Interoperability is the new L1. The primary constraint for applications is no longer raw throughput, but the ability to access fragmented liquidity and users across chains. Protocols like LayerZero and Axelar are building messaging standards that become the base layer for cross-chain applications, not just asset transfers.
cross-chain-future-bridges-and-interoperability
Blog
Why Interoperability Protocols Are Becoming the New L1s
A technical analysis of how generalized messaging protocols are evolving into the foundational settlement and security layer for the modular, multi-chain future, fundamentally reshaping value capture in crypto infrastructure.
introduction
THE NEW PRIMITIVE
Introduction
Interoperability protocols are evolving from simple bridges into foundational settlement layers that compete directly with monolithic L1s.
The intent-centric shift redefines value capture. New architectures like UniswapX and Across abstract chain selection from the user, letting solvers compete for optimal execution. This moves the economic moat from the destination chain's security to the interoperability network's solver and liquidity ecosystem.
Monolithic L1s cede sovereignty. An application built on Polygon CDK or Arbitrum Orbit that uses a canonical bridge is still tethered to its parent chain. An app using Hyperlane or Wormhole for messaging can deploy its state and logic anywhere, making the interoperability layer its true home base.
Evidence: The capital flow. Over $7B in TVL is locked in bridging protocols. Stargate's native yield and Circle's CCTP demonstrate that value accrual is shifting to the transport layer, not just the execution endpoints.
key-trends
FROM SILOS TO SUPERHIGHWAYS
Executive Summary: The Three Pillars of the Shift
The competitive moat is no longer raw TPS, but the ability to seamlessly compose assets and liquidity across chains. Interoperability protocols are becoming the foundational settlement layer for a multi-chain world.
01
The Problem: The Liquidity Fragmentation Trap
Billions in capital are trapped in isolated sovereign chains, creating massive arbitrage opportunities and poor UX. Bridging is a slow, expensive, and risky point of failure.
- $100B+ in locked assets across 100+ L1/L2s.
- Users face ~5-20 minute wait times and ~0.5-2% fees per hop.
- This friction kills DeFi composability and stifles innovation.
$100B+
Fragmented TVL
~5-20min
Bridge Latency
02
The Solution: Programmable Cross-Chain Intents
Protocols like UniswapX, CowSwap, and Across abstract the bridge. Users declare a desired outcome (an 'intent'), and a decentralized solver network finds the optimal route.
- ~500ms user experience vs. minutes for canonical bridges.
- ~30-50% lower effective costs via MEV capture and route optimization.
- Enables new primitives like cross-chain limit orders and batch auctions.
~500ms
UX Latency
-50%
Avg. Cost
03
The New Moat: Universal Verification & Messaging
Protocols like LayerZero, Wormhole, and Axelar are building the TCP/IP for blockchains. They provide the secure, generalized messaging layer upon which all other applications are built.
- $1B+ in secured value for leading protocols.
- Enables native cross-chain yield, governance, and identity.
- The network effect is in the dApp ecosystem, not the chain itself.
$1B+
Secured Value
100+
Connected Chains
thesis-statement
THE ARCHITECTURAL SHIFT
The Core Thesis: From Bridge to Base Layer
Interoperability protocols are evolving from simple asset bridges into the foundational settlement and execution layer for a multi-chain ecosystem.
Interoperability is the base layer. The core value proposition of a blockchain is no longer consensus or execution, but secure connectivity. Protocols like LayerZero and Axelar are building the TCP/IP for blockchains, making isolated L1s and L2s mere application-specific subnets.
Bridges were the MVP. Early bridges like Multichain and Stargate solved the asset transfer problem. The next evolution is generalized message passing, enabling arbitrary state changes and composable logic across chains, which is the true definition of a base layer.
The new moat is security. A base layer's primary function is trust minimization. Interoperability protocols compete on security models, not TVL. LayerZero's Decentralized Verification Network (DVN) and Axelar's proof-of-stake validator set are direct analogs to L1 consensus mechanisms.
