layer to non-smart-contract blockchains like Bitcoin.
Multichain smart-contract wallets that function as portfolio management tools across all blockchains.
Ethereum's Virtual Machine is abbreviated as "EVM." Likewise, ZetaChain's Ethereum-compatible virtual machine is called ZetaEVM or "zEVM." For this reason, ZetaChain is an EVM-compatible Layer 1 blockchain. Being EVM compatible, ZetaChain can seamlessly interact with Ethereum-based apps and support many of its tools and wallets. Further, it supports EVM features such as contract creation, interaction, and composition.
Smart contracts on zEVM can generate outbound transactions on external chains and be called from other chains. These features help zEVM to operate as a general-purpose programmable platform. It supports cross-chain transactions that can atomically modify states across different blockchains in one step.
It works by smart contracts on zEVM connecting to ZetaChain's interoperability layer to manage assets on external chains. The best part? It all happens as if these components existed on a single chain.
Developers building on ZetaChain create zEVM contracts that can be a standard Solidity contract. Because of Omnichain smart contracts, developers can build dApps that span across various blockchains. Omnichain smart contracts deployed on zEVM can also generate outbound transactions on other external chains.
So, zEVM is where developers can deploy and use Omnichain smart contracts built on top of ZetaChain's core chain. But to maximize its capabilities, developers must adhere to the interfaces unique to ZetaChain that allow interaction with externally connected blockchains.
Two ways to develop applications on ZetaChain are:
Using Omnichain smart contracts, developers only need to deploy one contract to ZetaChain. No contracts on connected chains are required. Additionally, the Omnichain contract can store the state of the application.
With Omnichain contracts, developers can pair and trade native asset liquidity directly against each other, thus reducing multiple steps to one. More importantly, it doesn't require token wrapping, a bridge, or sending complex messages. For example, a user could trade ETH for Polygon USDC (a bridged version of USDC) in a single transaction through a unified pool.
Developers can also pass data and value between blockchains with simple function calls. With message passing, dApp developers can build powerful cross-chain dApps by implementing basic functions within their existing smart contracts.
Developers need to deploy CCM-enabled smart contracts on connected chains that can pass value and message data between each other. A user calls a CCM-enabled contract on a connected chain in such cases. ZetaChain (the relayer) will transmit the message to the destination chain. Then, a CCM-enabled contract on the destination chain will receive and handle the message. Lastly, CCM-enabled contracts on different chains will store the state.
CCM can support all types of data transfer and works best as a general-purpose solution for existing apps that need cross-chain functionality.
The Zetadocs state that "at a high level, ZetaChain is a Proof of Stake (PoS) blockchain built on the Cosmos SDK and Tendermint PBFT consensus engine." ZetaChain uses the Tendermint consensus protocol, known for its security and efficiency. Being built on top of the Cosmos SDK allows it to provide chain-agnostic interoperability and seamless communication across various blockchain networks.
Tendermint's Byzantine Fault Tolerant consensus algorithm is designed to function correctly even if some of the Validator nodes go rogue and act maliciously. It makes the network resilient to attacks and unexpected faulty node failures.
It all adds up to a fast block time (~5s) and instant finality. Transaction throughput on ZetaChain can potentially hit 100 TPS because of the Tendermint consensus protocol's efficiency.
We've already mentioned the steady increase in ZETA token price recently. Moreover, as ZetaChain's native cryptocurrency, it serves multiple purposes. ZETA is used to pay for transaction fees on the network. It is also used as gas for the Omnichain smart contracts layer.
More importantly, ZETA is a staking token. That means users can stake ZETA to earn rewards while validating transactions and participating in ZetaChain's network security. Besides paying for transaction fees and staking, ZETA is also a governance token. By holding ZETA, users can participate in decision-making influencing ZetaChain's future development.
ZETA's total initial supply is 2,100,000,000, with a gradual release schedule over time with determined allocations and unlocking mechanisms. The release schedule focuses on long-term sustainability and network growth. Additionally, the protocol will burn some ZETA over time.
ZetaChain uses PoS consensus like other notable blockchains such as Ethereum, so its architecture consists of a distributed network of Validators. Validators act as decentralized network observers. They reach consensus on external states and events. Additionally, they update the external chain state through a distributed key signing.
