Interop 3.0 - Fundamental is Built, Its Time for Application

*Thanks to Mark (LayerZero), Arjun (LI.FI), and Tabasco (Particle Network) for discussions and review.

Key Takeaways

• Interoperability in blockchain has evolved through three phases: Interop 1.0 focused on asset transfers, Interop 2.0 introduced general messaging protocols, and Interop 3.0 is now enabling applications to build custom cross-chain strategies.

• The current Interop 3.0 phase emphasizes three key aspects: omnichain application logics, application-owned interoperability, and chain abstraction, allowing for more sophisticated cross-chain operations and improved user experiences.

• As the blockchain ecosystem expands, applications must develop appropriate multichain strategies to remain competitive, focusing on building the right product and preparing the right expansion approach tailored to their specific business models.

1. Intro - interop/acc

What is interop? Simply put, it's about connecting two isolated systems. In crypto, interop was first built as an infrastructure for transferring assets, then evolved to connect states through messaging protocols. Through these developments, the fundamental infrastructure was built. Namely, token bridges and messaging protocols in place, applications can now become truly "omnichain." Using this established infrastructure, projects can build custom logic and control their cross-chain operations, adding layers interactions. This opens up applications, on-chain businesses, with custom logic, omnichain operations, and universal tokenization.

Now, projects feel the need to build multichain strategy and understand how they can benefit from this in the long-term. Although more thorough research and data analysis is needed whether being multichain is economically beneficial, not considering to build multichain strategy will leave the project behind where there are new blockchains emerging everyday.

1.1 Interop is Now Essential?

Interop is now essential. 36% of total developers now work on multiple blockchains, and within this segment, 41.6% work in 10+ blockchains. The number of new blockchains are increasing at a fast pace. According to Defillama, there are now around 180 blockchains (including rollups) that has over $1M TVL. Looking into the rollup landscape, the number is just increasing faster, with around 120 rollups live in mainnet, and 87 rollups to be live soon. Research firms Equilibrium has made a prediction in 2025 that the number of L2/L3 will exceed 2000.

Source: Developer Report: Analysis of Open-Source Crypto Developers by Electric Capital

In the past, interoperability was merely optional. With few blockchains supporting smart contracts, teams focused on optimizing contracts and building user bases within single chains. When new blockchains emerged, DEX teams typically deployed forked versions from existing ecosystems. Uniswap's codebase became particularly influential, with numerous forks appearing across EVM-based chains.

This landscape changed as projects embraced "multichain" strategies. Uniswap expanded to about 25 blockchains, with Ethereum generating 75% of revenue and other chains contributing the remaining 25%. Uniswap has also announced its own L2 solution, exploring ways to connect their chain with other networks and liquidity pools.

Today, from blockchains to dapps and token projects, ignoring multichain strategy risks missing significant opportunities. Let's examine the requirements for different project types through Uniswap's lens.

1. Blockchain Projects (Appchains, Rollups, etc): New L1s and L2s must connect with other ecosystems to enable user and asset movement. Uniswap's new L2, Unichain, requires both messaging and liquidity connections with other blockchains. LayerZero, hyperlane, etc will handle messaging capabilities, while ERC-7683 will facilitate intent-based swaps.

2. Dapp Projects (Onchain Business): Dapps must expand across multiple chains to access broader liquidity and enable cross-chain dapp interactions. They can deploy complete or partial contracts across different blockchains. Uniswap has chosen full codebase deployment across 25 chains.

3. Token Projects: Cross-chain functionality allows tokens to move seamlessly between blockchains, enhancing liquidity and utility. Uniswap's governance token UNI exemplifies this challenge. Recent discussions focused on using messaging protocols for secure cross-chain contract upgrades after governance decisions. This remains under development, as Uniswap hasn't yet implemented token frameworks like OFT, NTT, or ITS for UNI.

Source: Developer Report: Analysis of Open-Source Crypto Developers by Electric Capital

1.2 The Development of Interop

To understand "where we should head," we must first understand "how we got here."

• In 2019, we entered the era of Interop 1.0. This period focused on delivering assets across blockchains, with "Users" as the primary customers.

