What is zkSync?

Every computer network is limited by its throughput capacity. How much data can it handle before becoming too congested? This problem is especially acute with a specific type of computer network: blockchains.

Because blockchains rely on network nodes to verify data integrity, they are prone to congestion. This is where a scalability solution like zkSync comes in.

Why Is zkSync Needed?

Short for zero-knowledge (zk), zkSync is a network that offloads Ethereum’s network traffic and relieves the mainnet of congestion and high transfer fees. Because zkSync’s existence is so tied to Ethereum, it is often called a Layer 2 scalability solution, whereas Ethereum itself is a Layer 1 network.

Ethereum accounts for half the traffic in DeFi. This includes NFT trading, token lending, borrowing, blockchain gaming, predictive markets, gambling, insurance, and DAO treasuries.

Ethereum may not be worth as much as Bitcoin but it has on average four times the daily transactions: .

Bitcoin vs. Ethereum daily transactions over three years. Source: ycharts.com

The reason for this discrepancy: Bitcoin is designed to provide peer-to-peer sound money. In contrast, Ethereum is a flexible smart contract network, hosting hundreds of decentralized applications (dApps).

Yet Ethereum still can’t absorb that level of traffic. Whenever there is a high traffic spike, Ethereum’s transfer fees soar, making it more daunting for mainstream adoption.

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As a result, Ethereum’s scalability depends on a variety of improvements. Some are called optimistic rollups or zero-knowledge rollups, and they offload that traffic and lower fees and speed up the Ethereum experience. Some of the most popular Layer 2 networks are Polygon, Arbitrum, Immutable X, and Optimism.

How Does zkSync Scale Up Ethereum?

There are two main components of Layer 2 scaling for Ethereum: rollups and cryptography.

zkSync combines them into a single scalability solution. First, let’s address rollups, which are smart contracts that make Ethereum faster and cheaper.

Rollups bundle hundreds of transactions into a single transaction without losing vital data. Rollups increase network throughput and make it cheaper.

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Next, these transactions are secured by cryptography.

Imagine confirming someone’s identity without that person revealing personal information to you. If possible, both parties would maintain their privacy. That’s what zero-knowledge proofs do, and zk-Rollups confirm the validity of a transaction without revealing the data needed for that confirmation.

Practical Benefits of zkSync

With transactions both cryptographically secured and streamlined, zkSync rollups scale up Ethereum in a variety of ways:

• Transfer fee (ETH gas) is reduced by up to one-hundredth of Ethereum’s layer 1 fees.
• The number of transactions increases, from Ethereum’s 14 tps to over 2,000 tps.
• Digital assets from zkSync layer 2 to Ethereum layer 1 can be moved near-instantly.
• The more transaction volume zkSync receives, the less time it takes to withdraw digital assets, making zkSync the frontrunner for Ethereum scaling.

In contrast to zk-Rollups, Optimistic Rollups assume the validity of transactions unless contested. That’s why they are called optimistic, while doing the same job of bundling transactions and returning them to Ethereum’s L1 as single transactions.

This has advantages and disadvantages. For instance, zk-Rollups require no monitoring to detect fraud, as instant validity proofs guarantee security. Likewise, there is no delay in transactions, in contrast to Optimistic Rollups, which require one week for withdrawals as transaction challenge period.

On the downside, zk-Rollups are harder to program because they require cryptographic proofs. They also require higher computational load to verify proofs and create zk-Proofs. This makes Optimistic Rollups somewhat cheaper when it comes to transaction fees.

zkSync Ecosystem

The zkSync ecosystem is still in the process of making hundreds of dApps, ported from Ethereum. On a monthly basis, new dApps are coming online, which you can check here.

To start using zkSync, one first needs to download the Argent wallet, in which “Argent Vault” is an Ethereum Layer 1 account, alongside the zkSync account.

As with any wallet, the account needs to be funded. This can be done by transferring existing funds from another wallet – exchange or MetaMask – to L1 Argent Vault. An alternative is to pay a tiny zkSync setup fee, enabling the zkSync account which supports transfers from all Ethereum addresses.

The latter option is preferable as it avoids paying for gas fees between L1 and L2. One could also buy cryptocurrencies or stablecoins from Ramp to fund the zkSync account. As an extra benefit, Argent wallet allows for staking ETH on Lido Finance. Once funded, here are some of the zkSync use cases in this early stage of development:

• ZigZag trading – entirely on L2 zk-Rollups, this decentralized exchange (DEX) offers token swaps with effectively negligible fees.It has the same set of features and order book setup as centralized exchanges.
• ZkNFT trading – In 2021, it was not uncommon to see NFTs getting minted for up to $100 per piece. No longer with zkNFT’s near-zero mint fees which can go as low as 0.00006 ETH. Likewise, the platform has no swap fees between NFTs and regular ERC-20 tokens.
• LayerSwap fund transfers – If you need more funds from a centralized exchange like Coinbase to your zkSync wallet directly, this bridge provides it with exceedingly low transfer fees.

zkSync allows for the transfer of tokens only between wallets. That is about to change with zkSync Mainnet 2.0.

zkSync Roadmap

At the end of October 2022, zkSync prepared to launch Mainnet 2.0, enabling developers to deploy their own dApps. This is the culmination of two years of work, with the ultimate goal of combining zk-Rollups with the Ethereum Virtual Machine (EVM), the software engine that powers all Ethereum smart contracts just like game engines power video games.

By making zk-Rollups compatible with EVM, any code written in Ethereum’s Solidity programming language could be deployed easily on the zkSync network.

For November 2022, zkSync team announced the possibility of a governance/utility token, similar to Arbitrum (ARBI) airdrop, which is from another Ethereum L2 scalability solution. By the end of that roadmap, zkSync should support up to 20,000 tps performance with the help of zkPorter, a protocol that fuses zkRollups with sharding.

Who Is Behind zkSync?

The brain behind zkSync is Alex Gluchowski, who founded Matter Labs in 2018. A year later, the Germany-based team laid the groundwork for zkSync and launched its mainnet 1.0 in June 2020.

From September 2019 to November 2022, Matter Labs received a total of $58M in funding rounds led by firms OKEx, Andreessen Horowitz, Gnosis, and Rarible, among others.

Series Disclaimer:

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.