The LayerZero Omnichain Fungible Token (OFT) standard is a specification for how tokens should behave across multiple blockchains using LayerZero.
If you’re new to blockchain development, you’ve probably heard about the problem of tokens being stuck on different blockchains. Your favorite token exists on Ethereum, but using it on Avalanche or Arbitrum requires wrapped versions and complicated bridges. LayerZero’s Omnichain Fungible Token standard (OFT) solves this problem by keeping one unified token supply across all connected blockchains.
This guide will walk you through what OFTs actually are, how they work, why they matter, and what makes them different from traditional token bridges. Whether you’re a developer, investor, or just curious about blockchain technology, you’ll understand the fundamentals by the end.
What Is LayerZero?
LayerZero is an immutable messaging protocol. You can think of it as the infrastructure layer that lets blockchains communicate securely with each other.
How Does LayerZero Works in Simple Terms?
LayerZero deploys endpoints (like entry points) on every blockchain it supports. When you send a message from Ethereum to Avalanche, LayerZero routes that message through its network. The security is maintained by Decentralized Verifier Networks (DVNs), which are essentially independent entities that verify each message to ensure nothing gets lost or corrupted in transit.
Interesting part? LayerZero is immutable and non-custodial. Once it’s deployed, nobody can change it. Your tokens never sit in LayerZero’s custody because they will always belong to you or your smart contract.
What is LayerZero OFT Standard?
The Omnichain Fungible Token (OFT) standard is a specification for how tokens should behave across multiple blockchains using LayerZero.
Here’s the core idea: instead of creating wrapped versions, an OFT maintains one global supply that’s distributed across all connected networks.
When you send tokens from Ethereum to Arbitrum using an OFT, something specific happens. Your tokens are burned on Ethereum (removed from circulation), and at that exact same moment, equivalent tokens are minted on Arbitrum. The total supply never changes. It just moves around. This is fundamentally different from wrapped tokens, where you’re trading your original tokens for a derivative.
Think of it like moving money between your bank accounts. If you transfer $1,000 from your savings account to your checking account, the total amount you have stays the same ($1,000). One account decreases by $1,000, the other increases by $1,000. That’s exactly how OFTs work.
What Does LayerZero’s OFT Challenge: Liquidity Fragmentation
Let’s start with the real issue. Imagine a project launches a token on Ethereum. It’s successful, and now they want to expand to Avalanche, Polygon, and Arbitrum to reach more users and increase liquidity. What happens next?
They deploy wrapped versions of their token on each chain. Now there are multiple versions floating around Ethereum version, Avalanche version, Polygon version, and so on. Users get confused. Liquidity scatters across all these versions instead of being unified. If you want to use the token on a different chain, you need to bridge it over, which costs gas fees, takes time, and introduces security risks.
This fragmentation is a fundamental problem in the current blockchain ecosystem. With over 150 different blockchains now hosting significant value, tokens are spread thin across the network. LayerZero’s OFT standard directly addresses this challenge.
How OFTs Work: The Burn-and-Mint Mechanism
Understanding the mechanism makes everything click. Let’s walk through an actual transfer step by step.
Step 1: You Initiate the Transfer
You decide to send 100 tokens from Ethereum to Avalanche. You approve the transaction in your wallet.
Step 2: Burning on Source Chain
The OFT contract on Ethereum executes a burn function. Your 100 tokens disappear from Ethereum’s total supply. They’re gone and permanently removed from that blockchain.
Step 3: Message Routing
LayerZero’s endpoint on Ethereum creates a message packet containing information about your transfer. This message is secured cryptographically and sent through the network.
Step 4: Verification
Decentralized Verifiers (DVNs) confirm that the message is legitimate and hasn’t been tampered with. Multiple independent parties verify this, so no single entity controls the security.
Step 5: Minting on Destination Chain
LayerZero’s endpoint on Avalanche receives the verified message. The OFT contract on Avalanche executes a mint function, creating 100 new tokens in your Avalanche wallet.
Result You now own 100 tokens on Avalanche instead of Ethereum. Global supply remained constant. No wrapped tokens. No fragmented liquidity. Just seamless movement.
Why OFTs Matter: Real-World Impact
The adoption of OFTs has been real and significant. There’s currently $44 billion in bridged assets using the OFT standard across LayerZero-supported chains. That’s not hype—that’s actual money moving through these systems.
Inside Aave, the largest decentralized finance protocol in the world with over $40 billion in total deposits, approximately $7.4 billion uses OFTs. That represents about 18.5% of their total value locked. Major projects including Bitcoin (BTC.b), Metis, Trader Joe, and Radiant Finance have all chosen OFTs for their tokens.
This adoption shows that real builders trust the OFT standard. They’re not just experimenting, they’re deploying billions of dollars worth of assets through it.
Two Ways to Deploy an OFT
Not every OFT is built the same way. There are two main approaches depending on your situation.
Standard OFT: For Brand New Tokens
If you’re launching a completely new token, you use the standard OFT implementation. You create token contracts on each blockchain you want to support, and they all communicate through LayerZero. You control everything about your token’s economics, supply, and behavior.
