ZetaChain: WhitePaper Analysis & Interview

In this piece, we take a look at ZetaChain, a foundational blockchain protocol designed to connect all blockchains into one cohesive, interoperable environment. With the whitepaper now live, we dig into the project and interview the team to get their thoughts.

The Problem

We all know the problem with Web3 – interoperability. Personally, I am a staunch believer that the future of crypto is one of interoperability, which is why I have taken a keen interest in the ZetaChain whitepaper.

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At first, I wanted to ask ZetaChain why they felt one blockchain could not rule them all, but then I saw they had outlined it prominently in their whitepaper: “While some people tend to favor one chain to rule them all, the reality is that blockchain technology and markets are evolving at astonishing pace and it is becoming more and more apparent that the future of the ecosystem will be comprised of multiple blockchains serving their own purpose with their own tradeoffs in terms of security, decentralization, scalability, speed, cost, compliance, and so on”.

That’s a logic I am totally on board with.

Right now, cross-chain solutions are limited to wrapping or bridging which are clunky and inefficient, as well as bespoke to the pair of specific blockchains in question. These are fragmented solutions which also introduce an additional layer of risk. So, there is definitely a problem that needs solving here.

The Team & Investors

A key piece of information for any prospective investor is the team behind the project, as well as who has already invested.

CoinJournal: “The founding team is anonymous, which is common in the crypto space. What are the reasons for the team choosing to conceal their identities? Could you reveal anything about their backgrounds?”

ZetaChain: We don’t plan to stay anonymous forever. Right now, we have our heads down building ZetaChain and we plan to share more about our backgrounds once we are closer to launch. We have been building crypto products and protocols since 2013. One of our lead contributors created one of the first DApps on microtransactions on Bitcoin, led product and engineering at one of the largest exchanges and also created one of the most widely used tokens. 

One thing bound to prick the ears of prospective investors is the big names mentioned in the press release. The recent closing of an initial seed funding round released the names of Nathalie McGrath, an early employee at Coinbase, JD Kanani of Polygon and other investors currently or formerly employed by Coinbase and Binance employees (Juan Suarez, Dan Romero, Sam Rosenblum, John Yi).

CJ: ”Are McGrath, Kanani, Remero, Rosenblum and/or Yi taking on the role of passive investors, or do they have an active role in ZetaChain? Can you reveal to what extent they are invested?”

ZC: Juan Suarez and Nathalie McGrath are advisors and have been involved from the early stages of the project, advising us on legal and people issues respectively. The others are passive investors.

Solving the problem

So, we know the problem of interoperability from the previous section. Put simply, whoever solves the interoperability issue will go right to the top of the crypto space. Many have tried to date – ZetaChain is the latest to tackle this problem, striving to create a bridgeless omnichain.

CJ: “Many projects have aimed to solve the interoperability problem without using bridging or wrapping, which we know is not a perfect solution. What separates ZetaChain from all those who have attempted this before?”

ZC: Our interoperability solutions include two steps: message passing and native cross-chain smart contracts. The Zeta Message Passing Interface is the most complete message passing solution that we know of, which handles revert. The native cross-chain vision is unique—there is no agnostic, decentralised, cross-chain smart contract platform that we know of. 

Technicals

Giving a high-level overview of the technicals outlined in the whitepaper, ZetaChain is a Proof-of-Authority consensus but will transition to Proof-of-Stake over time; the protocol is based on the Cosmos SDK.

CJ: “The technicals are understandably very dense for a goal of this magnitude. Could you do your best to explain to a less tech-savvy audience how ZetaChain expects to achieve this goal?

ZC: To put it in simple terms, ZetaChain allows developers to build cross-chain DApps that settle immediately on the connected blockchains (no wrapping, bridging, etc). ZetaChain observes connected chains and has accounts on them. Developers can program the ZetaChain with smart contracts to respond to events on connected chains and perform actions on connected chains, according to predetermined logic. The ZetaChain relies on consensus of validator nodes to secure itself and a distributed threshold signature scheme to secure the private keys on connected chains to avoid a single point of failure. PoS provides incentives for validators to act according to protocol. 