• In 2022, LayerZero's launch marked the beginning of Interop 2.0. This phase enabled general message execution across destination chains. "Blockchains" became the key customers, with protocols like LayerZero and Axelar providing messaging infrastructure. Through this period, most of the implementation issues in interop were resolved.

• We now stand at the threshold of Interop 3.0, where "Applications (also token issuers)" are the core customers. Interoperability has become essential, allowing applications to customize cross-chain logic with execution and reading capabilities (such as LayerZero's lzRead). Meanwhile, Chain Abstraction projects are simplifying complex interactions to help applications to attract users more easily.

Just as 20th-century globalization created specialized industries and new markets worldwide, blockchain's Interoperability 3.0 represents a similar transformation for the blockchain industry. The following sections will explore the evolution of interoperability from 2020 to present day, and examine how applications can prepare for "Interop 3.0."

Source: Globalization Using Technology

2. Development of Interop - From 1.0 to 2.0

The journey from Interop 1.0 to Interop 2.0 was on building the backbone for connectivity between blockchains. Fundamentally all blockchains have their own set of rules for finality and state changes. It can maybe reverse its state, and these aspects make it technically impossible to build a truely fast and secure interopability without relying on third party. There were no projects that supported interoperability from the core network layer. IBC in Cosmos is operated by the validators and trustless relayers for cross-chain communciation, but was only limited to Cosmos-SDK based blockchains. During this period, token bridges and general messaging protocols focused on solving these problems.

2.1 Interop 1.0: The Era of Asset Transfer

The development of Interoperability in its first phase, Interop 1.0, was focused on enabling asset transfers between different blockchain networks. The goal was simple: create ways for users to move their crypto assets between blockchains. This developments helped break down the barriers between isolated liquidity.

Individual users were the main beneficiaries of Interop 1.0. They wanted the freedom to move assets across different networks for trading, investing, or using Dapps on various chains. The primary solution came through cross-chain token bridges, like Thorchain, which worked as intermediaries by locking assets on one chain and creating equivalent versions on another, making cross-blockchain value transfer possible.

As we can see from below chart in 2021, all of them are token bridges. One notable project to highlight is Wormhole. Wormhole launched in 2020 and it grew its volume by connecting two big ecosystem - Ethereum and Solana. It supported token transfer through lock and mint mechanism providing diverse wrapped tokens in each ecosystem. Now wormhole has moved to provide more general messaging infra.

During Interop 1.0, two key infrastructure developments remained: (i) establishing a method for asset transfer, and (ii) aggregating the complex asset transfer process.

Source: Blockchain Bridges: Building Networks of Cryptonetworks | 1kxnetwork

2.1.1 Transfer Assets

Token bridges had employed four distinct security models, each offering different levels of trust and security.

The trustless model represented the highest level of security in blockchain bridges. It achieved this by directly connecting bridge security to the underlying blockchains themselves. While no system could be completely trustless due to inherent assumptions, this model minimized trust requirements. The Cosmos IBC protocol exemplified this approach, but was limited to its ecosystem.

Next was the insured model, which implemented a safeguard mechanism through operator collateral. If security breaches occurred, users could receive reimbursement from this collateral.

The bonded model shared similarities with the insured model but handled breaches differently. Instead of using collateral for reimbursement, it typically burned the staked assets as punishment. The Ronin Bridge, which experienced a significant hack in 2022, operated under this model, where validator collateral was at stake but not used for direct user compensation.

The trusted model represented the most basic security approach, relying purely on operator reputation without collateral or recovery mechanisms. Binance Bridge exemplified this model, where users had to trust the platform's reputation and centralized control for security.

Overall, the industry was trying to move away from trusted models toward more secure alternatives like bonded and insured models. Also these projects mostly had their own version of “Wrapped Tokens,” which led to a need for better liqudity management between wrapped tokens between same collateral assets. This led to the development of “Aggregation.”

Source: Blockchain Bridges: Building Networks of Cryptonetworks | 1kxnetwork

2.1.2 Aggregation of Transfer

Cross-chain token bridge aggregation has become essential as there were many different wrapped tokens. As different blockchains use various DEXs, token bridges, and wrapped tokens, users felt need for straightforward methods to move assets between chains. Bridge aggregators addressed this need by connecting multiple liquidity sources.

A prime example is LI.FI, a bridge and DEX aggregation protocol that enables cross-chain swapping, bridging, and messaging across multiple blockchains. Through its API and interface (known as Jumper Exchange), LI.FI provides access to all DEXs, DEX aggregators, and relevant bridges. These cross-chain swap aggregation projects have been selected as the primary providers for major wallets like Phantom and MetaMask.

Source: Announcing The LI.FI SDK!. LiFi’s Javascript/Typescript SDK… | by Arjun Chand | LI.FI Blog

2.1.3 Moving Away from Interop 1.0

As the industry evolved beyond Interop 1.0, it established fundamental infrastructure for "Asset Transfer for Users". However, bridge hacks emerged as a critical security concern, accounting for two-thirds of all DeFi hacks. The Axie Infinity Ronin bridge hack was particularly devastating, resulting in $600M in losses. Also Multichain bridge was hacked with a loss of $126M. With vulnerabilities in token bridges, developing secure solutions became a technical priority for the upcoming Interop 2.0 phase.

Beyond security concerns, the industry required more accessible cross-chain messaging infrastructure. As the number of blockchains increased, the need grew for messaging protocols that could transmit and execute messages across different chains, leading to the development of "Interop 2.0."

Dmitry's article "Blockchain Bridges" signaled the beginning of Interop 2.0. The article provided a comprehensive overview of blockchain connection projects and their varying designs, categorizing bridges into four types: asset-specific, chain-specific, application-specific, and generalized.

Source: Blockchain Bridges: Building Networks of Cryptonetworks | 1kxnetwork

2.2 Interop 2.0: The Era of Message Transfer

Source: Navigating Arbitrary Messaging Bridges: A Comparison Framework | by Arjun Chand | LI.FI Blog

The launch of LayerZero in 2022 marked the beginning of Interop 2.0. LayerZero became a key player by providing infrastructure for general messaging between different blockchains. Similarly, Wormhole evolved from a token bridge into a general messaging infrastructure, showcasing the growing demand for comprehensive cross-chain messaging. This phase went beyond simple asset transfers to enable broader blockchain interoperability.

Two crucial developments emerged during this period. First, cross-chain messaging (aka. GMP or AMB) became widespread through providers like LayerZero, Axelar, and Wormhole. The launch of new L1 blockchains and L2s accelerated the demand for this infrastructure. Second, use cases emerged, including token frameworks like OFT, built on these messaging protocols.

2.2.1 Messaging - A Must-Have for New Blockchains

Source: The Aptos Bridge by LayerZero | by LayerZero

When launching a blockchain, there are two primary tasks for building its ecosystem: (i) strengthening its own ecosystem and community, and (ii) attracting users and projects from other ecosystems. The first task requires creative implementation strategies, while the second requires cross-chain protocols.

Since token bridges were slow to integrate new blockchains, general messaging protocols emerged to enable developers to send messages and execute commands across blockchains. This allowed for easy connections between blockchains and, with customization, enabled token bridge development. The "Aptos Bridge" by LayerZero exemplifies this—a custom bridge that enabled USDC, USDT, and ETH transfers to Aptos from day one. Projects like Stargate and Radiant were also built using LayerZero's general messaging infrastructure.

As the pace of new blockchain launches accelerated and the number of rollups increased significantly, LayerZero launched V2 to become more permissionless and easier to integrate. Similarly, Axelar modified its tokenomics and services to facilitate rapid expansion.

2.2.2 Token Framework - Now, Inevitable

Source: Just OFT It? - Looking into the Landscape of Token Framework | Four Pillars

Token frameworks like Omnichain Fungible Token (OFT) by LayerZero, Native Token Transfers (NTT) by Wormhole, and Interchain Token Service (ITS) by Axelar saw adoptions. These frameworks enable cross-chain token transfers and create unified markets across multiple networks. By maintaining fungibility across different blockchains, they eliminate the need for wrapped assets or additional liquidity pools for bridging.