Node operators run ZetaCore and ZetaClient, which reside within each Validator. ZetaCore produces the blockchain and maintains the replicated state machine, while ZetaClient observes events on external chains and signs outbound transactions. Notably, ZetaChain accomplishes these functions in a decentralised, transparent, and efficient way without a single point of failure.
Anyone who desires can participate in validation provided they have enough ZETA staked (bonded/delegated). Validators are selected based on the amount of ZETA tokens they are willing to stake as collateral. By staking ZETA, they can create new blocks and confirm transactions.
10% of the ZETA tokens (210,000,000) go to Validator incentives. These incentives encourage participation in ZetaChain's consensus mechanism and network security.
In sum, ZetaChain incentivizes Validators to act in the network's best interest by requiring them to stake their tokens. If Validators behave otherwise, they put their collateral at risk.
Validators have three different roles:
Validator nodes get to vote on block proposals, and their voting power remains proportional to the amount of ZETA staked. A consensus public key identifies each Validator, and they need to be running at all times to participate in the ever-growing block production.
Transaction fees and rewards get distributed to Validators to compensate them for their service of processing transactions and securing the network.
Observers are another group of participants on the ZetaChain network. Besides being a blockchain itself, interoperability requires ZetaChain to observe other blockchains. Thus, each Validator node has an observer that scans other blockchains for relevant events. In other words, these participants use their full nodes of external chains to observe externally connected chains for transactions, events, or states at particular addresses and report them to ZetaChain to reach consensus.
Observers are divided into two roles: sequencer and verifier. The sequencer reports relevant external transactions, events, or states to verifiers.
Verifiers reach consensus by verifying and voting. The system needs multiple verifiers and at least one sequencer to function. Zetadocs explains that the "sequencer does not need to be trusted, but at least one honest sequencer is needed for liveness."
ZetaChain holds the Elliptic Curve Digital Signature Algorithm (ECDSA) and Edwards-curve Digital Signature Algorithm (EdDSA) keys for authenticated interaction with external chains. These are different algorithms used for signing and verifying messages.
The keys get distributed to multiple signers in a way that only allows a supermajority to sign on behalf of the ZetaChain on external chains. That's because it's critical to ensure that no small fraction of nodes or any single entity can sign messages for ZetaChain.
To stake on ZetaChain, users must create an Omnichain contract to receive tokens from interconnected chains before staking them. Native tokens must be deposited as ZRC-20s to be locked in the contract until the staker withdraws them. Rewards accrue at a fixed rate proportional to the amount staked.
The staker deposits tokens to the contract and must provide an address where the rewards will be sent. Only the staker may withdraw their rewards from the contract, and they go to the chain of origin.
The process of staking can be quite complex. So, for those new to staking or those who can't afford the time and opportunity costs of DIY staking, Luganodes provides a simple and secure way to stake cryptocurrency. Luganodes removes the complexity of staking for you while providing stable returns and Swiss-grade security.
ZetaChain envisions a Web3 world that supports a fluid multichain ecosystem. In this place, users and developers can quickly move between any blockchain that best provides the benefits they seek: payments, participating in DeFi, games, NFTs, or other use cases.
The ZetaChain platform solves the problems of cross-chain and multichain interoperability even between blockchain networks as diverse as Bitcoin and Ethereum. Interoperability is vital for building a more unified blockchain ecosystem and ensuring the future of Web3.
If you hold the ZETA token, you can enhance your portfolio by staking to earn rewards. Leverage Luganodes' institutional-grade infrastructure to stake your holdings and create a passive income. Staking with us ensures ease of use, support, and safety while you earn, and also contribute to the security of the ZetaChain chain.
Luganodes is a world-class, Swiss-operated, non-custodial blockchain infrastructure provider that has rapidly gained recognition in the industry for offering institutional-grade services. It was born out of the Lugano Plan B Program, an initiative driven by Tether and the City of Lugano. Luganodes maintains an exceptional 99.9% uptime with round-the-clock monitoring by SRE experts. With support for 36+ PoS networks, it ranks among the top validators on Polygon, Polkadot, Sui, and Tron. Luganodes prioritizes security and compliance, holding the distinction of being one of the first staking providers to adhere to all SOC 2 Type II, GDPR, and ISO 27001 standards as well as offering Chainproof insurance to institutional clients.
2 min read
2 min read
Subscribe to get our latest updates!
New products & networks supported, staking research, blog updates, and exclusive offers directly in your inbox.