CJ: “What made you choose Proof-of-Stake and the Cosmos SDK – did you ever consider another route? Do you know the timeline yet for transitioning to Proof-of-Stake?

ZC: We did consider other solutions such as Polkadot Substrate, but Cosmos SDK seems to be the most mature, dependable, extensible, and it has a great ecosystem. We plan to transition to PoS by the end of this year.

So the goal here, like a lot of projects of this ilk, is to provide generic blockchain support to connect to smart contract blockchains (e.g. Ethereum, Solana, Terra etc). But what is especially interesting about ZetaChain is the promise to not only achieve this, but to instil support for non smart contract blockchains such as Bitcoin and Dogecoin.

CJ: “Did you consider only providing support for smart contract blockchains, rather than both smart contract and non smart contract (such as Bitcoin and Dogecoin)? How important do you see the inclusion of non smart contract blockchains?”

ZC: “Both. We think that non-smart contract chains such as Bitcoin are very important. For example, the Bitcoin network has by far the largest liquidity; it is the most stable, secure, possesses a long track record and is likely to be a major player – if not the dominant player – for a long time. Also, the Proof-of-Work chains have their own unique strength of being extremely simple, robust and open to participation. Being able to incorporate blockchains such as Bitcoin into a multi-chain future seems obviously necessary. 

Presentation

It seems trivial in this day and age, but many whitepapers stick out immediately for being poorly written, presented or containing grammatical and formatting errors. ZetaChain has no such problems, passing the first test. It’s funny how many whitepapers I fling away one page in – it really is a pre-requisite in my book to have just a baseline amount of professionalism. The ZetaChain whitepaper is minimalistic, clean and articulate.

CJ: “How long has the team been working on ZetaChain?”

ZC: We started working on ZetaChain in June 2021.

Tokenomics

I did notice, however, that the tokenomics are not outlined in the whitepaper. I reached out to the team to get some clarity on this, given how key an issue it is for new coins. What is the whale concentration; can a small number of holders control the project? How many tokens do the team retain – are incentives aligned?

CJ: “Is there a reason that the tokenomics were omitted from the whitepaper? How many tokens will be supplied, how many are kept by the team/company? How many do the largest investors hold?”

ZC: We are still working on this and plan to share as soon as things are finalised.

Future

When assessing an investment, it is always important to complete a scenario analysis. Given this is crypto, of course you can lose it all and go to zero. But what happens if the upside is realised?

CJ: “What do you see as the potential size of the market here, and the upside case for the project in terms of market cap? Do you have a target market cap?”

ZC: We are focused on increasing the utility of ZETA token by providing the best possible experience for developers, which in turn would enable a really good user experience. 

CJ: “Given the absence of a roadmap in the whitepaper, could you please outline your roadmap/milestones for going forward?”

ZC: Yes, we plan to release a detailed roadmap in the near future, but at a high level we will do things in 3 steps. The first step is enabling interoperability between different chains using message passing. The second step is to enable native smart contracts on ZetaChain, while the third step is to enable omnichain smart contracts. We plan to do all these things by the end of the year.

Communication

Communication from the team is of vital importance in the crypto world. This is what makes the industry so unique – the contact one can have with other investors and the founding members is really unique. Telegram and Discord servers don’t normally exist for stocks or other assets. This takes on even greater important when the team is anonymous.

CJ: “Given we are still in the very early stages, your Telegram and Discord channels are quite quiet. Is there a timeline for when you plan to ramp these up, and how much communication do you expect to have with investors or prospective investors going forward?”

ZC: Yes, we plan to wrap these things up after we release the whitepaper and we can start engaging with additional developers for applications that can be built using ZetaChain.

With ZetaChain starting to ramp up, it will certainly be interesting to track this ambitious project going forward. As outlined above, whoever solves this problem of interoperability is going right to the top of the crypto world.