What is ZKsync? How Will it Shape the Future of Layer 2 Systems?

Key Points:

• ZKsync uses zero-knowledge rollups to process Ethereum transactions off-chain, boosting speed and reducing costs by alleviating network congestion and high gas fees.

• The Elastic Chain in ZKsync 3.0 enables limitless scalability and seamless interoperability among multiple ZK Chains, ensuring secure and trustless transactions through advanced cryptographic methods.

• ZKsync is compatible with Ethereum's smart contracts and tools, facilitating easy integration for decentralized applications. This compatibility has led to widespread adoption and numerous integrations with various DApps.

From Ethereum’s vast DApp ecosystem to its daily transaction volume, the crypto community remains optimistic about its long-term prospects. However, high gas fees and slow transactions have been persistent challenges for the Ethereum ecosystem. Layer 2 scaling solutions like ZKsync offer a promising remedy. Utilizing ZK-rollup technology, ZKsync significantly lowers transaction fees while maintaining robust security through advanced cryptographic methods. This blend of cost-efficiency and security makes ZKsync appealing for both users and developers seeking to optimize their interactions with the Ethereum network.

After more than two years of anticipation, crypto enthusiasts have witnessed the release of the ZKsync airdrops in 2024 with the launch of the ZK tokens. These distributions mark a pivotal moment in the cryptocurrency airdrop sector. Following the ZKsync 3.0 upgrade, which introduced the "Elastic Chain," ZKsync has adopted a multi-chain architecture. This upgrade, live since June 7, 2024, reconfigured ZKsync's Layer 1 bridge into a shared router contract in order to enhance interoperability among ZK Chains. The ZKsync Era network is the first chain within this ecosystem, with over 20 new ZK Stack-based chains expected to launch throughout 2024. Therefore, this article will delve into what ZKsync is, how it operates, and its benefits.

What is ZKsync?

ZKsync is a Layer-2 scaling solution developed to enhance the speed and cost-efficiency of transactions on the Ethereum blockchain by processing them off-chain. Utilizing zero-knowledge rollups (zk-rollups), ZKsync bundles multiple transactions together and handles them outside the main Ethereum chain. This off-chain processing effectively reduces the congestion and high fees typically associated with Ethereum, akin to adding an extra lane to a busy highway to alleviate traffic.

Matter Labs, the creator of ZKsync, aims to address the scalability issues that hinder mainstream adoption of blockchain technology. By focusing on not just transaction throughput but also the overall readiness of blockchain systems to support millions of users, ZKsync offers a solution grounded in trustlessness, confidentiality, and speed. Founded in 2018 by Alex Gluchowski, Matter Labs introduced ZKsync as the first trustless Layer-2 scaling solution with L1 reorg-level security, ensuring fund safety while supporting a fully zero-knowledge based smart contract ecosystem.

Since its initial release on the Ethereum Mainnet in June 2020, ZKsync has undergone significant enhancements, including the implementation of recursive ZK proofs and support for features like automatic recurring payments and token minting. Backed by notable investments, including a $50M round led by Andreessen Horowitz, ZKsync has processed over a million transactions on the mainnet and integrated with numerous DApps. Matter Labs envisions ZKsync as the primary payment backbone of Ethereum, connecting users, wallets, services, DApps, and exchanges seamlessly.

How Does Zksync Work?

ZKsync is a platform designed to enhance the Ethereum network by addressing its core issues of low scalability and high transaction fees. At its core, ZKsync utilizes zk-Rollups, a type of zero-knowledge proof technology that aggregates multiple transactions into a single one, processed off-chain before being verified on the Ethereum blockchain. This approach significantly reduces the computational load on the main Ethereum network, thereby lowering transaction fees and speeding up transaction times.

Unlike other Layer 2 networks that use optimistic rollups, which assume transactions are authentic unless proven otherwise, ZKsync leverages zero-knowledge proofs to regularly verify the authenticity of all transactions. This involves creating a proof that all batched transactions are valid without revealing the transaction details, akin to proving knowledge of a secret without disclosing it. This proof is then submitted to the Ethereum mainnet for validation, ensuring that transactions are officially recorded and confirmed on the blockchain. This method, while more secure, can result in slightly higher fees compared to optimistic rollups due to the cost of generating and submitting these proofs.

ZKsync maintains compatibility with Ethereum's existing smart contracts and tools, facilitating seamless integration for decentralized applications. It operates as a trustless protocol, with all assets secured on the Ethereum blockchain via smart contracts, preserving user sovereignty and the intrinsic security features of Ethereum. Additionally, ZKsync includes bridges that enable easy asset transfers between Layer 1 and Layer 2 networks, positioning it as a user-friendly and efficient scaling solution poised to support a wide range of applications and use cases on the Ethereum network.