Evidence: The total value secured (TVS) by cross-chain messaging protocols now exceeds $50B, rivaling mid-tier L1 market caps. Chainlink's CCIP explicitly markets itself as a base layer, not a bridge, for this reason.
market-context
THE ARCHITECTURAL SHIFT
Market Context: The Modular Mandate
The fragmentation of the monolithic L1 stack has elevated interoperability protocols to the role of primary network.
Interoperability is the new L1. Monolithic chains like Ethereum and Solana are disaggregating into specialized layers for execution, settlement, and data availability. This modular stack creates a coordination problem that interoperability protocols like LayerZero and Axelar solve by becoming the base communication layer.
The network is the bottleneck. The value of a chain is now its connectivity, not its virtual machine. A rollup with superior access to liquidity and users via protocols like Wormhole and Across Protocol outperforms an isolated chain with faster execution.
Evidence: The total value secured by cross-chain messaging protocols exceeds $60B. LayerZero processes more daily messages than many L1s process transactions, making it a de facto settlement layer for the modular ecosystem.
WHY INTEROPERABILITY PROTOCOLS ARE BECOMING THE NEW L1S
Protocol Metrics: The Value Capture in Motion
Comparison of value capture mechanisms and economic security between leading interoperability protocols and major L1s.
| Metric / Feature | LayerZero | Wormhole | Axelar | Ethereum L1 |
|---|---|---|---|---|
Total Value Secured (TVS) | $20B+ | $35B+ | $8B+ | $500B+ |
Avg. Daily Msg Volume | 150k-200k | 50k-100k | 20k-30k | 1.1M+ |
Native Fee Token | ZRO | W | AXL | ETH |
Fee Capture per Tx | $0.10 - $1.50 | $0.05 - $0.80 | $0.20 - $2.00 | $1 - $50+ |
Validator/Guardian Set | Decentralized Oracle Network | 19/20 Guardian Multisig | 75 PoS Validators | ~1M Validators |
Settlement Finality Time | < 2 min | < 5 min | < 3 min | 12-15 min |
Programmable Intent Support | ||||
Direct Revenue to Token Holders | Staking + Fee Sharing | Governance-Only | Staking Rewards | Validator Rewards |
deep-dive
THE NEW PRIMITIVE
Deep Dive: Anatomy of a Cross-Chain L1
Interoperability protocols are evolving into sovereign execution layers that subsume the functions of traditional L1s.
Interoperability is the new execution layer. Protocols like LayerZero and Axelar are no longer simple message-passing bridges; they are evolving into sovereign settlement environments. They manage state, finality, and security for cross-chain applications, directly competing with the core value proposition of monolithic L1s.
The trust model is the bottleneck. Traditional L1s like Ethereum derive security from a single validator set. Cross-chain L1s like Polygon AggLayer and Chainlink CCIP abstract this by creating a unified security layer across chains, allowing applications to inherit security from multiple underlying networks instead of a single source.
Liquidity fragmentation is the core problem. A true cross-chain L1 must solve state synchronization. Architectures using optimistic verification (Across) or light clients (IBC) create a unified liquidity pool, enabling atomic composability across ecosystems that isolated L1s cannot achieve.
Evidence: The Polygon AggLayer already secures over $1B in TVL across multiple chains with a single bridge, demonstrating that shared security at the interoperability layer is a viable scaling model that reduces systemic risk.
protocol-spotlight
WHY INTEROPERABILITY PROTOCOLS ARE THE NEW L1S
Protocol Spotlight: Three Architectures, One Goal
L1s compete for users, but interoperability protocols compete for the value flow between them, making them the new strategic layer.
01
LayerZero: The Messaging Primitive
The Problem: Applications need a universal, low-level communication standard, not a one-off bridge for every chain pair.\nThe Solution: A canonical messaging layer that lets any dApp send arbitrary data (tokens, states, calls) between any chain.\n- Omnichain dApps like Stargate and Rage Trade build native cross-chain logic on top.\n- Security Model relies on decentralized oracle and relayer networks, moving beyond multi-sigs.
50+
Chains
$10B+
Msg Volume
02
Axelar: The Interchain Router
The Problem: Developers want a single, SDK-based integration point to access all liquidity and users, not 30 different bridges.\nThe Solution: A proof-of-stake blockchain that acts as a routing hub, translating and securing messages between ecosystems.\n- General Message Passing (GMP) enables complex cross-chain calls for apps like Squid (swap router).\n- Sovereign Consensus provides security decoupled from connected chains, akin to an L1.
