Ethereum, the leading blockchain platform for decentralized applications (dApps), has revolutionized the world of finance and beyond. However, its success has also brought to light a major challenge: scalability. As more users flock to the network, transaction fees skyrocket, and processing times become sluggish.
The Ethereum 2.0 upgrade remains underway as progress rolls out in phases. While Ethereum 2.0 could solve much of Ethereum’s scalability issues, Layer-2 networks offer the most promising solution to help drive mainstream adoption of Ethereum’s decentralized infrastructure to support dApps across a multitude of sectors and use cases.
This is where ZK rollups emerge as a beacon of hope, promising to unlock the true potential of Ethereum through unparalleled efficiency and security.
What are ZK Rollups and How Do They Work?
ZK rollups are a type of Layer-2 scaling solution that aims to increase the transaction throughput of a blockchain like Ethereum. They do so by rolling up multiple transactions into a single one, thereby reducing the load on the network.
Imagine a bustling city with congested streets. ZK rollups are like bypasses, efficiently handling transactions off-chain while ensuring their validity on Ethereum's mainnet. They utilize a powerful cryptographic tool called zero-knowledge proofs, allowing them to prove the integrity of a batch of transactions without revealing any individual details.
These proofs are incredibly succinct and lightweight, drastically reducing the data stored on the mainnet and enabling lightning-fast transaction processing. ZKPs have three essential properties: completeness, soundness, and zero-knowledge, ensuring secure and efficient transaction validation.
Deep dive into Zero-Knowledge proofs (ZKPs) and how they work.
How Does a ZK Rollup Work?
ZK rollups function through a combination of on-chain contracts and off-chain virtual machines in the following manner:
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On-chain Contracts: Smart contracts on the mainnet define the rules for transactions in the ZK Rollup.
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Off-chain Virtual Machine: Transactions happen off-chain in a separate virtual machine, achieving significant cost reduction and speed benefits.
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Zero-Knowledge Proof Generation: A cryptographic proof is generated, demonstrating the validity of the entire batch of transactions without revealing any individual details.
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On-chain Proof Verification: This proof is submitted to the mainnet and verified by validators, ensuring the integrity of the off-chain transactions.
On-chain contracts define the rules and store critical data, while off-chain machines handle the bulk of transaction processing. This setup significantly enhances transaction throughput, reduces network congestion, and lowers transaction fees.
Benefits of ZK Rollup Networks
ZK Rollup networks have emerged as a groundbreaking solution within the Ethereum ecosystem, addressing the pressing challenges faced by Ethereum and paving the way for a more sustainable layer 2 landscape in the Ethereum network.
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Scalability and Efficiency: ZK Rollups enhance scalability by bundling multiple off-chain transactions into a single one, reducing data on the main blockchain, and lowering gas fees through off-chain processing and batching, leading to cost-effective transactions.
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Security and Speed: They ensure security through cryptographic proofs without revealing actual data and achieve faster transaction finality by verifying bundled transactions off-chain.
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User Experience and Network Stability: ZK Rollups improve user experience with quicker, cheaper transactions, which is beneficial for high-throughput applications, and reduce network congestion by offloading transactions from the main chain.
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Data Availability and Compatibility: Unlike some Layer-2 solutions, ZK Rollups maintain on-chain data availability, enhancing trust and reliability, and are often compatible with Ethereum's smart contracts, facilitating developer migration or deployment.
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Environment-Friendly and Supporting Blockchain Interoperability: They are environmentally friendly by processing transactions efficiently and reducing energy consumption, and some promote interoperability between different blockchain ecosystems.
ZK Rollups vs. Other Layer-2 Solutions
ZK rollups differ from other Layer-2 solutions, such as Optimistic Rollups, in several key aspects. Optimistic Rollups assume transactions are valid by default and only check them if a challenge is raised, whereas ZK rollups validate every transaction through zero-knowledge proofs.
ZK rollups offer increased security and immediate finality of transactions, as opposed to the challenge period in Optimistic Rollups. This makes them more complex but also provides a more robust solution for scaling Ethereum.
ZK Rollups offer distinct advantages over Optimistic rollups and other layer-2 scaling solutions:
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Stronger security: ZK Rollups offer immediate transaction finality on the mainnet, whereas Optimistic Rollups have a challenge period for potential fraud detection.
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No economic assumptions: ZK Rollups require no trusted intermediaries, unlike Optimistic Rollups, which rely on the assumption of honest validators.
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Enhanced privacy: Individual transaction details remain hidden within the proof, offering superior privacy compared to Optimistic Rollups.
Best ZK Rollup Projects in the Ethereum Ecosystem
The ZK Rollup landscape is rapidly evolving, with innovative players emerging to reshape the game. Here are some of the trending ZK rollup layer-2 solutions on Ethereum to watch:
1. Manta Network (Manta Pacific)
TVL: $851 million
Launch Date: September 2023 (Testnet launch)
Native Token: MANTA, used for governance, staking, and fee payments for the privacy-focused DeFi platform.
