The Ethereum Scaling Solutions Gold Rush
A closer look at Zero-Knowledge Rollup technology
*My previous post Ethereum might have more to offer than just high gas fees has got me all excited about Zero-Knowledge Rollup technology (ZK roll-ups). Here is my follow-up:
I have been a big fan of the Bankless Podcast. They create great content. Indeed the whole premise of going bankless sounds too good to be true. However, it is happening as we speak and these guys are definitely at the forefront of this movement. So if you want to know the ins and outs of what is happening at the frontier of crypto money & finance be sure to check them out.
A peek at their latest videos would certainly suggest that Ethereum scaling solutions all the rage in the Ethereum community.
Polygon, Arbitrum , ZK roll-ups, Immutable-X, … are all examples of well-known Ethereum scaling solutions that provide improvements to transaction affordability.
ZK Roll-ups in particular are poised to be the key scalability solution for Ethereum for the foreseeable future. But what exactly are the investment opportunities that retailers should be looking at. This post will attempt to answer some of those key questions.
In short, ZK roll-ups are aiming to fix Ethereum’s scaling issues. As the cost of using Ethereum increases, the need to scale the network has become more apparent than ever. Zero-Knowledge Rollup technology promises to lower gas fees without compromising on decentralization and security.
They’re called roll-ups because they “roll” lots of transfers “up” into one single transaction. Shifting computation off-chain helps reduce congestion on Ethereum and reduce overall gas costs for users. Roll-ups still pay fees to record their transaction bundles on Ethereum, but the cost per transaction is significantly cheaper because it’s shared among many users. (Think — everyone chips in.)
Here is Vitalik Buterin’s Incomplete Guide to Rollups (vitalik.ca).
The Bankless Podcast has an excellent discussion with the man himself — explaining the different kinds of roll-ups.
If you want to find out more about ZK roll-ups check out this ZK-Rollups and the Path to Scaling Ethereum and Bob’s your uncle.
To be sure, I believe that this category of technology is going to be a MEGAtrend and we have an opportunity to be in it from the beginning! Ellio Trades Crypto certainly gets it.
In this video, Ellio Trades Crypto discusses what ZK roll-ups are and how we all can get involved and possibly benefit from this upcoming trend, which is in short through the upcoming zkSync Airdrop.
*Please note: There is just an expectation of getting an Airdrop in the future. No Guarantee s given— but it doesn’t cost much to activate a zkSync account.
So what are some of the major investment opportunities that retailers should be looking into?
First, let’s look at the zkRollup Directory which aggregates any and every project building ZK roll-ups, building on ZK roll-ups, and building for ZK roll-ups.
This site alone will suffice to get you lost in the rabbit hole of ZK roll-ups. It is an excellent starting point of your #DYOR journey.
I just came accross L2BEAT (https://l2beat.com). L2BEAT is an analytics and research website about Ethereum layer two (L2) scaling. They provide a comparison of the various Ethereum L2 systems available today.
So let’s consider some ZK roll-ups that have peaked my interest:
ZKSync (No token)
I have written about zkSync in my previous post Ethereum might have more to offer than just high gas fees.
In short, zkSync is a trustless protocol for scalable low-cost payments on Ethereum, powered by ZK roll-up technology. It uses zero-knowledge proofs and on-chain data availability to keep users’ funds as safe as though they never left the mainnet.
Check out this brief overview of Layer 2 scaling with a focus on the unique offering of ZK roll-ups and zkSync protocol.
More info on this: Learn by watching
zkSync is definitely onto something. Look at the (Total Loved Value) TVL of zkSync — Mr. Boombastic!
zkSync does not have a token yet so be sure to activate your zkSync account through your Metamask wallet to be eligible for a potential airdrop (details in my previous post).
Overall, zkSync offers a cheap and user-friendly experience. Definitely keep an eye out for zkSync’s progress.
Stark Ware (No token)
In short, StarkWare is building StarkNet, a decentralized, permissionless and censorship-resistant STARK-powered Layer-2 ZK roll-up that supports general computation over Ethereum.
