Polygon has become a Swiss Army-knife for fixing Ethereum’s scalability problems. One of the latest methods Polygon uses to make Ethereum’s ecosystem faster and more efficient is zkEVM, the zero-knowledge Ethereum Virtual Machine.
zkEVM is the software that powers zk-Rollups, a smart contract technology that scoops up Ethereum transactions to increase the network’s capacity. What are the implications of this technology for ETH value and growth?
Polygon’s Importance in DeFi
The story of decentralized finance (DeFi) is the story of Ethereum blockchain hosting hundreds of dApps. These decentralized applications use smart contracts to recreate the world of traditional finance on-chain, removing CEOs, clerks, and bankers from the equation.
Unfortunately, despite Ethereum having the first mover advantage and most of the DeFi market, it is still not able to handle much traffic, at least not without ETH transfer fees spiking up proportionally.
While that situation may change after Ethereum’s Surge upgrade, there needs to be some way to keep growing the Ethereum ecosystem.
From 2020 to 2022, Ethereum’s daily transactions exceeded the 1M threshold. To onboard more users and traffic, Ethereum has deployed multiple Layer 2 blockchains, including Arbitrum, Optimism, and Polygon.
These networks use smart contracts to scoop up thousands of transactions from Ethereum’s ecosystem, bundle them and return them to Ethereum mainnet as single transactions. As a result, Ethereum’s network is left unburdened and uncongested, the key feature needed for mass adoption scalability.
Of all scalability solutions, Polygon,(its native token is MATIC) has been effective in forging partnerships to grow Ethereum’s ecosystem:
Adobe — the premiere software editing suite integrated NFT minting on Polygon.
Adidas, Prada, and Reddit — launched their NFT marketplaces on Polygon.
Stripe — payment processor to integrate USDC stablecoin payments via Twitter on Polygon.
Meta — NFT trading on Instagram via Polygon.
Disney — Polygon helps the entertainment giant with its Accelerator research program for augmented reality (AR), AI, and NFTs.
How Does Polygon Scale Up Ethereum With zkEVM?
Polygon uses Miden, Edge, Zero, Nightfall, Avail, Hermes, and zkEVM scalability solutions. The last one is becoming increasingly popular due to its many advantages. First of all, what exactly is zkEVM?
Polygon zkEVM is based on zero-knowledge cryptography (zk) while retaining full Ethereum compatibility. This is where EVM — Ethereum Virtual Machine — comes into play. All software runs on some kind of framework. For example, modern video games run on Unreal Engine 5. This engine, or machine if you will, powers all the logic and visual/audio assets developers deploy and gamers play.
Likewise, EVM is the underlying software framework that powers the logic of all Ethereum smart contracts, be they employed in lending dApps, exchanges, or blockchain games. To fully understand zkEVM, we must first delve into zk-Rollups and zk itself.
What Is a zk-Rollup?
The key problem in using Layer 2 networks is scaling data without compromising the security of Ethereum’s transactions. Ensuring that fraudulent data blocks are not added to the Ethereum network is crucial.
A zk-Rollup bundles Ethereum transactions in a clever way. Zero-knowledge cryptography is both a privacy-protecting measure and a data-saving measure. To understand zk, it is useful to recall the movie Eyes Wide Shut. Imagine partaking in a secret society. At a meeting, two conditions have to be fulfilled:
That all parties are legitimately a part of the secret society.
That no parties reveal their identities to each other.
A zero-knowledge proof makes it possible to provide such assurance, without revealing the data necessary to provide it. More precisely, zk-Rollups take only a portion of the data in order to validate the transaction as true or false. In turn, zk-Rollups only store the proof alongside compressed transaction data necessary to differentiate one transaction from another.
With data both reduced and compressed in batches, the network throughput is greatly increased. At their upper range, zk-Rollups offer 40,000 transactions per second (tps), compared to Ethereum’s 14tps, even post-Merge.
zk-Rollups and zk-EVM Features
By having a fully compatible EVM scaling, developers can deploy dApps on Polygon just as easily as they can on Ethereum. The EVM compatibility extends to wallets, smart contracts, and developer tools, all written in Solidity programming language.
When it comes to making Ethereum affordable, compared to ETH gas fees, zk-Rollups reduce fees by 90%. With that said, Polygon zkEVM is still in development, likely to be deployed in early 2023. In the meantime, it bears keeping in mind that, compared to the pioneering Optimistic Rollups, zk-Rollups have several key advantages:
Multi-round fraud proofs instead of single-round fraud proofs. While Optimism needs to execute an entire transaction on Ethereum to verify it, zk-Rollup executes multiple rounds of proofs to resolve disputes.
During that time, Ethereum doesn’t execute them, making zk-Rollups more efficient because they result in zero delays. In contrast, Optimistic Rollups require up to one week for the transaction challenge period to take place before transaction data blocks are added to Ethereum.
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Previously, zk-Rollups were more difficult to program due to lack of full EVM compatibility. So, Polygon zk-EVM rollup is a milestone breakthrough which offers both performance and EVM-equivalence.
Once Polygon zkEVM mainnet goes online in 2023, we are likely to see an explosion of dApps. Already, we have seen a record 160% year-over-year smart contract deployment in September 2022.
That this growth happened in the middle of a bear market is a healthy indicator that Ethereum’s ecosystem will continue to grow. On the user side of things, they will take advantage of drastically reduced transfer fees, which has been Ethereum’s critical stumbling block since it launched.
This series article is intended for general guidance and information purposes only for beginners participating in cryptocurrencies and DeFi. The contents of this article are not to be construed as legal, business, investment, or tax advice. You should consult with your advisors for all legal, business, investment, and tax implications and advice. The Defiant is not responsible for any lost funds. Please use your best judgment and practice due diligence before interacting with smart contracts.