What is ZetaChain? (ZETA)

To achieve this, the platform typically sits as an intermediary between other blockchains,

Although there have been efforts in the crypto space to improve cross-chain compatibility, most blockchains still operate in their own domains. That means that a user with assets on the Solana blockchain cannot easily pay a merchant using Bitcoin. Similarly, decentralized applications (dapps) built on Ethereum do not automatically support users of Polkadot.

Cryptocurrency and blockchain developers have developed multiple approaches to this problem. Side chains use bridges to transfer assets from a native blockchain (like Ethereum) and communicate their own operations back to that chain. Bridges themselves can be used to lock one asset on a blockchain and release another asset on an alternate one. Notary schemes like THORChain allow for multi-asset exchanges by providing a trusted party that keeps track of coins and tokens across different blockchains. Though many solutions attempt to address interoperability, they all have downsides—in many cases, it is the trust required in a centralized party.

Polkadot and Cosmos are blockchain-based solutions that build interoperability into their designs, providing the architecture for multiple chains in their networks. However, all parts of those networks still must conform to similar infrastructures (e.g., programming language). ZetaChain takes this model one step further. Rather than make all blockchains conform to one model, it accepts the diverse nature of existing blockchains and provides a way for them to talk.

ZetaChain is a Proof of Stake (PoS) blockchain made up of nodes that “observe” other blockchains and communicate activity back-and-forth with ZetaChain. The nodes can execute actions on external blockchains—like Bitcoin and Ethereum—by holding parts of private keys and collaborating to sign transactions. Through this model, ZetaChain can support smart contracts that use assets from non-smart contract chains, run cross-chain decentralized exchanges, and more. Its native coin, ZETA, is used to transact value, secure the chain through staking, and pay fees on the network (and thus all other connected networks).

How was ZetaChain developed?

ZetaChain was founded in 2021 and operates out of San Francisco, California. As many crypto contributors began developing the technology behind the new interoperability-focused blockchain, the company started raising funds to support its future. In 2023, ZetaChain raised $27 million from private equity, with supporters including Blockchain.com and Jane Street Capital.

The project launched its testnet in mid-2022, and its first native asset swap on the testnet occurred in August 2022. By March 2023, more than 1 million users had joined. Later, these users would be airdropped a total of 31.5 million ZETA. During the testnet phase, more than 14 million transactions were logged using ZetaChain’s infrastructure. The mainnet launched in January 2024, and within a week there were over 150,000 native cross-chain transactions.

How does ZetaChain work?

ZetaChain is a PoS blockchain designed using the Cosmos software development kit (SDK). Like Cosmos, it relies on the Tendermint Core to guide how the network reaches consensus. Therefore, the back-end of ZetaChain works much like Cosmos and its connected chains.

However similar ZetaChain’s fundamental blockchain is to its Cosmos brethren, its **Chain Abstraction Framework (CAF) **is what sets it apart. To effectively connect otherwise unrelated blockchains, ZetaChain needs a way to connect to any blockchain, observe and record its activity, and sign transactions on its network. This is how ZetaChain aims to be an “omnichain.”

The ZetaChain network consists of distributed nodes that put up a “stake” of ZETA coins to earn the right to validate the blockchain. They do this by communicating with each other and reaching consensus about the state of the chain. They differ from other PoS chains because validators also contain the ZetaClient, a software that allows them to observe other blockchains (acting as an “Observer”) and sign transactions on their external networks (“Signer”). Tools like omnichain smart contracts and cross-chain message passing provide developers the tools to build their applications on ZetaChain but enact them on virtually any blockchain.

When performing the action of signing transactions on external chains—like Bitcoin or Ethereum—nodes only ever have part of the private keys. By distributing the data for private keys among multiple nodes, no node can act maliciously by signing transactions without the network’s consent.

How is the ZETA token used?

ZETA is the native cryptocurrency of the ZetaChain network. It is used in the Proof of Stake design for validators to earn the right to service the network and receive rewards.

By locking ZETA, validators put their assets “at risk” if they behave poorly, and thus can be subject to slashing. This keeps network participants honest. Individual users can also delegate their ZETA to a validator to receive some of the rewards associated with block creation. The coin is also used to transfer value across the network and pay gas to keep the chain running and go toward the fees required to operate on multiple other chains.

Tokenomics and distribution

There is an initial total supply of 2.1 billion ZETA, and after 4 years this is planned to be subject to a 2.5% inflation rate. This means there is no maximum supply. Of the initial supply, 24% of ZETA were allocated to the protocol treasury, 22.5% to core contributors, 16% to purchasers and advisors, 12% to the ecosystem growth fund, 10% to the user growth pool, 10% to validator incentives, and 5.5% to liquidity incentives. Varying percentages of these supplies were made immediately available upon launch, and the rest was set to unlock over 3-4 years (through 2028).

Conclusion

• ZetaChain is a blockchain that serves as a connection among other, unrelated blockchains so users can seamlessly interact across the crypto space—from simple transactions to using decentralized applications.

• The omnichain solution relies on nodes that act as validators of the network while also “observing” other blockchains to relay transactions/states at designated times between those chains and ZetaChain.

• ZETA is ZetaChain’s native digital asset; it is used in staking on the Proof of Stake network and paying towards maintaining the blockchain and gas/transaction fees across all connected blockchains.