LayerZero OFT: a "unified" solution among public chains

Text / Dong Nuo

Cross-chain token transfer has always been an industry pain point in the cryptocurrency world. Due to the different architectures and rules of different blockchains, it has become very difficult and inefficient to transfer tokens between different chains. Before the advent of Omnichain Fungible Tokens (OFTs), several approaches were tried. One of the earliest solutions was the use of wrapped assets, where tokens on one blockchain were wrapped in a smart contract and then pegged to a specific value on a different blockchain. This method allows tokens to be transferred between different chains, but it also introduces new risks, such as tokens losing their anchor, which may cause significant losses to users.

Another approach is to use centralized exchanges to facilitate cross-chain transfers. However, this approach is often slow, expensive, and requires users to trust the exchange to custody their funds.

Atomic swaps have also been introduced as a solution for cross-chain transfers. Atomic swaps enable users to exchange tokens between different chains without the need for a centralized exchange. However, the implementation of atomic swap is more complicated and requires both parties to be online at the same time, which is not practical for users who transfer large amounts or are not familiar with operations.

Until July 2021, the emergence of OFTs provides a new solution for cross-chain token transfers, making it easier and more efficient to transfer tokens between different chains. OFTs do not require the use of wrapped assets, reducing the risk of tokens losing their anchor, and providing a more user-friendly and efficient cross-chain transfer solution. As the first batch of decentralized exchange Trader Joe to adopt the OFT standard for its tokens, it starts with blockchain platforms such as Avalanche, Arbitrum and BNB, and aims to provide users with a seamless exchange through OFTs standards and cross-chain technology. A liquidity hub that connects different blockchains. In Trader Joe, users can easily transfer their $JOE tokens between the three supported chains through the Stargate bridge, and the transaction fee is very low. Trader Joe's supported chains include Avalanche, Arbitrum, and Binance Smart Chain, where users can freely transfer and trade JOE tokens. By using the OFTs standard, Trader Joe provides users with more convenient and efficient cross-chain token transfer and liquidity solutions.

In the answer sheet submitted by Trader Joe, we can see that OFTs solve three main problems related to cross-chain token transfer. One is to solve the liquidity problem. Due to the emergence of OFTs, the protocol can easily establish liquidity on the new blockchain and can easily handle large transfers. The OFTs standard allows tokens to circulate freely between different blockchains.

The second is user-friendliness and convenience. The OFTs standard makes it easy to transfer tokens between different chains even for users who are not familiar with the operation. In the future, the OFTs standard can even realize seamless full-chain dapps, which will greatly promote the development of cross-chain DeFi applications.

The third is safer and more efficient. The OFTs standard is not a wrapped asset, which means that the risk of tokens losing their anchors on different chains is eliminated. A $JOE token is a $JOE token on any chain and will not change due to cross-chain transfers, providing users with a more reliable and efficient cross-chain token transfer solution.

Another coin adopting the OFT standard is $BTC.b – Avalanche-bridged Bitcoin. Thanks to the support of LayerZero, $BTC.b can cross-chain from Avalanche to other EVM-compatible blockchains, such as Arbitrum and BNBChain, providing users with a decentralized alternative to WBTC. Using the OFTs standard, $BTC.b tokens can be freely transferred and traded between different chains.

Level__Finance, one of Trader Joe's newest partners, is also adopting the OFT standard for its $LVL token on Arbitrum and #BNB. Other DeFi protocols have also begun leveraging LayerZero's technology to initiate and drive their cross-chain expansion. By using the OFTs standard, $LVL tokens can be freely transferred and traded between different blockchains. The emergence of the OFTs standard has brought more reliable and efficient solutions to the development of cross-chain DeFi applications, contributing to the healthy development of the cryptocurrency ecosystem.

Since the OFTs standard supports more than 14 primary and secondary chains, it has become one of the standards defining the future of the entire chain. And due to the industry-leading efficiency of Liquidity Book AMM, users can easily trade OFTs tokens such as $BTC.b, $JOE, $LVL, $STEAK, $RDNT, etc. The OFTs standard brings more reliable and efficient liquidity solutions to the development of cross-chain DeFi applications, helping to promote the development of the cryptocurrency ecosystem in a more open and seamless direction. As more DeFi protocols adopt the OFTs standard, cross-chain token transfers and liquidity will become more convenient and efficient, providing users with richer and more diverse cryptocurrency trading and investment options. Let us look forward to it together!