In our previous blog post, we discussed the three most important Optimistic rollups: Arbitrum, Optimism, and Base. In this blog post, we will explore the three leading ZK rollups:
Matter Labs was the first team to ship a functional zkEVM to mainnet with their zkSync 2.0 rollup, albeit in closed form, in October 2022.
A zkEVM is an Ethereum Virtual Machine that executes smart contracts in a way that is compatible with zero-knowledge proof computation. Until very recently, the possibility of a commercially viable zkEVM was generally considered to be years away. However, research in this field has progressed much more rapidly than expected and zkEVMs are already available for public use.
After battle-testing their zkEVM for several months, Matter Labs opened up zkSync 2.0 to developers in February 2023. To mark the occasion, zkSync 2.0 was renamed to zkSync Era, or just “Era” for short. In March, Era was opened to the public, making it the first zkEVM available for public use on a permissionless rollup.
In the near future, Era’s state will be comprised of two parts: the “zkRollup” part, with on-chain data availability, and the “zkPorter” part, with off-chain data availability. zkPorter accounts will enjoy much lower transaction fees due to the cost savings of only occasionally needing to interact with Ethereum L1. Users can always choose which of the two they prefer to interact with; those more concerned with security will be willing to bear the cost of using zkRollup accounts and more cost-sensitive users will probably prefer to use zkPorter accounts.
Uninterrupted availability of off-chain data from the zkPorter side will be secured by zkSync token holders, named “Guardians”, who can lose their tokens if they fail in their job.
Similar to Arbitrum’s L3 solution, Nova, Matter Labs is intently focused on delivering an L3 solution, dubbed “HyperChains”. Put simply, HyperChains are a potentially limitless series of rollups built on top of other rollups, all stemming from the single Era “BaseChain” that is directly connected to Ethereum L1. HyperChains can, in theory, infinitely scale Ethereum, with each branch of the tree inheriting its security from Ethereum L1. This is visualized below as a form of fractal canopy:
Source: https://www.youtube.com/watch?v=0RZvOLKo3Xw
According to the Era developer documentation:
Hyperchains will have unique hierarchical identifiers similar to the Internet domains:
zksync
reddit.zksync
ethereum.reddit.zksync
Accounts will have standard EVM addresses, augmented by the Hyperchain id:
0x60250Fff03f8E8aed6a5B36Fa4F5a5F75fD5d25d @ zksync
0x31a7ca77c0bc7a26a5ee69ea3e65363ead6aa322 @ reddit.zksync
Of course, services like ENS / Unstoppable domains can always be used for shortcuts:
gluk64 @ reddit.zksync
gluk64.eth
Thus, sending digital assets to another user will feel just like sending an email (which arrives asynchronously in a few seconds), but now you can attach money to it.
The release date of the $ZKS token is not yet public but it can safely be assumed to be several months away while Era remains in “mainnet alpha” stage. According to Era’s documentation, $ZKS token staking is part of the security model for off-chain data availability, so we can expect to see more information about the token when zkPorter accounts are being rolled out.
There is often confusion about the naming with this one, so let’s tackle that head-on. StarkWare is the name of the team, StarkEx is their application-specific L2 scaling solution, and StarkNet is their generalized L2 rollup.
StarkWare rolled out its flagship L2 SAAS product, StarkEx, in 2020. The popular dApps Deversifi, ImmutableX, and dYdX were all built on it and managed to onboard thousands of users and hundreds of millions of dollars in TVL. StarkEx is not generalizable to any type of application; each app requires its own customized version of the software.
Starknet overcomes the limitations of Starkex by allowing for generalized computation; anyone can deploy any smart contract on Starknet. However, StarkNet does not natively support EVM smart contract execution and uses its own programming language, Cairo, which is an initial hurdle for onboarding new developers.
Despite being launched on mainnet in November 2021, Starknet has failed to garner much in terms of dApps, capital, and users until very recently. This is probably partially due to them launching into a bear market and partially due to the aforementioned technical hurdles for developers. Even though there are more tools that make it easier for Solidity developers to port their code over to Cairo, the growth of StarkNet still ultimately depends on convincing more developers to learn a novel programming language. Time will tell if this can be achieved.
$STRK is the rollup’s governance token, can be staked to participate in StarkNet’s consensus mechanism, and will eventually be the exclusive gas fee token of the network. On-chain governance voting was recently launched but was initially limited to investors, core contributors, and StarkNet Foundation members.
Polygon acquired Hermez, a ZKR project, in August 2021 for $250mn USD. This was one of the first blockchain “network mergers”, in which Hermez’ $HEZ token began a slow deprecation process by allowing all $HEZ token holders to swap their balance for $MATIC at a fixed ratio of 3.5 MATIC/HEZ.
The merged entity was named ‘Polygon Hermez’, but eventually morphed into the more generic ‘Polygon zkEVM’. To be clear, Polygon zkEVM is a ZKR that is distinct and independent from the Proof-of-Stake Polygon sidechain. Polygon zkEVM’s gas fee token is $ETH, not $MATIC.
Polygon zkEVM claims to be fully EVM equivalent, meaning that all Ethereum smart contracts, developer tools, and wallets are compatible with it without any modification.
The Polygon Hermez Beta mainnet launched on March 27th, just after Era opened up to the public. Vitalik Buterin sent the very first transaction on it, signifying the importance of this specific rollup to the Ethereum community.
The common perception is that Polygon zkEVM will not be airdropping a governance token to its users in the future, which probably explains the muted reception that its mainnet launch received outside of the Ethereum developer community. $MATIC token holders do not benefit from Polygon zkEVM, outside of a reduction in the circulating supply equal to the $MATIC tokens that must be locked up as part of the rollup’s incentive mechanism.
Zero knowledge rollups are rapidly maturing, much faster than most anticipated. However, the technology is still not at the same level of maturity as optimistic rollups and the recent increase in activity on ZKRs can be attributed mostly to airdrop hunters.
We can see that activity on ZKRs, in the form of ETH deposited to them via their official bridges and daily active addresses interacting with the bridges, explodes as soon as Arbitrum announces its $ARB token airdrop on March 16th. At that time, only bridges to zkSync Lite and Starknet were open.
Since it was first opened to the public on March 24th, the Era bridge has dominated the other ZKRs in both cumulative ETH deposited and daily active addresses. Polygon zkEVM’s mainnet bridge opened on March 27th but barely shows up on the charts, most likely because airdrop hunters don’t believe that activity on it will be retroactively awarded with an airdrop.
Source: https://dune.com/subinium/zk-bridge-market-share, as of 21.04.2023
Source: https://dune.com/subinium/zk-bridge-market-share, as of 21.04.2023
Despite this recent infusion of capital, the combined TVL of the ZKRs mentioned in this blog post is not even 5% of the combined TVL of Arbitrum and Optimism. One should however keep in mind the two of the four ZKRs covered in the blog post launched to mainnet only last month. Over time, the superior capital efficiency and privacy potential of ZKRs should allow them to capture market share away from ORs over time.
This is an exciting time for Ethereum and potentially one of existential reflection for alternative L1 chains competing with Ethereum solely on the basis of lower transaction fees. What remains to be seen is how much pressure these rollups can siphon away from the Ethereum L1 fee market during a bull run and how effectively they can decentralize crucial components of their design, such as their transaction sequencers and ZKP provers.
We hope that you enjoyed this series of blog posts about Ethereum rollups. If you have any comments or questions, please feel free to e-mail them to w.bailey@nyala.de. Thank you for reading!