Difference Between Zksync vs. Other Layer 2 Networks

ZKsync, a Layer-2 scaling solution for Ethereum, enhances the blockchain's scalability and efficiency by processing transactions off-chain and anchoring their finality to the Ethereum mainnet through zk-Rollup technology and zero-knowledge proofs. This approach ensures robust security and high throughput. In contrast, Optimism, another popular Layer-2 solution, employs Optimistic Rollup technology which assumes transaction validity by default and resolves disputes on-chain through fraud proofs. While both solutions offer significant improvements in scalability, their underlying technologies and security models differ significantly.

Comparing ZKsync with Polygon and StarkNet further highlights its unique approach. Polygon offers a versatile scaling framework that includes sidechains and its custom Supernets, as well as the recent zkEVM. This flexibility allows developers to tailor solutions to their specific needs. On the other hand, ZKsync's commitment to zk-Rollup technology emphasizes secure and efficient scaling. StarkNet, like ZKsync, utilizes zero-knowledge technology but relies on zk-STARKs instead of zk-SNARKs. This difference impacts setup procedures, scalability, and resistance to potential quantum computer attacks. Additionally, ZKsync is EVM-compatible, supporting Ethereum smart contracts seamlessly, whereas StarkNet currently does not offer this compatibility.

This chart below provides a concise comparison of ZKsync and other prominent Layer-2 networks, highlighting their key differences in technology, security, compatibility, scalability, quantum resistance, and flexibility:

Advantage of ZKsync

In the world of blockchain and decentralized systems, scalability and efficiency have long been persistent challenges. However, ZKsync, a Layer-2 scaling solution, leverages zero-knowledge proofs (ZKPs) and rollups to offer several significant benefits, transforming the landscape of blockchain transactions. Here’s a closer look at how ZKsync addresses these critical issues.

Exceptional Scalability and Cost Efficiency

• High Throughput: One of the most notable advantages of ZKsync is its exceptional scalability. Traditional Layer-1 solutions like Ethereum face limitations in transaction throughput. ZKsync overcomes these limitations by utilizing rollups, a technique that bundles multiple transactions into a single batch for off-chain processing. This enables ZKsync to handle thousands of transactions per second, significantly surpassing the capacity of Layer-1 solutions. Such scalability makes ZKsync particularly well-suited for high-throughput applications, including decentralized exchanges and gaming platforms.

Reduced Gas Fees: Gas fees have been a persistent concern for users of Ethereum and other blockchain networks. ZKsync addresses this issue by processing transactions off-chain, which eliminates the need for users to pay expensive gas fees for every operation. Consequently, ZKsync transactions are significantly cheaper compared to on-chain transactions. This reduction in costs enables a broader range of use cases, especially for microtransactions and everyday transactions that were previously hindered by high fees.

Transaction costs on different chains, Source: growthepie

• Mitigation of Network Congestion: Network congestion has become a common occurrence on the Ethereum network, leading to slower confirmation times and higher fees. ZKsync’s off-chain processing ensures faster transaction confirmations and effectively bypasses network congestion issues. This capability provides users with a seamless and efficient experience, even during periods of high network demand.

Enhanced Security and Trustless Transactions

• Zero-Knowledge Proofs: Maintaining the security and integrity of transactions is of utmost importance in the blockchain space. ZKsync employs zero-knowledge proofs (ZKPs) to ensure trustless and secure transactions. When a batch of transactions is processed, ZKsync generates a cryptographic proof that verifies the validity of the batch without disclosing sensitive information about individual transactions. This trustless nature eliminates the need for intermediaries or trusted third parties, preserving the decentralized essence of blockchain technology.

• Trust and Security: With ZKsync’s ZKP-based approach, users can confidently engage in transactions, knowing their funds are secure and the system is resilient against malicious actors. This high level of security is crucial, especially in applications involving sensitive financial operations and value transfers. The use of ZKPs ensures that transaction data remains private and secure, bolstering user trust and confidence in the system.

Overall, ZKsync’s ability to enhance scalability, reduce transaction costs, and provide robust security mechanisms positions it as a game-changer in the blockchain space. By addressing the key limitations of traditional Layer-1 solutions, ZKsync not only improves the overall user experience but also opens up new possibilities for a wide range of decentralized applications and financial transactions.

What is Elastic Chain in ZKsync3.0?

On June 7, 2024, ZKsync introduced the Elastic Chain which marked a significant evolution in the blockchain landscape. This groundbreaking development transforms ZKsync from a single Ethereum Layer 2 solution into an ever-expanding network of ZK rollups, secured by mathematical proofs and designed for seamless interoperability under a uniform, intuitive user experience. The Elastic Chain aims to solve the persistent issues of liquidity fragmentation and poor user experience that plague current multi-chain ecosystems.