The Bankless Podcast has an amazing discussion with the team from StarkWare. The goal of StarkWare is simple: “Bring massive scalability to Ethereum while preserving Layer-1 security, permissionless interactions, and decentralization.”
StarkWare hopes to bring “crypto apps for all” with StarkNet. StarkWare’s co-founder Eli Ben-Sasson said in the interview that StarkNet will help make blockchain technology “usable by a much wider population.”
With a recent $50 million raise at a valuation of $2 billion, the StarkWare founders have yet to comment when asked if StarkWare is looking to launch its own token i.e. no token yet folks. Be that as it may, StarkWare is pioneering zkRollups across the Ethereum ecosystem. As it powers *dYdX, arguably the most liquid market in the world, StarkWare is continuing to move into new territory, with StarkNet imminently deploying on Ethereum Mainnet.
*dYdX ($DYDX) is a decentralized exchange platform for cryptocurrency margin trading for assets like BTC, ETH, SOL, DOT, and more. The bulk of dYdX crypto margin trading products reside atop the Ethereum blockchain.
Also, StarkEx currently has the highest total value locked (TVL) at nearly $1.3 billion, followed by Loopring (about $630 million) and zkSync (about $60 million), according to The Block Research.
In case you are wondering, the key difference between StarkEx and StarkNet is that the former is a permissioned tailor-made scaling engine, while the latter is a permissionless decentralized ZK-roll-up that supports independent deployment of smart contracts.
In summary, StarkWare is cooking up something that is definitely worth a sniff. Keep your eyes on the ball if you want to front-run this opportunity.
Here is an interesting debate between the founders of Solana vs. StarkWare. Interesting watch if you want to form your own opinion of scaling solutions and the accompanying trade-offs between Solana, which utilizes the more traditional blockchain model, and StarkWare, which exploits the process of “Zero-Knowledge Proofs” to boost efficiency.
Polygon is a protocol and a framework for building and connecting Ethereum-compatible blockchain networks. Aggregating scalable solutions on Ethereum supporting a multi-chain Ethereum ecosystem.
In a new blog post, Polygon announced the acquisition of Mir, a startup focused on developing zero-knowledge (ZK) technology.
With the acquisition of Mir and its recursive proof system Plonky2, Polygon hopes not only to improve the current ZK roll-ups compatible with ETH but also create ones that work with the Ethereum Virtual Machine (EVM).
In fact, the deal follows Polygon’s acquisition of Hermez Network for $250 million in August.
The latest news and developments are coming in fast and furious. To keep up with it all watch this recent conversation with the Polygon’s founders:
In summary, Polygon has established itself as one of the most popular layer 2 solutions. Recent acquisitions of ZK roll-up tech indicates that they are all in on ZK’s for all its intents and purposes. Indeed a number of investors including Sequoia Capital India and Steadview Capital have noticed and as a result are in talks to back Polygon.
Aave, Sushi Swap and Curve Finance are among some of the largest blue-chip projects that have deployed on Polygon, which has amassed one of the largest developer ecosystems (even when compared to some layer 1 blockchains).
As we can see from the diagram, many things are happening on in the Polygon ecosystem. (Btw the aforementioned Mir protocol is displayed as Polygon Zero).
Check out Polygon’s ZKVerse: A Gentle Introduction to Zero Knowledge Proofs for more learning. (Not to be confused with the ZuckerVerse and Facebooks feeble attembt to profit from the Metaverse.)
Clearly Polygon is making BIG moves — follow closely and #DYOR. (I will surely be dollar cost averaging into this).
Loopring (LRC) is an ERC-20 token that describes itself as “an open-sourced, audited, and non-custodial exchange protocol.” In other words: Loopring, focuses solely on decentralized exchanges (DEXs) and payment applications.
It aims to allow anyone to build non-custodial, orderbook-based exchanges on Ethereum by leveraging zero-knowledge proofs.
