What Is LayerZero?

LayerZero allows separate blockchains to exchange messages. A token or instruction created on Ethereum can therefore be recognized on Solana, Arbitrum or Tron. Without a protocol connecting them, blockchains cannot read each other's records.

Most users encounter LayerZero through applications such as the USDT0 transfer page, the Stargate bridge or a token issuer's transfer tool. In its June token report, LayerZero counted 160 million messages and $260 billion moved across 165 networks. The company puts its share of cross-chain stablecoin transfers at about 70%.

A traditional crypto bridge locks a token on one chain and issues a wrapped copy, or stand-in token, on another. With LayerZero's Omnichain Fungible Token standard (OFT), the token is burned (destroyed) or locked at the source, and the same asset is minted at the destination. All chains share one supply.

The protocol's developer, LayerZero Labs, is now building its own blockchain for financial markets, Zero. ATLAS, an exchange engine, will run on it.

How LayerZero Works

Before a destination chain acts on a LayerZero message, verifiers must check it. Each application chooses those verifiers. That flexibility is the protocol's main strength, but April exposed the risk of how it is used.

• Endpoints: Smart contracts on each chain that send and receive messages. No one, including LayerZero Labs, can upgrade, pause or modify them.
• Message Libraries: Contracts that encode messages and store an application's verification settings. Developers can add new versions, but deployed versions cannot be changed.
• Decentralized Verifier Networks (DVNs): Independent operators that watch the source chain and sign statements confirming messages are real. LayerZero counted 71 DVNs in June, with operators including Google Cloud, Deutsche Telekom and PayPal.
• Executors: Services that deliver verified messages on the destination chain and pay its network fee (gas). Users only pay on the chain where they start.
• OApps and OFTs: Any application that sends LayerZero messages is an OApp. An OFT is a token built to move between chains.

Every DVN on an application's required list must agree before a message is accepted. Two independent verifiers must sign in a "2-of-2" setup; a "1-of-1" setup trusts just one. LayerZero's documentation now instructs developers to configure this explicitly and include at least one verifier operated independently of LayerZero Labs.

The KelpDAO Exploit and What Changed

Attackers stole 116,500 rsETH, worth about $292 million, from KelpDAO's LayerZero-based bridge on April 18, 2026. It was the first major loss tied to LayerZero's own infrastructure. Kelp is a liquid restaking protocol, and rsETH represents ether deposited through EigenLayer.

The protocol's contracts were not broken. LayerZero's incident report traced the breach to March, when a LayerZero Labs developer was tricked into installing malware. The attackers gained access to RPC nodes, the servers its DVN used to read blockchain data. They made two internal servers report a transaction that never happened, then knocked an outside provider offline. Only the false data remained available to the DVN.

Because Kelp's bridge relied solely on the LayerZero Labs DVN, one forged signature released the funds. Mandiant and CrowdStrike attributed the attack to TraderTraitor, the North Korean group responsible for the $1.5 billion Bybit theft.

LayerZero initially blamed Kelp's single-verifier setup. It apologized three weeks later, conceding that its DVN should never have been the sole verifier for high-value transfers.

In September, Kelp's parent company sued LayerZero and CEO Bryan Pellegrino in British Columbia. It alleges that LayerZero approved the configuration in writing. Pellegrino has called the claim meritless; no court has ruled on it.

LayerZero Labs has since introduced the following changes:

• No sole-verifier signing: Its DVN refuses to sign for applications that list it as the only required verifier.
• Higher defaults: Protocol defaults are moving to at least three required DVNs for every connection between two chains.
• Rebuilt infrastructure: The company replaced the compromised cloud environment. Its DVN now reads each chain through several independent data providers.
• Larger bug bounty: In September, the reward pool for LayerZero V2 rose to $3.5 million.

Who Left and Who Stayed

Most customers that left after the exploit chose Chainlink's Cross-Chain Interoperability Protocol (CCIP). The rival messaging service uses one shared set of node operators managed by Chainlink for all customers. LayerZero leaves each application to choose its verifiers, giving teams flexibility and responsibility for the result.

Kelp moved rsETH to CCIP in May. In August, BitGo named CCIP its exclusive cross-chain provider for about $7.3 billion of Wrapped Bitcoin. That brought announced migrations to nearly $15 billion, although some transfers remain in progress.

Wyoming also moved its state-issued FRNT stablecoin to CCIP in August. Ethereum engineering firm Nethermind gave up its DVN role to operate Chainlink nodes instead.

Stablecoin issuers have largely stayed. The OFT standard still carries Tether's USDT0, PayPal's PYUSD0 and Paxos's USDG0. LayerZero's June report also listed Ethena's USDe and ether.fi among its users.

USDT0 and Stablecoins on LayerZero

Stablecoins account for LayerZero's largest business, led by USDT0, its biggest single user. This version of Tether's USDT moves between chains as one token and is backed 1:1 by USDT locked on Ethereum. Our USDT vs USDT0 guide compares the two.

Since launching in January 2025, USDT0 has transferred more than $113 billion, according to its own figures. Over $3.5 billion circulates across more than 25 chains. USDT0 supplied the dollars that made Plasma the largest chain by stablecoin deposits on its first day. The same system now carries Tether's gold token, XAUT.

