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With increasing popularity of cryptocurrencies, whether that is thanks to DeFi, NFTs, Web3 or Metaverse, many major blockchains upon which these subsectors are built can get congested. High fees, slow transactions or technical hiccups are just a few of the problems that can quickly arise when the demand for usability of some blockchain sharply rises.
This is something that was seen for instance with Ethereum in the last few years. Incredibly high gas prices have often discouraged people from using this blockchain or dApps built on it. However, this also gave a reason for new projects or solutions to be created. And most of them have tried to develop on a second layer, such as zkSync.
Before we dive into zkSync, first the introduction of layer-2 solutions and what they are is necessary to provide better context. The term layer-2 describes solutions, platforms or services that are built on top of the first layer. The first layer or layer-1 is usually the blockchain itself such as Ethereum or Bitcoin.
Layer-2 technologies are built on top of layer-1 to solve particular problems of the given blockchain. In most cases it is mainly the scalability of the given blockchain. However, these solutions also tend to offer higher privacy, higher speed and lower transaction costs.
zkSync is one of those solutions. This layer-2 technology uses zk-rollups as its scaling technology to help solve problems of the main Ethereum network. ZK stands for “zero knowledge,” a term that describes a case in which one party is able to prove to the second party that something is true, without actually revealing the information. The “rollup” stands for bundling off-chain transactions into a smaller transaction and sending it over to layer-1.
zkSync is thus using this technology to help Ethereum scale thanks to rolling up transaction off-chain and submitting it with proofs on the Ethereum chain. Simply said, hundreds or sometimes thousands of transactions are batched into one, which is then verified and secured on the chain of Ethereum.
This technology ensures seamless transfer of assets between layers thanks to not only zero knowledge proofs, but also on-chain data availability and zk-rollup technology. Thanks to all of this, the users are able to send funds over zkSync without any need to worry about switching between layers. This should allow seamless use for not only users, but also the developers building on Ethereum.
zkSync is expected to roll out a new version (version 2 – V2) by the end of year 2022. This version aims to improve mainly the transaction speed. The current estimated tps (transactions per second) is at 20 000, but with the new V2, the throughput of transactions is expected to reach 100 000 tps. This is expected to happen thanks to zkPorter, which is a protocol combining zk-rollups and sharding.
Putting all of these together has the potential to bring several benefits. Here are just few of them:
While we have mentioned zk-rollup on a few occasions, we did not explore this technology more in detail, which is something that the few following paragraphs will do, as zk-rollups are inherent to zkSync.
Zk-rollups (zero knowledge rollups) allow for handling of hundreds or thousands of transactions at the same time and off the Ethereum chain. The “rolling up” technology is simply a system in which the off-chain transactions are batched together into one (smaller) transaction.
This transaction is then sent to an off-chain prover, which generates a cryptographic proof confirming whether the transactions are valid. If they are, the batch is then sent to layer-1 and is verified by smart contracts. Thanks to all of these technologies, the transactions happening between layer-1 and layer-2 are nearly frictionless.
It also needs to be stated that zkSync uses SNARK as the prover that generates the cryptographic proof. In general, the creation of the proof is very difficult, while its verification of it is pretty easy. This simply allows for a proof of possession of specific data, without the need of actually specifying the details.
The potential of this technology, as well as the stated benefits mean that there are projects that are already implementing zkSync. While the whole ecosystem and landscape of zkSync is still growing and is becoming quite important for Ethereum, here is a list of some of the most intriguing and best-known projects that are using this technology:
The list of these projects also includes Chainlink, 1inch, Zerion, Argent, ZigZag, Taker Protocol, MintSquare, Tevaera or Homespace. The whole infrastructure is however much bigger and can be seen in the image below.
zkSync and its whole ecosystem, Source: zksync.io
zkSync is an open-source project that is being developed by Matter Labs. In September 2019 it raised $2 million dollars in its first seed round, followed by a Series A funding round during which it added $6 million in February 2021. At that time the project was supported by companies such as Curve, Coinbase or Binance. Later that year it had a Series B round, in which it raised $50 million while securing support by companies such as a16z, Placeholder or Dragonfly. At the beginning of this year it was backed by BitDAO with $200 million.
Nevertheless, even with the huge backing that the project has received, it is still considered to be more “grassroots” movement than some of its competitors such as Starkware for instance. Starkware is supported by many more venture capitals and big backers, making it more centralised and intertwined with the traditional financial markets.
That however does not mean that the Matter Labs is on its own. On the contrary, it still has some pretty solid partners and backers. Amongst others, whom we have not yet mentioned, are Ethereum Foundation, Alchemy Ventures or USV.
Backers of zkSync, Source: zksync.io
Thanks to the support of all of these, zkSync wants to fulfill its mission of breaking the barriers in the financial markets and enhancing the world’s freedom. The acceleration of mass adoption of public blockchains is seen as the first step to do that by the zkSync team.
As of now, this project does not have its own token. Yet, it has been stated by the tokenomics subsection of zkSync that it will have its own native token in the future. It will be used for staking and will enable its owners to become validators in the zkSync network.
It is expected that the users will be able to earn this token at the beginning through airdrop, which is a pretty common practice not only in this space, but mostly in the new coming layer-2 technologies. Optimism, which is its main competitor, has seen its airdrop as well.
The team behind zkSync has big plans for this project. With the V2 coming up soon and a potential native token, zkSync is expected to gain even more traction than it did until now. Yet, it already has some interesting backers and the funds coming from the seed rounds are increasingly bigger, showing that the project is moving forwards, which is great for Ethereum as it can benefit from layer-2 technologies such as the one offered by zkSync. Scalability, fees or security could all benefit from greater adoption of this technology.