Manta Network focuses on privacy-preserving DeFi transactions. The Manta Pacific layer-2 on Ethereum uses zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) to ensure transaction privacy. Within a short time since its launch, it has overtaken Coinbase’s Base to become the fourth largest Ethereum Layer-2 network by TVL.
By leveraging zk-SNARKs, Manta Network allows users to transact and swap cryptocurrencies in a completely private manner. The details of the transaction, including the assets and amounts, are encrypted but verifiable for legitimacy.
Key Advantage: Manta Network sets itself apart from its competition owing to its emphasis on privacy within the DeFi space, a feature often lacking in other DeFi platforms. This Ethereum layer-2 network also focuses on interoperability, aiming to create a privacy layer for all DeFi applications across various blockchains.
2. Linea
TVL: $202 million
Launch Date: August 2023
Native Token: LINEA, utility yet to be announced.
Linea is a Layer-2 scaling solution that uses ZK Rollups to improve transaction speeds and reduce costs. Linea processes transactions off the main Ethereum chain and batches them together for submission, using zk-SNARKs for validation. Linea has announced an airdrop campaign for its native token in January 2024, although details about the token’s utility are yet to be revealed.
The Linea network also focuses on ease of integration for developers, enabling them to build and deploy Ethereum applications more efficiently.
Key Advantage: Linea's key strengths are scalability and speed, offering higher throughput than many competitors.
3. Polygon zkEVM
TVL: $115 million
Launch Date: March 2023 (Mainnet Beta launch)
Native Token: MATIC, used for gas fees and network governance.
Polygon zkEVM (Zero Knowledge Ethereum Virtual Machine) is part of the Polygon suite, offering a scalable and Ethereum-compatible ZK Rollup solution. It operates by executing transactions off-chain in an EVM-compatible environment and then proving their validity on-chain using ZK proofs. This ensures compatibility with existing Ethereum contracts and tools.
As part of the larger Polygon ecosystem, zkEVM benefits from network effects and integration with other Polygon solutions, potentially offering a robust and versatile Layer-2 environment.
Key Advantage: The standout feature of Polygon zkEVM is its compatibility with existing Ethereum tools and smart contracts, making it highly accessible for developers already familiar with Ethereum's ecosystem.
4. Starknet
TVL: $170 million
Launch Date: February 2022
Native Token: STRK, used for gas fees, governance, and staking.
StarkNet is built on STARKs (Scalable Transparent ARguments of Knowledge), a type of zero-knowledge proof technology. It's designed for high scalability and privacy. StarkNet processes and verifies transactions off-chain using STARKs and then posts these proofs to the Ethereum mainnet. This method allows for significant scalability while ensuring the security and privacy of transactions.
StarkNet supports general computation, meaning it can run any smart contract, potentially making it a versatile platform for developers.
Key Advantage: The use of STARKs makes StarkNet highly scalable and secure without requiring a trusted setup (unlike zk-SNARKs). STARKs are also quantum-resistant, offering future-proof security.
5. zkSync Era
TVL: $555 million
Launch Date: March 2023 (Full Mainnet launch)
Native Token: ZKS, used for gas fees, governance, and staking.
zkSync Era, developed by Matter Labs, uses zkRollup technology. It focuses on scalability and user experience, maintaining Ethereum compatibility. zkSync Era processes transactions off-chain and batches them into a single proof, which is then submitted to the Ethereum mainnet. This process leverages zero-knowledge proofs for security and efficiency.
zkSync Era aims to offer low transaction fees and high throughput, addressing two major pain points of the Ethereum mainnet.
Key Advantage: zkSync Era maintains EVM compatibility, meaning it can run Ethereum smart contracts directly. This is a significant advantage for developers looking to migrate to Layer-2 without rewriting their code.
6. Scroll
TVL: $63.46 million
Launch Date: October 2023 (Bridge Deployment)
Native Token: No native token yet.
Scroll is a ZK Rollup solution focusing on high throughput and low latency. It utilizes zk-SNARKs for compressing transactions. Transactions are executed off-chain and then aggregated into a single zk-SNARK proof. This proof is then submitted to the Ethereum mainnet, confirming the validity of all the included transactions.
Scroll emphasizes its compatibility with the Ethereum Virtual Machine (EVM), which allows for easy porting of existing Ethereum smart contracts to its platform.
Key Advantage: Scroll focuses on achieving high throughput while keeping costs low. It aims to provide a more efficient alternative for DeFi applications and other high-transaction-volume use cases.
7. Aztec Protocol
Launch Date: 2017
Native Token: No native token yet.
Aztec's hybrid public-private ZK-Rollup model executes smart contract logic both publicly and privately, maintaining Ethereum's security. Privacy is optional, enabling applications from private trades to anonymized voting.
A key feature is Noir, a programming language for writing zero-knowledge circuits, simplifying the development of dApps that use ZK proofs. The protocol aims to fully decentralize all its core components by its mainnet launch, aligning with Ethereum's values of open-source development, censorship resistance, and permission-less systems.
Key Advantage: Aztec's strengths include programmable privacy, a hybrid model, Noir language, and private-public composability.
