Guide to ZetaChain
October 16, 2024
Introduction
You wouldn't expect one single gadget to solve all your problems, right? Well, the same goes for blockchains. We’re in the first inning of the multichain future, where many different blockchains exist side by side, each doing their own thing. The problem is that each blockchain exists within its own little island and can’t communicate with other blockchains. It’s almost like having a bunch of computers but no internet. This lack of interoperability is one of the things that would prevent blockchain and crypto going mainstream. For example, if a developer builds a dapp, they are basically committing to a specific blockchain and users will also take that commitment. If a user wants to try to use another dapp on another chain, they face a ton of UX hurdles. And for developers, they’d have to deploy their app to multiple chains. This makes exploring the crypto ecosystem more challenging than it needs to be, for users and developers alike.
Enter: ZetaChain.
ZetaChain is a Universal Layer 1 (L1) blockchain designed to connect to any blockchain “agnostically,” compatible with many different blockchain networks including other Layer 1 blockchains, Layer 2 (L2) blockchains, or even non-smart chains such as Bitcoin. ZetaChain’s purpose-build connectivity lets developers build Universal Apps that natively connect to any other blockchain and users access these apps without switching their desired network.This enables an ecosystem where users and developers can operate as if everything is on one chain.
ZetaChain Node Types
Validators
ZetaChain is built using the Cosmos SDK using Tendermint consensus. Validators vote on new blocks based on how much ZETA (the token) they’ve staked. More ZETA means more voting power. In return for their efforts validators earn rewards. Users can delegate their ZETA to their preferred validator operators like Coinbase.
Observers
Observers keep an eye on external blockchains, watching for specific transactions or events. The observers watch connected chains for certain relevant transactions/events/states at particular addresses via their full nodes of connected chains. This component can evolve to use zero knowledge and proof-based verification to lighten the dependency on full nodes while maintaining security.
Signers
Signers control ZetaChain’s keys which allow it to interact with external chains. ZetaChain is designed so that no single signer has the power to sign on behalf of ZetaChain as it takes a supermajority to sign off on any action.
Validators keep things moving, observers keep things accurate, and signers keep things secure. Together they let ZetaChain operate efficiently across all connected chains.
It is important to note that each of these node types can earn rewards. In exchange for their efforts Validators earn 75% of the rewards distributed, Observers earn 12.5% of the rewards distributed, and Signers earn 12.5% of the rewards distributed. It is expected that Observers will eventually shift towards zero-knowledge proof-based verification which will lessen the need for incentives, so the portion of rewards allocated to Observers will eventually transition more to Signers via governance-based upgrades.
Source: ZetaChain
ZetaChain Universal EVM (zEVM)
Universal EVM (zEVM)
ZetaChain has an Ethereum Virtual Machine (EVM) compatible execution layer known as zEVM, which functions like a typical EVM. However, zEVM has two unique features:
Contracts on zEVM can be called from, and accept assets as input from, external chains
These contracts can also send transactions to other chains, orchestrating assets and data on many chains from a single place of logic and execution.
This makes zEVM an extremely flexible platform for multichain transactions, enabling state changes across different blockchains in one smooth, atomic step. It’s the connective tissue amongst L1s and L2 solutions. Developers can deploy once and access users and liquidity on any chain, thereby creating Universal Apps.
Chain Abstraction Framework (CAF)
ZetaChain’s connectivity to/from connected chains is surfaced to developers through its Chain Abstraction Framework (CAF), that lets developers build chain abstraction for apps to build with. This framework lowers the barrier and simplifies the architecture of apps that span many or all chains. Apps built with this toolkit are accessible and can access any chain. For users, this means they can use apps from any chain and any wallet without having to worry about networks and chains underlying them. The Chain Abstraction Framework is powered by the Observer-Signer Nodes and ZetaClient, accessible through the zEVM.
Universal Smart Contracts
Universal Smart Contracts are contracts that, once deployed on ZetaChain, can be accessed from and can access external chains, allowing seamless cross-chain interactions and orchestration. They don't need to be redeployed on other blockchains. Universal Smart Contracts also maintain a unified state and execution spanning all connected chains. This unified state ensures smoother operations for most applications and reduces complexity by minimizing the need for multiple messages between chains.