55+
Connected Chains
~3s
Finality
03
The Intent-Based Shift (Across, UniswapX)
The Problem: Users don't want to manage liquidity across 10 bridges; they just want the best execution for their asset transfer or swap.\nThe Solution: Solver networks compete to fulfill user intents via the most efficient path, abstracting the underlying bridge.\n- Architecture separates declaration (intent) from execution (solver competition).\n- Efficiency aggregates liquidity from bridges like Hop, Celer, and native AMBs for optimal rates.
-20%
Avg. Cost
~15s
Fill Time
counter-argument
THE EXECUTION LAYER
Counter-Argument: Are They Just Glorified Oracles?
Interoperability protocols are not passive data feeds but active execution environments that compete directly with L1s for developer mindshare and economic activity.
They execute, not just report. A traditional oracle like Chainlink fetches and attests to external data. Protocols like LayerZero and Wormhole operate as general-purpose messaging layers that trigger arbitrary on-chain logic, enabling cross-chain DeFi, governance, and NFT mints.
They capture economic value. Unlike oracles that sell data feeds, interoperability protocols monetize message-passing and state attestation. This creates a fee market for cross-chain security, directly competing with L1s for transaction fee revenue.
They define new standards. The rise of omnichain applications (e.g., LayerZero's ONFTs) means core logic and liquidity are now distributed. Developers build on the interoperability protocol's SDK first, treating connected chains as modular components.
Evidence: Axelar's General Message Passing powers dApps like Squid for cross-chain swaps, handling billions in volume. This is application logic, not price data.
risk-analysis
WHY INTEROPERABILITY PROTOCOLS ARE BECOMING THE NEW L1S
Risk Analysis: The Fragile Spine of Web3
The critical infrastructure for moving value and data between chains has become a systemic risk vector, forcing protocols like LayerZero and Axelar to evolve into full-stack execution environments.
01
The Problem: Fragmented Security Models
Every bridge is a new attack surface. The $2B+ in bridge hacks since 2022 proves that isolated, application-specific security is a losing game. This creates a combinatorial explosion of risk for users and protocols moving assets.
- Asymmetric Trust: Users must trust each bridge's validator set, creating dozens of new trust assumptions.
- No Shared Security: A hack on one bridge has zero bearing on another, preventing collective defense.
- Audit Fatigue: Each new bridge requires a full security audit from scratch, a slow and expensive process.
$2B+
Bridge Hacks
50+
Trust Assumptions
02
The Solution: Generalized Messaging Layers (LayerZero, Axelar)
These protocols abstract security and connectivity into a shared network layer, becoming the TCP/IP for blockchains. They don't just move tokens; they enable arbitrary cross-chain function calls, making them the foundational substrate for DeFi and on-chain apps.
- Unified Security: A single, audited messaging layer secures thousands of application connections.
- Composability Primitive: Enables native cross-chain applications, not just asset bridges.
- Economic Security: Staked token models (e.g., AXL, ZRO) align validator incentives with network integrity.
50+
Chains Connected
$10B+
Value Secured
03
The Evolution: From Bridge to Sovereign VM (Wormhole)
The next step is providing a full execution environment. Wormhole's launch of a generalized rollup framework demonstrates that interoperability stacks are morphing into sovereign app-chains. They provide the messaging, security, and settlement.
- Escape Hatch: Apps built on these frameworks can seamlessly migrate liquidity and state across L1s.
- Vertical Integration: Control the full stack from messaging to execution, optimizing for latency and cost.
- Protocol Capture: The interoperability layer becomes the default home for the most valuable cross-chain state.
~1s
Finality
200+
dApps Built
04
The Risk: Centralization of the Interop Layer
Consolidation around 2-3 dominant messaging protocols creates a new centralization bottleneck. If LayerZero's oracle/relayer set fails or is compromised, it could freeze a significant portion of cross-chain DeFi. This recreates L1-level systemic risk in a new form.
- Single Points of Failure: The health of the entire cross-chain ecosystem depends on a handful of relayer networks.