This is when Interop shifted from B2C to B2B, allowing asset issuers to control their cross-chain deployments and profit from asset transfers. This brought key advantages: enhanced liquidity, easier token management, and quicker market expansion. These frameworks have gained significant traction, particularly OFT by LayerZero, which now leads in both deployed tokens and secured value. Notable assets including WBTC and PYUSD have adopted the OFT framework. As security measures strengthen and these frameworks mature, they will play an increasingly vital role in shaping multi-chain token ecosystems and DeFi.

The Product-Market Fit (PMF) of token frameworks like OFT has enabled protocols to view multichain expansion as more accessible, offering a way to keep pace with the growing number of blockchains. For example, Ethena can immediately expose new chain users to their high-yield crypto dollar from day one of launch. Moving beyond Interop 2.0, the stage is now set for applications.

3. Interop 3.0: Building Upon Backbone

During the Interop 2.0 era, cross-chain infrastructure was established. Blockchains now readily support messaging protocols, and projects have conducted some cross-chain experiments. Throughout Interop 1.0 and 2.0, the fundamental cross-chain infrastructure for asset and data transfers has been established, creating a scalable backbone for blockchain connectivity.

Building on this foundation, applications are now expanding to be cross-chain in terms of their operations and tokens. Interop 3.0 marks a new phase where applications can build and control their cross-chain operations. Just as globalization prompted countries to optimize their offerings and transformed the global economy, cross-chains strategy is now becoming essential. While earlier versions established basic connectivity, Interop 3.0 will see application-specific implementations. Applications should consider three key aspects:

1. Omnichain Application Logics: How applications can build their custom logics, with omnichain logics and cross-chain read (i.e. lzRead by LayerZero)

2. Application-Owned Interop: How to align cross-chain operations with applications' infrastructure and economics

3. Chain Abstraction: How applications can simplify complexities using chain abstraction projects

3.1 Omnichain Application - Now Taking Off

3.1.1 Omnichain Application Logics

Omnichain applications can operate across multiple blockchains simultaneously, unlike traditional applications that are limited to a single chain. This allows users to have a seamless experience, regardless of which blockchain they're using. Although the current omnichain use case is token bridging like Stargate and LI.FI, I expect to see diverse use cases as app-specific blockchains and rollups emerge.

Superform, which recently got investment from VanEck, is an omnichain lending and yield marketplace that simplifies cross-chain interactions in DeFi. Built on interoperability protocols like LayerZero, Superform enables users to access and manage yield opportunities across multiple blockchains through a single interface. A key feature is its use of "SuperPositions," tokenized representations of yield positions that allow users to manage their assets from any chain, enhancing user experience and composability.

Another example is EtherFi's L2 native restaking. It represents an application of omnichain logic in Ethereum's liquid staking ecosystem. It enables native restaking on Layer 2 networks, reducing gas costs and improving scalability for stakers. This means EtherFi allows management of staking and restaking positions across Layer 1 and various Layer 2 networks. This implementation showcases how omnichain logic can be initiated from Layer 2 and executed to core L1 Ethereum infra.

Source: Superform + LayerZero = Omnichain Yield Access — Superform

3.1.2 lzRead - More than Messages

LayerZero's lzRead extends its messaging protocol to enable developers to access on-chain data from any supported blockchain network. Unlike traditional cross-chain messaging, which focuses on sending messages or assets between chains, lzRead allows smart contract developers to request and retrieve external blockchain states in a single function call with a lower cost.

Applications can use lzRead for use cases such as verifying cross-chain asset ownership, aggregating historical pricing data, synchronizing liquidity pools, and enabling seamless governance across DAOs.

For example, lzRead can enable simple cross-chain asset verification. Abstract, an L2 solution by Luca Nets, could use this feature to build an ecosystem for Pudgy Penguin NFT holders. The system could verify Ethereum-based Pudgy Penguin ownership through lzRead, offering holders exclusive privileges within the Abstract ecosystem. Benefits could be tiered based on the number or rarity of Pudgy Penguins owned—including reduced fees, early access to features, and governance participation. This setup would let Pudgy Penguin holders access benefits on Abstract while keeping their NFTs secure on Ethereum, enhancing both utility and engagement in the Abstract L2 ecosystem. This kind of mechanism is now available for Apechain.