Tether bought a stake in LayerZero Labs in February. Following the Kelp exploit, USDT0 disclosed that every transfer requires approval from three separate DVNs: its own, LayerZero Labs and Canary.

OFT holders rely on their issuer's verifier settings. These are public, so check them on L2BEAT's LayerZero page before moving large amounts.

Zero Blockchain and ATLAS

LayerZero Labs announced Zero in February as a blockchain for financial institutions' trading, payments and settlement. The main network is targeted for fall 2026 but had not launched as of early October.

On most blockchains, every validator, a computer that confirms transactions, re-runs every transaction. Zero assigns execution to specialized operators. They produce a zero-knowledge proof, a compact mathematical receipt showing that the work was done correctly, which validators then check.

LayerZero's technical paper claims each "zone" can process up to 2 million transactions per second, with validators running on ordinary hardware. Those figures come from company tests and have not been demonstrated on a live network. The paper also criticizes layer 2 networks for allowing small security councils to control upgrades. Zero's zones, it says, change only through token-holder votes.

Citadel Securities invested in ZRO. ARK Invest's Cathie Wood joined the advisory board. DTCC, the US securities clearing house, and ICE, which owns the New York Stock Exchange, are exploring Zero for tokenized assets and round-the-clock clearing. Their exploration is non-binding.

Unveiled in August, ATLAS is Zero's first product. This "headless" exchange has no app of its own. It handles order matching, clearing, settlement and risk checks behind the scenes, allowing exchanges, brokers and prediction markets to retain their customers and screens. LayerZero expects a launch later this year.

ZRO Tokenomics

LayerZero's only token, ZRO, has a fixed supply of 1 billion. In early October 2026, CoinGecko showed about 353 million circulating at roughly $1.75 each, giving it a market value near $617 million. ZRO peaked at $7.47 in December 2024 and traded as low as $0.71 this year.

The launch allocation split the supply as follows:

• Community: 38.3%, including the 8.5% distributed through the June 2024 airdrop
• Strategic Partners: 32.2%, vesting over three years after a one-year lock
• Core Contributors: 25.5%, following the same schedule
• Repurchased: 4.0%, bought back by LayerZero Labs

Team and investor tokens unlock on the 20th of each month into 2027. About 25.7 million ZRO, or 2.6% of total supply, is scheduled for release on October 20.

The LayerZero Foundation bought back 50 million ZRO from investors in September 2025. It has re-locked its own holdings until Zero launches and says no further airdrop is planned.

Most of the mechanisms connecting ZRO to revenue are not yet active:

• Stargate buybacks: LayerZero acquired the Stargate bridge in August 2025. Since April, all Stargate revenue has gone toward buying ZRO on the open market, purchasing 1.9 million ZRO for $2.8 million by June. Holders of the former STG token have until December 15 to convert to ZRO.
• Fee switch: Every six months, holders vote on a protocol fee that would fund ZRO purchases and burns. All four votes have fallen short of the required turnout. The next is due in December.
• Zero and ATLAS: ZRO will secure Zero through staking and pay its transaction fees. On open ATLAS markets, 75% of fees remaining after venue rebates are slated to buy and burn ZRO.

Founders and Funding

Bryan Pellegrino, Ryan Zarick and Caleb Banister founded LayerZero Labs in 2021. Pellegrino serves as CEO. A former professional poker player, he is also a named defendant in the Kelp lawsuit.

In March 2022, the company raised $135 million at a $1 billion valuation from a16z, Sequoia and FTX Ventures. Its April 2023 $120 million Series B valued the business at $3 billion.

a16z crypto purchased $55 million of ZRO in April 2025 under a three-year lockup. Alongside the Zero announcement, Citadel Securities, ARK Invest and Tether invested on undisclosed terms.

Risks

For holders of ZRO or LayerZero-based tokens, risk depends partly on each application's configuration and the security of its operator. The new products also have to arrive as described.

• Verifier configuration: According to CoinDesk, 47% of active LayerZero applications relied on a single verifier when Kelp was attacked.
• Operator security: A state-backed group spent six weeks inside LayerZero Labs' systems before the theft. The company operates the most widely used DVN.
• Litigation: Kelp's parent is seeking damages, including punitive damages, from LayerZero Labs and its CEO. Neither the outcome nor the cost is known.
• Customer losses: Nearly $15 billion of assets has announced a move to Chainlink. If the fee switch is activated, fewer messages would mean less fee revenue.
• Token supply: About 35% of ZRO is circulating. Monthly unlocks continue into 2027 and far exceed the buybacks completed so far.
• Unproven launches: Zero's speed claims remain untested, and its institutional partners have committed no volume. Canton Network and Tempo are among the rivals pursuing the same firms.

Bottom Line

LayerZero remains the most widely used way to move stablecoins between blockchains. USDT0 alone has carried more than $113 billion. Although the protocol's contracts held up in April, attackers breached the company operating its main verifier. Customers holding about $15 billion of assets subsequently chose to leave.

ZRO gains a direct claim on revenue for the first time if Zero and ATLAS launch on schedule and their fee burns begin to offset monthly unlocks. Until then, check the verifier settings behind any OFT token you hold and treat Zero's throughput figures as targets.