zkSync Ecosystem Overview 2022: Is it the future of Ethereum Layer 2?
What is zkSync? What is so special about zkSync’s ecosystem? Why is it considered one of the most impressive Layer 2 Rollups on Ethereum? Let’s learn more about zkSync as well as answer the questions concerning zkSync compared to other extension solutions!
zkSync’s ecosystem consists of the following pieces: zkSync, zkEVM, zkPorter and zkSync 2.0
What is zkSync? zkSync Ecosystem Oviewview in 2022
zkSync is a Layer 2 scaling solution using ZK Rollups technology. zkSync is the first product based on this architecture by Matter Labs. The purpose of zkSync is to help speed up transactions and security on Ethereum, while reducing transaction fees. Currently, zkSync’s functions include low-cost ERC20 token transfer, limit orders, atomic swap mechanism, and NFT support on Layer 2.
With the ZK Rollup structure, data will be calculated and stored off-chain (off-chain), while the funds will be stored on On-chain smart contract (main network). In the process, SNARK, which can be understood as Valid Proof of all transactions in the rollup block, will be created and verified by the Smart Contract on the main chain. Public data updates for every block will be published in a calldata through a low-cost mainchain network, which can be interpreted as a temporary data location in Solidity.
Matter Labs was founded around the end of 2020, headquartered in Berlin. The zkSync project was officially introduced and launched to the public in the summer of 2020. The two founders of Matter Labs are Alexander Vlasov and Alex Gluchowski. Alex Gluchowski has 19 years of experience as a software engineer, has served as CTO for several technology companies. He had a company specializing in Ethereum R&D before devoting himself to zkSync.
Matter Labs’ operating principle is aimed at the most important factor: getting the job done – “What matters is getting things done.”
Outstanding parameters of zkSync
Outstanding parameters of the zkSync blockchain (16/3/2022):
- Activation fee: $2.67 (Used 1 time when first account activation).
- NFT mint fee: $0.22
- Transaction fee: $0.08
- Withdrawal fee: $5.38.
- Chain ID of zkSync 2.0 Testnet: 280.
- TVL: $80M
- Number of transactions: 6,392,687.
Features of zkSync
Some important characteristics of zkSync can be mentioned as follows:
- High security: Unlike SideChain, ZK Rollup or more specifically, zkSync has much better security. In particular, the Validator Rollup cannot damage the state or take fraudulent actions. At the same time, users can still get money from rollups even if the validator has stopped working thanks to the available data source.
- Reduce dependence: Based on Valid Proof, users will not need to monitor rollups to prevent frauds.
- Low trading fees (50 times lower than the fees on the Ethereum network), fast transaction speeds (300TPS), friendly Smart Contracts and protection of more than 5 million transactions.
The zkEVM virtual server can execute Smart Contracts for compatibility purposes with the Zero-Knowledge Proof algorithm. This is the key to a ZK Rollup solution to be compatible with EVM – Ethereum while ensuring the same code flow and efficiency.
Optimistic Rollup had previously possessed this ability; however, with zkEVM, ZK Rollups become better in terms of EVM compatibility.
zkPorter is a very important piece of the zkSync ecosystem to bring power to zkSync 2.0. More specifically, the Layer 2 state of zkSync 2.0 is divided into 2 sides: zkRollup (On-chain data availability) and zkPorter (Off-chain data availability). The purpose of zkPorter is to make it possible for these two to combine and interact with each other. In other words, a contract/account belonging to zkRollups can interact with a contract/account belonging to zkPorter and vice versa.
In addition, this is also a component that improves transaction costs for users, making the fee of the zkPorter account 100 times lower than the account on zkRollups. We can take UniSwap as an example. Although implemented on zkRollup’s Smart Contract, users on zkPorter can swap at a lower cost (<0.03 USD). Why? The cost on Rollups largely comes from publishing data on Ethereum. Meanwhile, zkPorter can perform countless swaps on UniSwap contracts but only needs a single update published to Ethereum.
Based on the power of zkEVM, zkSync 2.0 is a ZK Rollups scaling solution that is compatible with Ethereum. More specifically, zkSync uses Zero-Knowledge Proof to deliver low-cost and scalable transactions on Ethereum.
zkSync 2.0 can solve thorny problems, including decentralization, security, scalability and programmability.
If zkSync 1.0 only covers the basic range of functions such as transaction and payment, zkSync 2.0 can support generalized Smart Contracts from Solidity to zkEVM to ensure compatibility and provide off-chain data availability (with zkEVM and zkPorter). In addition, thanks to interoperability and hybridization, zkEVM and zkPorter can also help Smart Contracts on Ethereum convert to zkSync 2.0 easily with minimal code editing. This is what makes zkSync 2.0 superior to all other scaling solutions.