Projects launching fresh tokens prefer this approach because they get native support on all chains from day one. There’s no legacy baggage, and users get a truly seamless experience.
OFT Adapter: For Existing Tokens
What if your token already exists on Ethereum and you want to add omnichain functionality? That’s where the OFT Adapter comes in. Instead of modifying your existing token contract (which you might not even be able to do if you don’t have control), an adapter wraps your token.
Here’s how it works: when you send tokens through the adapter on Ethereum, they get locked in a smart contract. Meanwhile, the adapter mints equivalent tokens on the destination chain. When you want to bring your tokens back, you burn the destination version and unlock the originals.
This approach is powerful because it lets established tokens join the omnichain ecosystem without any changes to their original contracts. It reduces risk and maintains backward compatibility.
Real Projects Using OFTs Today
Bitcoin (BTC.b): Non-Ethereum Assets
One of the coolest examples is Bitcoin (BTC.b), which uses the OFT standard to exist across 80+ blockchains. This solves a major problem for Bitcoin holders as they can now move their Bitcoin across chains without relying on centralized custody services or complex bridges.
Arbitrum Orbit: Chain-Level Integration
Arbitrum went a step further and integrated OFT functionality natively into their Orbit chains. This means new projects building on Arbitrum Orbit get omnichain support automatically. Projects like ApeCoin have already deployed using custom gas tokens that work across multiple Arbitrum Orbit chains.
DeFi Governance: Trader Joe and Radiant Finance
In the DeFi world, projects like Trader Joe and Radiant Finance chose OFTs for their governance tokens. Why? Because it means their communities can participate in governance from any chain where the token is deployed, without fragmentation.
Why LayerZero’s OFTs Are Safe?
LayerZero’s design includes several security features that make OFTs trustworthy. First, tokens always remain under your control—LayerZero never holds your assets. The protocol is immutable, meaning once it’s deployed, nobody can change the rules or alter how security works.
Second, Decentralized Verifier Networks (DVNs) handle security. Instead of one central authority verifying transactions, multiple independent entities do. This means no single point of failure and no ability for any one party to censor or block transfers.
When you’re transferring tokens, the verification happens automatically. The DVNs confirm that the message is legitimate before tokens are minted on the destination chain.
Key Takeaways
Here’s what you need to remember about OFTs:
- OFTs solve liquidity fragmentation by maintaining one global token supply across multiple blockchains
- Instead of creating wrapped versions, OFTs use a burn-on-source, mint-on-destination model
- The total token supply always stays the same—tokens simply move between chains
- LayerZero is immutable and non-custodial, meaning your tokens are always under your control
- There are two approaches: standard OFTs for new tokens and adapters for existing tokens
- $44 billion in assets currently use OFTs, showing real institutional adoption
- Major projects like Bitcoin, ApeCoin, and leading DeFi protocols have already deployed OFTs
Bottom Line
The LayerZero OFT standard represents a fundamental improvement in how tokens can work across multiple blockchains. Instead of the complicated, fragmented experience of wrapped tokens and multiple bridges, OFTs offer a unified, secure way to move tokens seamlessly.
Whether you’re a developer interested in building omnichain applications, a project founder considering how to launch on multiple chains, or simply someone curious about blockchain technology, understanding OFTs is increasingly important. They’re not theoretical. Billions of dollars are already moving through these systems.
The future of blockchain is omnichain, and OFTs are playing a central role in making that future possible.
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Frequently Asked Questions
Q: Is an OFT the same as a wrapped token?
No. A wrapped token represents your original token on another chain, you’re trading one thing for another. An OFT maintains a single global supply that moves between chains. Your tokens are burned on one chain and minted on another.
Q: Can I use OFTs on any blockchain?
OFTs work on any blockchain that LayerZero supports. LayerZero currently supports 80+ blockchains and continues to add more. Check LayerZero’s documentation for the current list.
Q: What happens if something goes wrong during a transfer?
LayerZero’s verification system makes failures extremely rare, but if they do occur, there are timeout mechanisms that return your tokens. You wouldn’t lose assets—the system would flag the transfer as incomplete.
Learn More
- LayerZero Official Documentation – Omnichain Tokens | LayerZero
- Comprehensive technical reference for OFT standard architecture, variations, and deployment patterns.
- LayerZero V2 OFT Quickstart – LayerZero
- Practical implementation guide with CLI tools, code examples, and setup instructions for new OFT projects.
- Explaining the OFT Standard – Medium | LayerZero Official
- Real-world adoption examples (BTC.b, Metis, Trader Joe, Radiant) and detailed use case analysis by LayerZero maintainers.
- LayerZero OFT Standard: DeFi Exposure & Risk – Llama Risk Research
- Security analysis, smart contract vulnerability assessment, and regulatory considerations for OFT deployment at scale ($44B+ TVL).
- Metana: Programming Languages for Ethereum Development – Metana.io
- Structured learning path comparing Python, JavaScript, and Solidity within Ethereum development context, ideal for Metana.io community members.