The transformation of ZKsync, Source: https://mirror.xyz/

The Elastic Chain is designed to be infinitely scalable. This means that the network can continuously expand by adding new ZK Chains (rollups, validiums, and volitions) to match the growing demand without compromising on performance, verifiability, or decentralization. This scalability is made possible by the ZK Stack framework, which enables native, trustless, and low-cost interoperability between the various chains within the ecosystem. In terms of user experience, the Elastic Chain stands out by making the entire network feel like a single blockchain. Users benefit from a unified experience, where they can use one address across all ZK Chains. Transactions are quick, and users can pay fees in any liquid token, or even have the fees sponsored by DApps. This eliminates the need for cumbersome bridging processes and enhances overall usability.

At the core of the Elastic Chain's architecture are several key components that ensure its seamless operation and robust security. The ZK Router consists of smart contracts deployed on Ethereum. These contracts manage the state of the network, handle chain registrations, facilitate critical interactions, and maintain shared liquidity. This foundational layer ensures that all ZK Chains can interact and transact efficiently, inheriting Ethereum's security. Another crucial component is the ZK Gateway, which acts as middleware between Ethereum and the ZK Chains. It facilitates full interoperability, provides faster finality for low-latency cross-chain bridging, and optimizes network interactions by combining proofs and state data. This reduces verification costs and enhances overall efficiency. The ZK Gateway also plays a vital role in proof composition, state diff compression, and censorship resistance, ensuring that the network remains secure and resilient.

The ZK Chains themselves are autonomous and fully customizable, built using the ZK Stack framework. They operate independently but are interconnected through the ZK Gateway and the L1 smart contracts on Ethereum. This setup allows each chain to maintain its autonomy while benefiting from the shared security and interoperability provided by the Elastic Chain architecture.

The Elastic Chain in ZKsync 3.0 represents a monumental leap forward in blockchain technology. By addressing the challenges of liquidity fragmentation and user experience, and leveraging the power of ZK proofs for scalability and security, the Elastic Chain creates a seamless, intuitive, and infinitely scalable network. This innovation promises to enhance the overall usability of blockchain technology and pave the way for more widespread adoption in the future.

Function of the ZK Token

The ZK token is central to the governance and evolution of the ZKsync ecosystem. As a protocol token, it empowers holders to propose and vote on protocol upgrades, ensuring that the system remains decentralized and responsive to the community's needs. The token also facilitates network fee payments through ZKsync's native account abstraction, enabling seamless transactions. With the community driving governance-driven upgrades, the protocol can evolve to include features like staking and other innovations. As more ZK chains launch, including Lens Network, Cronos zkEVM, and GRVT, the ZK token will be essential for coordinating technical advancements across an expanding network of interconnected ZK chains.

A significant portion of the ZK token supply is allocated to the community, with 67% distributed to ensure robust decentralized governance. This includes a 17.5% airdrop to early users, making it the largest token distribution among major rollups. The remaining supply is divided between investors (17.2%) and the Matter Labs team (16.1%), with these tokens locked for the first year and gradually unlocked over the next three years. The airdrop ensures that those who have supported ZKsync's vision from the beginning can continue to contribute to and shape its future. This community-first approach underpins ZKsync's commitment to decentralization and personal sovereignty.

ZK Token Distribution, Source: https://blog.zknation.io/zk-token/

Conclusion

ZKsync stands out as a transformative Layer-2 scaling solution for Ethereum, addressing critical issues of scalability, transaction speed, and cost-efficiency. With its advanced use of zero-knowledge proofs and the introduction of the Elastic Chain, ZKsync not only enhances the user experience but also supports the broader adoption of blockchain technology. The decentralized governance model, empowered by the ZK token, ensures that the ecosystem remains responsive to community needs and poised for future advancements.

FAQ

Q: What Is Zksync and How Does It Improve Ethereum Transactions?

A: ZKsync is a Layer-2 scaling solution that enhances Ethereum's transaction speed and cost-efficiency by processing transactions off-chain using zero-knowledge rollups (zk-rollups). This reduces congestion and high gas fees, making the Ethereum network more efficient and user-friendly.

Q: How Does Zksync 3.0’s Elastic Chain Enhance Scalability and Interoperability?

A: The Elastic Chain, introduced in ZKsync 3.0, allows for infinite scalability by adding new ZK Chains that operate under a unified, intuitive user experience. It ensures seamless interoperability, reduces liquidity fragmentation, and maintains high performance without compromising security or decentralization.

Q: What Is the Zk Token and How Does It Work?

A: The ZKsync token (ZK) is crucial for the ZKsync ecosystem. It allows holders to participate in governance decisions, such as protocol upgrades and fee structures. Future staking mechanisms may enable ZK holders to earn rewards and enhance network security. Additionally, part of the ZK token supply funds ecosystem development initiatives, encouraging innovation. ZK tokens may also offer fee discounts on the ZKsync network, promoting token ownership and usage.

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