Main characteristics of zkSync 2.0
- Smart Contracts are compatible with permissionless EVM.
- Maintain the EVM feature.
- The security is similar to Mainnet but not dependent on 3rd parties.
- The standard Web3 API application programming interface aims to effectively link protocols/projects with Web3 networks in the future.
- Introducing new features (Account Abstraction, meta transactions)
How to evaluate the superiority of zkSync 2.0
It would be one-sided to judge the superiority of zkSync 2.0 based solely on its capabilities without putting zkSync 2.0 in comparison with other scaling solutions.
Out of the 4 Layer 2 scaling solutions: State Channel, Plasma, Optimistic Rollup and ZK Rollups, it is clear that Optimistic Rollup and ZK Rollup have more outstanding characteristics. So, to best assess the capabilities of zkSync 2.0, we will take a look at some comparisons between zkSync 2.0 and Optimistic Rollup.
Difference between zkSync 2.0 and Optimistic Rollup.
First, in terms of Solidity Smart Contract (EVM compatibility), both solutions are compatible with EVM.
Second, in terms of Max Secure Total Locked Value (security), zkSync 2.0 security is based on Cryptographic Security (cryptography) while Optimistic uses a security model based on the Game-theory economy. The security of zkSync 2.0 is much better than Optimistic because it does not depend on Watchers. This is why the Total Value Locked on zkSync2.0 is unlimited while Optimistic’s security scale is limited to only $50 million.
Third, regarding Finality / Capital Efficient Exit Time (transaction completion time), zkSync 2.0 currently has a transaction completion time of about 1 hour (based on the deposit and withdrawal time on the Testnet) while Optimistic Rollups is about 1 to 2 weeks.
Wednesday, in terms of Cost of Privacy (capital efficiency), zkSync 2.0 continues to outperform Optimistic Rollup. This factor is actually a consequence of the time it takes to complete the transaction. If the time to complete the transaction is long, the asset is put on hold, leading to a lot of losses, most typically due to the possibility of slippage. With Optimistic, due to the long completion time, the loss that users have made ranges from 10 to 100 times, while this figure with zkSync 2.0 is only 2 times.
In short, every data, every number, every statistic, and every comparison is leaning towards zkSync 2.0.
What are the pieces that make up the zkSync ecosystem?
The zkSync ecosystem owns more than 60 projects; the majority of them are in Testnet, Developer Mode, Beta; about 25 projects are officially available on zkSync’s Mainnet.
This is an important area in any blockchain ecosystem because it has the ability to capture and circulate liquidity to the ecosystem. Some outstanding projects can be mentioned:
- Zigzag: It is a secure, reliable, easy-to-use, and low-cost decentralized exchange. Currently, Zigzag has a mainnet version on zkSync and will soon be available on StarkNET. Zigzag’s main functions are to provide spot orders, orderbook, and bridges from Layer 1. Some leaked information indicates that Zigzag may launch a few new features such as margin trading or NFT marketplace.
- Mute.io: This is the native AMM project of zkSync 2.0 with 4 basic features: Pool, Farming, Swap, Dashboard to monitor the status of wallet balance.
- 1Inch: This fairly large DEX in the market is implementing their version on zkSync (Devnet version)
Currently, stablecoins on zkSync are very diverse (USDT, UST, USDC, FRAX, DAI) to cater to user needs. BUSD may also be available on zkSync to attract users from the BNB Chain network.
Lending’s role in an ecosystem is to help increase the efficiency of the amount of capital in the ecosystem, while promoting the development of more applications in the future such as yield farm leverage, derivatives, etc. However, zkSync currently does not have a native lending platform. Some of the current projects can be mentioned as
- Yearn.finance offers a selection of Ethereum lending and trading protocols to help users optimize their cryptocurrency income.
- Taker Protocol allows users to liquidate and rent all crypto assets such as metaverse assets, synthetic assets, financial papers, encrypted collectibles, etc.
Although it is a young ecosystem, zkSyn has served the need of owning and trading NFTs and retaining users. Some of the main projects can be mentioned as:
- zkNFT: The project allows the discovery, mint and swap of NFTs at only a fraction of the cost of the Ethereum mainnet.
- zkPunks: a 10,000 OG punk NFT collection on zkSync. 10% is donated to Ethereum scaling solutions through Gitcoin. Not affiliated with Larva Labs.
- Boonji Project: This is the project that airdroped “Explore the Joa Galaxy” NFTs on zkSync.
