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ZK-rollups are on their way to becoming the crypto tech of 2023.
Much discussed in the previous years, several major protocols implementing ZK-rollups are going to be released soon, together with their own (already impressive) ecosystems.
In the meantime, the tokens of projects already implementing zk-rollups are skyrocketing 🚀
It’s about time we took a closer look at this tech and tried to understand:
❔ What are ZK-rollups
❔ Biggest ZK-rollup projects
❔ Should we fall for the buzz
❔ And how can we profit from it
While searching for answers, we’ll come across such cryptoassets as $ZEC, $MKR, $IMX, $DYDX, $MATIC, $LRC, $SYS, $DUSK, $MUTE, and $MINA.
⚙️ The first part of ZK-rollups is ZK, which stands for zero-knowledge.
The concept of zero-knowledge proofs was introduced back in 1985 by two MIT students who detailed a method, by which the prover can show that they have access to a piece of information without necessarily revealing it. ZK proofs have been since used in privacy and security-oriented systems, including privacy blockchain ZCash ($ZEC).
⚙️ The second part of ZK-rollups are rollups – a layer-2 scaling solution for blockchains that bundle millions of transactions into one, easing the load on the base layer and spreading the cost of one transaction across many users. The rollups process transactions, perform computations, and store data off-chain while holding assets in an on-chain smart contract.
There are two main types of rollups: Optimistic and ZK.
Optimistic rollups optimistically assume that each transaction bundled within a rollup is valid, but leave a window (usually 7 days) for users to contest fraudulent transactions.
The most famous protocols using optimistic rollups are Arbitrum and Optimism, both second layers to Ethereum.
ZK-rollups use the zero-knowledge proof method to verify and submit regular validity proofs to the main chain’s smart contract. They are reportedly more difficult to build and maintain, but so far they present themselves as a more promising version of rollups.
The ZK-rollup narrative is gaining momentum now, not least thanks to the forthcoming releases:
One of the most backed projects in the space, with over $480 million raised.
The latest release – the ZkSync Era – has been on the mainnet since last October, allowing users to test it.
Zk-Sync already has an impressive ecosystem of over 150 projects, with both web3 veterans like decentralized stablecoin issuer Maker ($MKR) and new ventures, all of which will simultaneously kick off at Full Alpha Launch, expected in Q2 2023.
Matter Labs, a French company behind zk-Sync, claims that this event will mark the largest layer-2 launch in the history of crypto, which cannot help but heat the zk-rollup narrative even further.
The company hasn’t yet announced a token, but it would definitely get a lot of interest. The scammers are already flooding Twitter with “airdrop” news, but you know better than to trust an airdrop74545683 account, don’t you? 😉
Developed by an Israeli company StarkWare, StarkNet is a permissionless decentralized ZK-Rollup (also called validity roll-up) layer-2 on Ethereum.
StarkNet Alpha is already on the mainnet, and last November, the company deployed its first $STRK tokens to Ethereum. The tokens will be gradually released after a lock-up period of one year. The details of the distribution mechanism are not yet revealed, but the crypto community is already excited.
StarkNet is growing its ecosystem, while another StarkWare product called StarkEx (permissioned tailor-made scaling mechanism) is already used by a number of famous Dapps: NFT game Sorare, derivatives exchange dYdX, and Ethereum’s layer-2 Immutable X ($IMX), home to famous crypto games Gods Unchained and Illuvium.
The rising zk-rollups’ trend is affecting these projects too, with $IMX reaching a 9-month high last week (+223% since the beginning of the year) and $DYDX gaining +177%.
The main difference between zk-Sync and StarkNet lies in their proofing mechanisms (zk-SNARK vs zk-STARK, respectively). The former must undergo an initial setup, trusting a group of developers to not manipulate the code or divulge its vulnerabilities, while the latter can do it in a trustless way.
ZK-STARKs are also considered more scalable in computational speed and size than ZK-SNARKs, but they are not compatible with EVM, Ethereum Virtual Machine (more on Ethereum design here).
Ethereum’s most illustrious layer-2 Polygon is also getting into the zk-rollups game.
After buying a zk-rollup specialist Hermez two years ago, last week Polygon announced the launch of Polygon zkEVM Mainnet Beta on March 27th. A zkEVM is a virtual machine that executes Ethereum transactions in with zero-knowledge-proof validations.
Polygon zkEVM’s goal is to become the gold standard for EVM-equivalence, and it says already has passed 100% of the Ethereum test vectors that apply to a zkEVM.
There will not be a token launch for Polygon zkEVM, as the system will continue using $MATIC, already one of the best-performing cryptoassets (+96% since the beginning of the year).
As the buzz grows, some already running zk-rollup implementations see their spiking since the beginning of the year:
📌 Loopring ($LRC, +150%), layer-2 for DEXes,
📌 Syscoin ($SYS, +100%), which combines Bitcoin’s PoW with EVM,
📌 Dusk ($DUSK, +175%), a privacy-focused blockchain,
📌 Mute ($MUTE, +287%), a DEX,
📌 Mina ($MINA, +137%), “world’s lightest blockchain”…
This is mostly due to the speculation now, which always brings up the question:
ZK-rollups are a promising way to ensure that Ethereum can scale and process a big number of transactions, as its “world computer” motto would suppose.
However, Ethereum itself plans to scale through sharding – although it’s still unclear when – which would make ZK-rollups less relevant.
There are also competing layer-1 blockchains that already offer high transaction throughput and are actively motivating developers to build on them: Solana, BNB chain, NEAR…
Every scaling alternative has its pros and cons, which most often go down to the issue of centralization and the related security and censorship problems. So far, no PoS blockchain was able to show sufficient decentralization, and ZK-rollups can add to the problem, as they too can present some censorship risks if the validation sequencing is centralized.
There are several ways to profit from a trend in crypto:
– qualify for an airdrop 💧, most often by testing the networks before their full release,
– invest in a project’s tokens upon their release,
– investing in individual ecosystems…
The important thing to keep in mind is to not get carried away by the FOMO and always… yes, always Do Your Own Research 😊