Welcome back to Stake Nā Eggs. Last week we dove into the projects on the forefront of Optimistic Rollup technology, such as Optimism, Arbitrum, Boba Network, and Metis, but today we explore the other side of rollup technology, zero knowledge rollups. While the Ethereum Layer 1, known as the Consensus Layer, explicitly utilizes on-chain computation to process transactions and validate blocks, zk-rollup solutions introduce off-chain functionalities on a second layer, known as Layer 2.
The first zk-rollup that we will be diving into is zkSync. zkSync was created by German-based Matter Labs in December 2019 and released for the first time in June 2020. This first iteration was able to scale to 300 transactions per second. The development of zkSync 2.0 saw the release of the first version of their zkEVM, which enabled the compatibility of Ethereum Virtual Machine (EVM) in the rollup environment. The compatibility of zero knowledge technology with the EVM was arguably the largest hurdle to zero knowledge adoption, but recently solutions were announced by zkSync, Polygon, and Scroll that purportedly solve this issue.
At the time of writing, zkSync is 6th in terms of Total Value Locked (TVL) within the ecosystem per the image directly above, and is the third cheapest rollup solution currently behind Metis and Loopring per the image below.
One of the reasons why zk-rollups manage to perform significantly better than its counterparts is that they handle many transactions off the main Ethereum chain and create a SNARK (Succinct Non-Interactive Argument of Knowledge), a cryptographic proof that enables a user to prove it possesses specific data without unfolding its details. It offers proof of validity, which is sent to the Ethereum mainnet, while maintaining the off-chain storage of data through the use of Merkle Trees.
Merkle Trees only consist of the most important data relevant to the smart contract and are accessed and requested to output information much more infrequently than in Layer 1 solutions. This saves huge amounts of processing power and time for the blockchain. Consequently, as less of the blockchainās capacity is utilized for transaction validation, gas fees decrease, making Layer 2 solutions, especially zk-rollups, a preferred solution for smaller transactions.
The technology that allows zk-rollups to successfully validate transactions faster than Layer 1 blockchains are the implementation of Merkle Trees. Merkle Trees are an important mathematical structure that allow blockchains to ensure that no one can fake data in the on-chain records of a zk-rollup. Usually, a zk-rollup consists of two Merkle Trees which are both stored in a smart contract, or in other words, on-chain. One tree is dedicated to storing accounts, while the other stores all balances. Any other type of data generated and used by the zk-rollup is stored off-chain.
Main Differences between Optimistic and zk Rollups
The key advantage of zero-knowledge rollups over optimistic ones is the speed of on-chain processing. Since there is no waiting time for zero-knowledge rollups during which the authenticity of a transaction may be challenged, they are posted to the underlying blockchain ledger faster than optimistic rollup transactions.
However, the cryptographic validity proofs used by zero-knowledge rollups rely on significant hash power to compute. Therefore, programs that have limited on-chain activity may find it more beneficial to use optimistic rollup solutions.
Now that we have a basic understanding of the underlying technology and the key differences between zk and optimistic rollups, lets get to the real question this article aims to uncoverā¦
Why zkSync?
With its announcement of its zkEVM, a rollup that can handle any Ethereum smart contract allowing developers will be able to build on zkSync just as they would Ethereum or any other EVM compatible protocol, Matter Labs insists that it will be the first team to bring a fully EVM-compatible zero knowledge rollup to market.
Within the last two weeks, the zkSync team announced their first ever roadmap, with zkSync 2.0 (the upgrade including their zkEVM solution) aiming to go live in October, 100 days from the announcement above.
The most important takeaways observed are as follows:
As mentioned previously, and most importantly, zkSync is EVM compatible, and the network supports Solidity and Vyper with no security re-audit required.
Porting to zkSync should be effortless, with the company claiming that 99% of tooling will work immediately out of the box.
Dynamic Fees - zkSync states in their roadmap their belief that Developers should only pay for what they use. Thats why they have included what they call a āmajor upgrade āto the fee modeling system to make sure that fees are charged in the most accurate manner.
Post zkSync 2.0 Upgrade
After the EVM compatibility upgrade is made, the roadmap states that they will have a stress-testing period followed by a Fair Launch onboarding process to allow developers to access the protocol.
ā[The goal will be to] first launch the mainnetā¦with no external projects where we are putting the system through a series of real-money stress tests that will help us verify the production system is working correctly and performing as expected.ā the roadmap states.
After the stress testing period, the roadmap further explains that zkSync āwill carefully execute a Fair Launch onboarding process. Fair Launch means that we welcome all of our ecosystem projects and we will not participate in picking winners or favorites. The idea here is we want to make sure we can handle the onboarding of new ecosystem partners wisely. We want each of our ecosystem partners to have a high-quality experience, and with each onboarding we want to improve our systems, processes, and support. At this stage, user access will remain limited.
The goal for the roadmap is to have the full 2.0 mainnet live by the end of 2022, with further announcements about zkSync 3.0 also coming by EOY.
As zkSync races Polygon and Scroll for the ability to claim the first fully functional mainnet zkEVM protocol, one thing that all of these solutions have going for them is the backing of Vitalik Buterin, who said at ETH CC a few weeks ago in Paris that āzk-rollups lower security risk even if the rollup has a very high capacity,ā and that āzkEVMs will make lots of things more amazing at L1 and L2.ā
zkSync Native Token?
At the time of writing, zkSync does not have a native token yet. However, the company explicitly states on its tokenomics page that there will be a native zkSync token that will be used for staking, as well as becoming a validator in the zkSync network. There will likely be an airdrop at some point after the mainnet has launched and the stress testing periods are complete.
Not financial, legal or tax advice.Ā This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. All opinions expressed are solely those of the individual author. This newsletter is not legal advice and does not create an attorney-client relationship. This newsletter does not constitute tax advice. Talk to your independent attorney and/or accountant for any questions specific to you. Always do your own research and use caution when interacting with smart contracts or the blockchain.