8. ZKFair
Launch Date: December 2023
Native Token: ZKF, used for gas fees, governance, and earning rewards from gas fees.
ZKF Market Cap: $163 million
ZKFair is designed as a decentralized exchange (DEX) using ZK Rollups. It specializes in ensuring fair trade execution and preventing front-running.
ZKFair employs zero-knowledge proofs to process transactions off-chain and then batches them to Ethereum. Its key feature prevents transaction order manipulation (like front-running), which is common in other DEXs.
Key Advantage: Its resistance to front-running and trade order manipulation is ZKFair's standout feature, offering a fairer trading environment. ZKFair's approach caters to traders concerned about the integrity of their transactions in decentralized trading environments.
9. DeGate V1
Launch Date: September 2022
Native Token: DG, used for governance, staking, and fee payments on the derivatives platform.
DG Market Cap: $21.14 million
DeGate V1 is built on a ZK rollup, a type of layer 2 scaling solution for Ethereum. It uses zero-knowledge proofs to batch multiple transactions off-chain before submitting them to the Ethereum mainnet. This process helps reduce transaction costs and increase throughput while maintaining the security of the Ethereum network.
Key Strength: DeGate V1's unique selling point is its focus on being a decentralized exchange (DEX) optimized for low slippage and low cost, specifically targeting large trades.
10. ZetaChain
Launch Date: February 2021
Native Token: ZETA, used for gas fees, governance, and cross-chain communication for the interoperability platform.
ZetaChain is pioneering "universal bridges" between blockchains using ZK Rollups for secure and efficient cross-chain communication. It utilizes zk-SNARKs to prove the validity of transactions on one chain without revealing any confidential information on the other chain. Enables seamless asset and data transfer across different blockchains.
Key Strength: ZetaChain focuses on interoperability and cross-chain functionality, enabling dApps to utilize assets and data from multiple blockchains seamlessly. It also features a unique "ZetaML" technology for off-chain smart contract execution.
11. Taiko
Launch Date: January 2024 (testnet)
Taiko is pioneering in the Ethereum ecosystem with its innovative use of Zero Knowledge Ethereum Virtual Machine (ZK-EVM) and ZK rollups to create a decentralized Layer 2 blockchain protocol. It is designed to be fully compatible with Ethereum, allowing for the seamless deployment of existing Ethereum dApps without any modifications, thus ensuring a smooth transition for developers and maintaining the integrity and principles of the Ethereum network. Taiko has raised significant funding, amounting to $37 million across two rounds, to support its development and growth. It has shown substantial progress through its Alpha testnets, attracting wide participation from developers and validators alike.
Key Strength: A notable advancement in Taiko's technology is its "based" sequencing method, which sets it apart in the landscape of rollup solutions. In this architecture, the sequencer—a crucial component that functions similarly to an air-traffic controller by bundling transactions for finalization—is driven by the base or layer-1 blockchain rather than being a separate, centralized entity. This approach addresses a common concern in current rollup technologies, where a centralized sequencer could act as a single point of failure or a potential vector for censorship. Taiko's based sequencing simplifies the layer-2 value chain, streamlines trust assumptions, and reduces friction for developers looking to adopt this technology.
Challenges of ZK Rollup Technology
Despite their advantages, ZK rollups are not without challenges:
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Complexity: ZK rollups use advanced cryptography, making them difficult to implement and maintain.
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Limited Flexibility: ZK rollups have limitations on the types of transactions they can efficiently process, restricting their use cases.
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Data Availability: The need for data corresponding to rollup transactions to be available is critical, requiring robust data management.
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Prover Efficiency: The resource-intensive nature of generating cryptographic proofs can lead to efficiency issues.
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User Adoption and Integration: ZK rollups require widespread adoption and integration into the blockchain ecosystem, necessitating user trust and infrastructure support.
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Governance: Decisions about protocol upgrades and changes can be challenging, requiring an effective, decentralized, and secure governance model.
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Cost and Viability: Despite aiming to reduce transaction costs, the economics of running and using ZK rollups can be challenging due to operational expenses.
Future Outlook for ZK Rollup Blockchains
The future of ZK rollups is bright, with ongoing developments aimed at simplifying their complexity and enhancing their integration with Ethereum. Continued research and development are addressing complexity issues, while innovative solutions are emerging to overcome liquidity fragmentation.
With sustained growth and collaboration, ZK Rollups have the potential to revolutionize the Ethereum ecosystem and usher in a new era of high-speed, cost-effective, and secure blockchain applications.
Closing Thoughts
ZK Rollups represents a groundbreaking technology reshaping the scalability landscape of Ethereum. By efficiently processing transactions off the main chain while ensuring security and data integrity, they hold the promise of a more scalable, efficient, and robust Ethereum ecosystem, as well as the broader blockchain ecosystem.
Their ability to break through existing limitations opens the door for mass adoption of blockchain technology, unlocking its full potential to empower individuals and redefine how we interact with the world.
Further Reading
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Zero Knowledge Proofs (ZKPs) in Blockchain: A Beginner’s Guide
- How to Stake Ethereum in 2024: A Comprehensive Guide