Source: Read External State (LayerZero Read) | LayerZero

3.2 Application-Owned Interop, Sovereignty for Applications

Applications can now have control over their cross-chain operations in both economic and infrastructure aspects. Applications can set security parameters, choose validators, and customize fee structures for cross-chain transactions—leading to more alignment. To be specific, on the infrastructure side, applications configure their own networks of validators and relayers. This control ensures cross-chain communication aligns with each application's needs and security requirements.

Looking into the alignment with LayerZero’s offerings, applications can leverage this new sovereignty through restaking and custom Decentralized Validator Networks (DVNs). Here's how:

1. Economic Alignment through Restaking DVN: Protocols incentivize verifiers to stake tokens across multiple chains, creating shared economic interests. This reduces the risk of malicious behavior and enables more efficient capital use, lowering user costs while strengthening network security.

2. Infrastructure Alignment with Custom DVNs: Protocols create tailored DVNs, like Ondo Finance's diverse DVN, to meet specific security and operational needs. These DVNs select validators based on criteria such as geographical distribution and technical capabilities, optimizing cross-chain operations for each protocol's requirements.

Source: Ondo Finance Goes Omnichain with LayerZero | by LayerZero | LayerZero Ecosystem

3.3 Chain Abstraction - UX Game Changer for Applications and Users

Source: Chain Abstraction - The Final Narrative to Fix the Crypto UX Problem in Hundreds of Blockchains | Four Pillars

Chain abstraction emerged as the dominant narrative in 2024. Projects have transformed this concept into practical products by simplifying complex cross-chain interactions. As applications grow more sophisticated across different chains, chain abstraction offers an elegant solution—creating a layer that shields users from multi-chain complexities.

Intent and solver infrastructure powers chain abstraction with a clear purpose: receiving and fulfilling user requests. Cross-chain swap requests have gained significant traction. In the Ethereum DEX orderflow market, the solver model now handles 38% of total trades, surpassing traditional DEX frontends.

We will see major developments in general intents, especially in managing accounts and assets across multiple blockchains. Projects like Particle Network, One Balance, and Socket Protocol are building this crucial infrastructure.

Before Interop 3.0, the focus was on unbundling. Now, Interop 3.0 introduces primitives like omnichain application logic, token framework, and cross-chain read/compute capabilities like lzRead, enabling applications to build their strategies. Chain abstraction shares this goal but takes a bolder approach—focusing on bundled state and construction.

Chain abstraction aims to take the vast multi-chain ecosystem that has emerged (partly due to Interop 2.0) and return to blockchain's original vision: letting users interact with what feels like a single, global state.

In summary, Interop 3.0 aims to provide better on-chain business for dapps. From a bottom-up infrastructure perspective, primitives like OApp, cross-chain read (i.e. lzRead) and Token Framework are now available. From a top-down user perspective, Chain Abstraction will fundamentally change how users interact with dapps.

Source: ETH DEX OrderFlow market size (Single-Domain Intents=Solver Models)

4. Looking Ahead - Applications, Applications, Applications

In interop 1.0, we saw the birth and needs for interop.

In interop 2.0 we saw the backbone of connectivities being built.

In Interop 3.0, it's time to build upon this backbone. Applications must expand or risk being left behind. What are the key points applications should focus on?

First, it's all about building the right product. A dapp is essentially an on-chain business (thanks to Mark for this analogy). Just as globalization helped businesses expand beyond their local countries and find new revenue sources, interop allows exposure to new revenue opportunities. However, simply expanding to other chains doesn't guarantee success. Although cross-chain expansion is now easier than ever, building the right business model and forming strategic partnerships for use cases on other chains should be the priority.

Second, be prepared with the right strategy. Each application needs its own expansion approach. For example, yield token projects like Ethena focus on seamless cross-chain token transfers. Restaking protocols like Swell have built their own rollup to maximize the yield flywheel from staking/restaking. Lending projects like AAVE is considering to build their own blockchain or rollup to unify liquidity. The optimal expansion strategy depends on the application's core operations. Applications should carefully evaluate which expansion method best suits their business model.

In 2025, it's time for interop/acc.

Source: X (@arjunnchand)