- Opensky: Similar to zkNFT.
- zkSharks: zkSharks is an NFT project looking to boost Ethereum expansion and move NFT trading to L2. The goal of the project is to be the first NFT collection to launch on zkSync 2.0.
Unlike the primitive nature of the ecosystem, the DAO projects on zkSync are pretty well done, and some even include protocols that are more complex than the basic needs in the DeFi space. Some outstanding projects:
- OlympusDAO: To provide stability and transparency, Olympus is building a community-owned decentralized finance infrastructure.
- Aragon: This is a project that allows the building of decentralized autonomous organizations on an open-source infrastructure with administrative plugins.
- Alchemix: The synthetic asset platform is backed by future returns and is a community DAO.
- zkDAO: The decentralized organization aims to expand the zkSync ecosystem through active funding across multiple vertical industries.
Currently, the infrastructure pieces on zkSync are quite complete and capable of serving applications well. zkSync is a layer 2 of Ethereum, so the infrastructure and tools on Ethereum can also be used and scaled via zkSync very easily.
- Bridge: Via.Exchange, Ferrum Network, cBridge (Celer), deBridge, Multichain, Connext, Nomad, Ferrum Network, Obiter Finance, Poly Network, Gnosis Safe.
- Data API: Covalent.
- Oracle (Data retrieval and storage): Chainlink.
- Game support infrastructure: Title Labs.
- Tool: zkMint.
- Explorer (Explorer): zkScan.
- On-ramp (Basis for bringing new funds into the cryptocurrency market): UTORG, Simplex, Ramp, Banxa.
- Payment: Sprintcheckout, zkSync Link.
- Stablecoins Protocol: Angel Protocol, Frax.
- Web3 standard wallets to connect to Dapps: Wallet Connect.
- Cross-chain & cross-layer infrastructure and tools for DeFi developers: Composable Finance.
- Modular and implementation APIs for Verifiable Data and SSI: Veramo.
- Managed backend program for blockchain projects: Moralis – Allows you to set up chain alerts, automatically sync user balances to a database, view smart contract events, build an index, and more.
- Web 3 Zero-knowledge proof Base Layer: Mystiko.Network.
The wallets supported on zkSync are very diverse, such as Numio (non-custodial wallet allows swap tokens, interaction with dapps), zkSync (wallet dedicated to zkRollup network), ONTO, Mathwallet (wallet supports multi-chain), imToken, Argent, D’CENT, Zerion (wallet allows investment and asset management)
Thanks to multi-chain wallets and many different types of wallets, zkSync can provide a good experience for users to move to zkSync easily.
Other pieces of the puzzle
- External links (Social Media): Poster.
- Proof-of-Stake Provider: Stakefish.
- Middleware services: Automata Network.
(Middleware code service for privacy, security and easy payment during Dapps connection)
- Ethereum Developer Platform: Tenderly.
(Serving to fix bugs, bugs, smart contract emulators)
- Staking: Figment.
- Misc: Clr.fund – a protocol for allocating funds to public goods that benefit the Ethereum Network.
- Ownership for anchoring digital content to physical locations: The Geo Web.
Summary of the zkSync ecosystem
Currently, zkSync is still in the early stages of development. In particular, the most basic applications of DeFi have just begun to be launched. There is only one native DEX project on the mainnet. Mute.io, the core project is still in the testnet version. Most DEXs are also not complete enough to attract users. ZigZag is one of those DEXs that is doing a pretty good job. With total trading volume already exceeding the $1B mark, Zigzag has opened a gateway to attract cash flow to the zkSync ecosystem.
The infrastructure projects on zkSync are rated as quite solid. Currently, resources are focused on developing key infrastructures such as wallets, explorers, smart contract platforms, Oracle, etc.
With a solid development orientation and EVM compatibility thanks to zkEVM, zkSync 2.0 has all the necessary conditions to develop stronger in the future. Besides, there are Defi 2.0 protocols like OlympusDAO. the OlympusDAO team has implemented a protocol in zkSync 2.0 besides Ethereum, BNB Chain or Solana. This shows a strong interest of Olympus in zkSync’s future.
However, zkSync is not completely mature and currently not ready to welcome capital flows into the ecosystem. It needs to work on pieces such as Lending, Margin Trading, Staking, Options, Farming…
What is the future of zkSync?
In conclusion, zkSync is far superior when compared to other solutions. It has full potential for outstanding development in the future. However, to realize this, zkSync needs to complete its ecosystem; at the same time, it can learn from Arbitrum’s direction and consider integrating into large CEX exchanges such as Binance, Coinbase, FTX to attract a large number of users.