TL;DR In the crowded space of Layer 2’s on Ethereum, ZkSync is a fresh entrant. A month after launch it is already in third position counting Total Value Locked, partly because of the expected airdrop. ZkSync Era has bet on zero-knowledge (zk) technology as the key requirement for onboarding hundreds of millions of users to Web3 without compromising security.
View zkSync Era as a Layer 2 ‘scaling and privacy engine’ for Ethereum, based on zero-knowledge proof technology. It is the first Layer 2 of its kind to launch – beating Polygon’s zkEVM by four days. Both are so-called zero-knowledge rollups that allow for faster and cheaper transactions while maintaining a high level of security. How does zkSync Era compare to other L2s?
Let’s take a step back for a moment. What is a Layer 2 (L2) on Ethereum? The second layer helps to offload work from Ethereum. While the assets remain on the Ethereum main chain, computation and transaction storage happen on the layer on top of Ethereum. This should give a high transaction rate while keeping the underlying safety of the Ethereum main chain.
ZkSync is Third in TVL
As with Arbitrum’s launch and subsequent airdrop, it’s no surprise that zkSync has seen a huge surge in activity. In fact, zkSyncEra now has the third largest total value locked ($260 million) among Layer 2’s that settle on Ethereum.
So, will this huge activity fizzle out after the airdrop? Not necessarily. Arbitrum has been going strong after its airdrop.
Delphi Digital tried to assess which of the current top 3 L2s (Arbitrum, Optimism, and zkSync Era) is the most profitable. They took the spread between the fee revenue generated by the L2 and the price the L2 pays to the L1 (L1 call data security costs), plus the verification costs for zk-rollups. It turns out that Arbitrum is the most profitable L2. For zkSync Era, Delphi argues the launch is too recent for a meaningful comparison. But it’s a metric to keep an eye on in the coming time, as demand for L2s will surge.
Difference Between Zk-rollups and Optimistic Rollups
A competing type of Layer 2 on Ethereum is called optimistic rollups. The current dominant L2s – Arbitrum and Optimism – are both optimistic rollups. Coinbase’s Base is another example. The ‘optimism’ part of optimistic roll-ups refers to the ‘optimistic’ assumption that transactions are valid until proven otherwise. But for the finality of transactions, you’ll have to wait a week or so on optimistic rollups. In contrast, on zero-knowledge rollups, you have near-instant finality, and you can bridge much faster back to Ethereum or to other rollup chains.
Zero-knowledge proofs in crypto are important for two reasons: privacy and data compression. Imagine that I can prove that I am the legitimate owner of a valid passport, without showing my passport to the clerk at customs, or to the car rental agency. Similarly, zero-knowledge proof technology enables cryptographic algorithms for verifying claims regarding the possession of data without having to reveal the data.
The Origin of ZkSync and ZkSync Era
The founders of Matter Labs, the company behind zkSync, viewed the scalability problem in Ethereum as the major hurdle standing in the way of adoption – until they discovered the existence of zero-knowledge proofs, and more specifically zk-snarks. The latter compresses…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