As such, the Loopring Layer 2 app is a non-custodial exchange that supports both automated market maker (AMM) and order-book exchange model. It also has a payment platform built on the Loopring protocol. This trading platform allows users to cross-exchange many digital assets. The Loopring DEX offers secure trading at high speed and with no transaction fees.
Here is a Bankless Podcast that features Loopring that might be of interest. (Bonus Synthetix & Immutable X.)
Interestingly, there are rumors GameStop might partner with Loopring. Accordingly, November saw a flurry of speculation that GameStop might partner with Loopring. The rumors were sparked by mentions of GameStop in Loopring’s source code. People think GameStop might be working on a non-fungible token (NFT) marketplace, and that Loopring might be involved.
A related rumor is that Loopring might play a role in some form of Metaverse development, especially if there’s any truth to the speculation about a partnership with GameStop. Everything related to the metaverse is hot right now, so it’s a case of pouring speculation on speculation.
In summary, Loopring is worth a closer look. A Dex leveraging zero-knowledge proofs certainly smells delicious given the popularity of Uniswap etc.
Aztec (no token)
The Aztec protocol is a second-layer solution that uses zero-knowledge proofs and confidential transactions to enable confidential transactions for any generic digital asset on Ethereum, including existing assets.
Instead of balances, the protocol uses AZTEC notes. A note encrypts a number that represents a value (for example a number of ERC-20 tokens). Each note has an owner, defined via an Ethereum address. In order to spend a note the owner must provide a valid ECDSA signature attesting to this.
In this episode of The Bankless Podcast Aztec Protocol founders Joe Andrews (CPO) and Zac Williamson (CTO) describe it as ‘a private Venmo for crypto users’ and explain how Aztec is building out a scalable solution for zero-knowledge, private payments on Ethereum.
Aztec launched zk.money, the first private rollup service on Ethereum. zk.money is a private, Venmo-like app that allows users to transact anonymously with one another by attaching aliases to Ethereum addresses.
In summary, as blockchain technologies are expected to be adopted at scale across the global economy, privacy related technologies will surely become extremely valuable. Atm there is no token sale but be sure to keep an eye out for future developments.
Other noteworthy ZK roll-ups:
zkTube is a layer 2 mining network for Ethereum. It’s a protocol that utilizes technology to provide low gas fees, higher transaction throughput and enhanced privacy for Ethereum. It’s 200 times faster than Layer 1 with 100% security on the Ethereum level. It especially provides great value in the gaming space to enter Metaverse & NFT protocols through the PayTube Wallet gateway. Its mission is to be the best Layer 2 environment for supporting Cross-Rollup.
zkTube is the world’s solution for blockchain mining that turns Ethereum green with a proven-decentralized design for lower energy consumption. Maintaining privacy in a data-based world by relying on the zero knowledge proof algorithm proposed into the mining network.
ZKSwap is a decentralized cryptocurrency exchange (DEX) with an automated market maker (AMM) model. This allows for users to trade digital assets without a centralized authority/exchange (CEX) automatically by using liquidity pools.
Immutable X ($IMX)
Immutable X is a layer 2 protocol for trading Ethereum NFTs that gives users instant trade confirmation, huge scalability (9,000 transactions per second), and zero gas fees without compromising user ownership. Immutable X’s goal is to make minting and trading NFTs easier than trading traditional digital assets.
In conclusion, ZK roll-ups are poised to be the key scalability solution for Ethereum for the foreseeable future. zkSync and StarkWare are onto something big so definitely keep an eye out for their progress. Also be sure to activate your account on zkSync to be eligible for an airdrop.
Polygon is making big moves as they are commiting to ZK’s. I will be average dollar costing into this one. #DYOR for your own investment choices.
Lastly, be sure to follow The Bankless Podcast — like them or not but these guys are on the ball. Tune in if you want to be ahead of the game!
Happy ZK roll’ing ya’ll.
Frei Bier / Twitter: @FreiBIER13
DISCLAIMER: My writings are merely a reflection of my learning journey and my attempt to compartmentalize the cryptoverse. I am learning out loud so feel free to correct me or disagree with me. This is not investment advice but my hope is that you find value in some of my links and ideas.