- Governance Capture: Token holders of the interop protocol gain outsized influence over all connected chains.
- Regulatory Target: A centralized choke point is a more attractive target for enforcement actions than a diffuse network of bridges.
2-3
Dominant Protocols
>60%
Market Share
future-outlook
THE NEW PRIMITIVES
Future Outlook: The Convergence and The Endgame
Interoperability protocols are evolving into foundational settlement layers that subsume the functions of traditional L1s.
Interoperability protocols become L1s. The distinction between a bridge and a chain is collapsing. Protocols like LayerZero and Axelar are not just message-passing layers; they are evolving into verification hubs that settle cross-chain state. Their networks of validators or oracles now form a new type of decentralized consensus layer for interchain truth.
The endgame is a unified settlement layer. The future isn't 100 sovereign L1s. It's a mesh of specialized execution zones (rollups, app-chains) that all settle to a canonical, interoperable security base. This base will be a generalized interoperability protocol, not a monolithic blockchain. It provides finality and data availability for cross-domain transactions.
This convergence kills liquidity fragmentation. Today, liquidity is siloed. With protocols like Circle's CCTP and intents-based systems (UniswapX, Across), assets move as messages, not locked tokens. The interoperability layer becomes the liquidity layer, creating a single, composable pool of capital across all chains.
Evidence: The modular stack proves it. Celestia provides DA, EigenLayer provides shared security, and Hyperliquid L1 uses Wormhole as its native bridge. The interoperability protocol is the glue that binds these modular components into a coherent user experience, making the underlying L1 increasingly irrelevant to the end-user.
takeaways
WHY INTEROPERABILITY PROTOCOLS ARE THE NEW L1S
Key Takeaways for Builders and Investors
Liquidity and users are fragmenting across hundreds of chains and rollups. The winning infrastructure won't be another siloed L1, but the protocol that unifies them all.
01
The Problem: The L2/L3 Explosion is a UX Nightmare
Users face a fragmented landscape of 50+ major rollups and app-chains. Bridging is slow, expensive, and insecure, creating massive friction for adoption.
- Capital Inefficiency: Assets are trapped in silos, reducing yield and utility.
- Security Fragmentation: Each new chain introduces its own trust assumptions and bridge hacks (see: Wormhole, Nomad).
- Developer Burden: Apps must deploy and maintain liquidity on dozens of chains to reach users.
50+
Major Chains
$2.5B+
Bridge Hacks
02
The Solution: Intent-Based Architectures (UniswapX, Across)
Instead of moving assets, move user intent. Solvers compete to fulfill cross-chain swaps, abstracting complexity and optimizing for cost/speed.
- Better UX: Users sign a single intent; a network of solvers handles routing via the best path (CCTP, layerzero, native bridges).
- Capital Efficiency: Solvers leverage existing liquidity pools instead of locking capital in bridges.
- Cost Reduction: Competition among solvers drives fees toward marginal cost, unlike monopolistic canonical bridges.
~5s
Settlement Time
-90%
vs. AMM Fees
03
The Meta-Solution: Universal Verification Layers (EigenLayer, Babylon)
The endgame is a shared security layer that verifies any chain's state, making interoperability a primitive. This turns L1s into execution shards.
- Unified Security: Borrow economic security from Ethereum or Bitcoin to secure light clients and bridges.
- Trust Minimization: Move from 10+ multisigs to cryptoeconomically secured verification.
- Protocol Moats: The network securing the most value becomes the indispensable settlement and coordination layer.
$15B+
Restaked TVL
1-of-N
Trust Model
04
The Investment Thesis: Aggregation Beats Fragmentation
Value accrual is shifting from individual L1/L2 tokens to the protocols that connect and aggregate them. The 'Interop Stack' is the new base layer.
- Fee Capture: Interop protocols (e.g., layerzero, Axelar) capture fees from all connected chains, not just one.
- Composable Leverage: Builders can launch an app-chain in days, backed by shared security and native liquidity access.
- Winner-Takes-Most Dynamics: Network effects in interoperability are stronger than in execution; users flock to the system with the most connections.
1000x
More Connections
Protocol
Revenue Model
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall