The shiny new thing which may ignite the next bull run: what are Zero- Knowledge-Proof Solutions?!
The zk rollup revolution is here and zksync seems to lead others on the path toward a more scalable, less public DeFi ecosystem
(Any views expressed below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
Blockchains are a powerful technology, but they have some limitations. One of the biggest limitations is scalability. The Ethereum blockchain, for example, can currently only process about 15 transactions per second. This is not enough to support the growing demand for blockchain applications.
There are a number of scaling solutions being developed for blockchains. One promising solution is zero-knowledge proofs (ZKPs). ZKPs are a cryptographic technique that allows parties to prove the correctness of a statement without revealing the statement itself. This means that ZKPs can be used to verify the correctness of transactions without having to publish the entire transaction on the blockchain.
Last month we attended EthCC in Paris, one of the biggest EU-based Ethereum conferences. Zk Rollup solutions dominated the conference: ZkSync, Starkware, Mantle, Linea, and many more competitors are working on and with the Ethereum ecosystem to develop a secure growth hack for blockchain applications seeking to build on Ethereum.
But what exactly are ZKs and how do they work? Let’s dive into how Zero Knowledge Proofs (ZKPs) and ZK Rollups can revolutionize Ethereum by enabling quick, cheap, and scalable L2 networks.
ZK Rollups
ZK rollups are a type of scaling solution that uses ZKPs. ZK rollups work by batching transactions together and then executing them off-chain. The results of the transactions are then proven to the blockchain using ZKPs. This allows ZK rollups to achieve much higher throughput than the underlying blockchain. Sequencers neatly compress the data and sequence the transactions on the mainchain.
For example, zkSync, a ZK rollup for Ethereum, can process up to 2,000 transactions per second. This is a significant improvement over the 15 transactions per second that Ethereum can currently process!
ZK Rollups and Privacy: In addition to scalability, ZK rollups also offer some privacy benefits. Because the transactions are executed off-chain, the details of the transactions are not visible to the public. This can be important for applications that require privacy, such as DeFi applications. For DeFi it is especially important that transactions can also be private, and although this is in contrast with what the ethos of public finance is all about — many tradfi asset managers do not want their transactions to be publicly auditable. In fact, many tradfi institutions require private transactions to function properly.
ZK Rollups are largely praised for their innovative concepts and are heavily backed by the best funds in the industry. zkSync for instance uses a technique called PLONK to generate ZKPs. PLONK is a new proof system that is designed to be more efficient than previous proof systems. This makes zkSync even more scalable and more privacy-preserving than its competitors.
zkSync is still under development currently, and while expected to go live soon, its launch has often been postponed. However, it has the potential to be a major scaling solution for Ethereum. If zkSync is successful, it could attract and retain considerable amounts of liquidity and TVL (Total Value Locked)— becoming the defacto chain for private DeFi!
While several VCs seem to think (and bet on) this scenario to become reality, many developers are unsatisfied with the current state of affairs, since many Solidity apps are non-compatible with the zk infrastructure as it stands — resulting in many teams having to rewrite the code entirely or refactor large parts of it to be able to deploy safely on the new L2.
zkSync — what's under the hood?
zkSync is a ZK rollup for Ethereum. Its superior technique called ‘PLONK’ to generate ZKPs is said to be “a revolution in cryptography”. PLONK is a new proof system that is designed to be more efficient than all previous zero knowledge systems.
This makes zkSync more scalable and more privacy-preserving, and potentially a major scaling solution for Ethereum. If zkSync is successful, it could enable the Ethereum blockchain to go mainstream by making it more user-friendly for developers and more powerful for onboarding millions of users to fast blockchain dapps.
The major benefits of zkSync are:
- Scalability: zkSync can process up to 2,000 transactions per second. This is a significant improvement over the 15 transactions per second that Ethereum can currently process.
- Privacy: The transactions are executed off-chain, so the details of the transactions are not visible to the public - important for applications that require privacy, such as DeFi applications and identity solutions.
- Security: zkSync is based on the Ethereum blockchain, so it inherits the security of Ethereum.
However, there are complexities from the following challenges that zkSync faces:
- Complexity: zkSync is a complex technology, and it is still under development, with some fundamental differences to Ethereum — making solidity applications not always compatible.
- Adoption: zkSync is a new technology, and it will need to gain adoption in order to be successful. Like any new technology, this will require time and business development effort.
Next, let's look at how zkSync differentiates from other L2 rollup solutions, specifically Optimistic rollups, its biggest competitor.
Optimistic Rollups
zkSync and Optimistic rollups are two of the most promising scaling solutions for Ethereum. Both technologies use off-chain execution to achieve higher throughput than the underlying blockchain. However, there are some key differences between the two technologies.
Optimistic rollups use a technique called fraud-proofs to verify the correctness of transactions. Fraud-proofs are less efficient than ZKPs, but they are simpler to implement. This makes optimistic rollups more accessible to developers but ultimately compromises efficiency, security, and security.
Nonetheless, Optimistic rollups have a number of other advantages over zkSync. For example, optimistic rollups are more widely adopted, and they have a larger ecosystem of already running DeFi applications, such as Optimism — the optimistic rollup of choice.
zkSync and optimistic rollups are both promising scaling solutions for Ethereum. However, they have different strengths and weaknesses. Ultimately, the best scaling solution for Ethereum will depend on the specific needs of the application and the developer teams. For applications that require high scalability, privacy, and security, zkSync is a good choice. For applications that are more focused on adoption and ecosystem, optimistic rollups are a better choice.
Other ZK Projects
In addition to zkSync and optimistic rollups, there are a number of other ZK rollup projects in development. These projects include StarkNet, zkPorter, Hermez, Mantle, zkEVM, and Linea.
StarkNet is a ZK rollup that uses a technique called STARKs to generate ZKPs. STARKs are a more efficient proof system than PLONK, which makes StarkNet even more scalable than zkSync.
zkPorter is a ZK rollup that is designed for low-cost transactions. zkPorter uses a technique called zk-SNARKs to generate ZKPs. zk-SNARKs are less efficient than PLONK and STARKs, but they are also much smaller. This makes zkPorter ideal for low-cost transactions.
Hermez is a ZK rollup that is designed for interoperability. Hermez allows ZK rollups to interact with each other and with the Ethereum mainnet. This makes Hermez ideal for applications that require cross-chain communication.
Additionally, Polygon’s zkEVM, Consensys’s Linea, and Mantle are all zk solutions seeking to harness the power of zero-knowledge rollups to help Ethereum scale.
Finally, it is obvious that ZKPs are a promising technology that can be used to scale blockchains. ZK rollups are a type of scaling solution that uses ZKPs. ZK rollups offer a number of benefits, including scalability, privacy, and security. zkSync, the leading ZK rollup for Ethereum that is currently still in development, which if successful, could help to make Ethereum more scalable, more privacy-preserving, and more user-friendly, to help meet the needs of the growing DeFi ecosystem. There are a number of different ZK rollup projects in development, each with its own strengths and weaknesses. The best ZK rollup for a particular application will depend on the specific needs of the application.
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