These contracts can receive assets, be called from other chains, and interact with users and chains on other chains. Native assets can be sent into the ZetaChain execution environment as ZRC-20 token standard tokens on ZetaChain. Universal Smart Contracts can also work with non-smart contract networks like Bitcoin. Gas fees for these contracts are paid in the native token of the source chain, and cross-chain gas fees are managed by the protocol.
Gateway
The ZetaChain Gateway is a unified entry point that simplifies interactions between Universal Apps and connected blockchains like Ethereum, Solana, and Bitcoin. On connected chains, the gateway allows for token deposits, contract calls, and data transfers to and from ZetaChain Universal Apps. The features vary slightly depending on the chain, but the general functionality remains consistent. Meanwhile, on ZetaChain, the gateway handles outgoing transactions like token withdrawals and contract calls to connected chains.
Secure Liquidity Management
The liquidity flowing through ZetaChain and Universal Apps have key security measures in place to minimize risk for apps and users. ZetaChain’s network manages liquidity and transaction flow using two key mechanisms: liquidity caps and rate limiters.
Liquidity caps set a maximum amount of tokens that can be sent to ZetaChain from external chains, ensuring stability during high transaction volumes. Once the cap is hit, further transactions are reverted or the network can raise the cap through a governance operation.
Rate limiters control outgoing transactions by capping the total token withdrawals within a set time frame, helping to prevent over-withdrawals and network abuse.
Together, these systems keep the network secure and efficient, even during heavy traffic. Users transacting across chains can settle into native assets on their designated chains, including native Bitcoin.
The ZETA Token
Supply and Utility
ZETA has an initial supply of 2.1 billion tokens. Over the next 4 years, the network will shift to a planned yearly inflation rate of about 2.5% to support long-term sustainability, to be determined by governance. ZetaChain’s governance model allows for updates to monetary policy and other network adjustments as needed.
The ZETA token secures the Proof of Stake network power the network by offering incentives and slashing mechanisms for validators as well as serving as the governance token for proposals that shape the network’s future. ZETA also serves as the gas asset for transaction fees on ZetaChain’s zEVM, and facilitates cross-chain transactions by serving as an intermediary asset that can be burned and minted across chains. It’s also in core protocol liquidity pools that enable cross-chain native transaction fee payment.,
Allocations
Sourced from ZetaChain Docs: Token Distribution
Conclusion
We are in the early stages of the multichain world, and improving the developer and user experience across disparate and diverse L1s and L2s is essential. ZetaChain aims to enhance this experience by enabling developers to create Universal Apps where they can deploy once and access features and opportunities across any underlying chains, and thus bring more powerful and simple experiences to users.
This material is the property of Coinbase, Inc., its parent and affiliates ("Coinbase"). This material is for informational purposes only, and is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, tax advice, investment recommendations or other professional advice or (iii) an official statement of Coinbase. You should consult with a professional advisor before making any decisions based on this information. No representation or warranty is made, expressed or implied, with respect to the accuracy, completeness, reliability or suitability of this information or to the future performance of any digital asset, financial instrument, protocol, network, project or other market or economic measure.This information contained herein is believed to be current as of the date indicated and may not be updated or otherwise revised to reflect information that subsequently became available or a change in circumstances after the date of publication. The risk of loss in cryptocurrency, including staking, can be substantial and nothing herein is intended to be a guarantee against the possibility of loss. Coinbase may have financial interests in, or relationships with, some of the entities and/or publications discussed or otherwise referenced in the materials. Certain links that may be provided in the materials are provided for convenience and do not imply Coinbase's endorsement, or approval of any third-party websites or their content. The right to use any of Coinbase’s services and tools may be contingent on completion of Coinbase’s onboarding process and is subject to Coinbase’s sole discretion, including entrance into applicable legal documentation and will be, at all times, subject to and governed by Coinbase’s policies, including without limitation, any applicable terms of service and privacy policy, as may be amended from time to time. Coinbase, Inc. is not registered or licensed in any capacity with the U.S. Securities and Exchange Commission or the U.S. Commodity Futures Trading Commission. *Uptime guarantee subject to contractual requirements.
