The layer 2 project zkSync last night unexpectedly announced it had raised an additional $200 million. Recently when the community is boiling with the airdrop hunting movement, everyone knows that zkSync is one of the 4 biggest Layer 2 projects and is about to release a token. However, if only that is the case then it is impossible for a project to raise to 200M during such a negative market time.
So what is zkSync, which stage it's in, and what potential does the project have? Why does Vitalik Buterin believe it will bring mass-adoption to crypto. Join Holdstation to learn more about this Layer 2 below.
Project overview
zkSync is a Layer 2 for the Ethereum network, a project belonging to the same Zk Rollup solution group as StarkWare and a counterweight to the Optimistic Rollup group of Arbitrum and Optimism. The Zk Rollup solution uses Zero knowledge proof technology, which allows aggregating a large number of transactions on Ethereum and execute on Layer 2. In a word, zkSync allows for faster transaction execution with much cheaper fees than Ethereum.
Team and Backer
The project was launched by Matter Labs in 2020, although it has been in development since 2018. The two core founders of Matter Labs include Alexander Vlasov and Alex Gluchowski. Both are seasoned blockchain developers, especially Gluchowski, who has nearly 20 years of experience and worked as CTO of many large projects before devoting himself to zkSync.
zkSync announced last night that it successfully raised another $200M in round C, with a total raise of $458M so far. zkSync's funding rounds are led by market leading venture funds such as a16z, Dragonfly Capital, Coinbase Venture, Parafi, etc.
➡ Compared to Layer 1 that have been heavily invested recently like Aptos, Sui with $350M, $300M, zkSync is still much larger. Although this is only a Layer 2, and not much attention from the community. Along with the market is in a difficult period, the fund raising of zkSync is very impressive ➡ It shows that VCs expect a lot from this project.
Especially, zkSync is backed by a large number of CEX exchanges such as Binance, Huobi, Okex, Crypto.com, ... So the possibility of being widely listed when the project releases tokens is high.
Outstanding Technology
zkSync uses ZkRollup, which Vitalik Buterin himself thinks will surpass the Optimistic Rollup and become the future of Ethereum. For now, all data processing will be done off-chain, and push the transaction onto the on-chain. This means that zkSync greatly increases processing speed but still retains the same security as Ethereum. More specific:
- Transaction processing speed of zkSync will be about 50x faster than Ethereum, with TPS of 300.
- Transaction fees are extremely cheap, currently only about $0.02/transaction compared to tens of $ on Ethereum.
- Good security, Zk Rollup is said to be the best security solution currently in Layer 2. Users can completely forget their accounts for a few months and still can withdraw their assets safely, even when the validator is no longer active.
- Asset deposit and withdrawal times are much shorter than Arbitrum and Optimism's Optimistic Rollup technology.
To be able to ensure the above features, zkSync currently includes 2 main components: zkEVM and Zk Porter.
zkEVM
The technology allows compatibility with Ethereum servers and other EVM chains. Although it does not have a huge impact on the performance of zkSync, it plays a very important role. Because it makes it possible for Dapps/tokens/NFTs to fully migrate to zkSync and enjoy the advantages of Zk Rollup technology without any changes.
zkPorter
In the upcoming zkSync 2.0 version, users will be allowed to choose between a zkRollup account and a zkPorter account, which are:
- zkRollup is more about on-chain data, with high security.
- zkPorter is more about off-chain data, with powerful data processing capabilities.
➡ The ability to flexibly switch and combine these two accounts is the zkPorter feature. Therefore, zkPorter is the most important and necessary pillar with zkSync 2.0, allowing the project to thrive in both security and processing speed. Far superior to other Layer 1, Layer 2.
Where is zkSync's position now?
It can be seen that this is a potential project with an ambitious future. But now, where has zkSync come from on this path? In the long term, the roadmap of zkSync includes 4 major phases below.
- With the first phase, or zkSync 1.0, the project was simply for payments and transactions on Ethereum.
- By the second stage, zkSync 2.0, we see a big change. Starting to adopt smart contracts means building Dapps and Defi ecosystems on this Layer 2. At the same time, this is also the period when new features such as Account Abstraction are introduced.
- In Phase 3, the project will focus on security for users.
- And finally in phase 4, zkSync will move all the way to decentralization, the ultimate destination of every crypto project.
➡ We are currently at the end of phase 1 and beginning of phase 2 as a pre-mainnet and have not officially launched zkSync 2.0 yet. It can also be said that this is the most important moment because it marks a big change in both technology and development direction of the project, from a supporting technology to a cryptocurrency ecosystem.
More specifically, if divided into small stages, we have now completed Baby Alpha, which means that the stage has been prepared for the mainnet. The next milestone will be Fair Onboarding Alpha, allowing all Dapps to be completed on zkSync in preparation for users.
What to expect for zkSync next time?
As mentioned above, we are at the stage where there will be major changes to the project. Personally, in my opinion, this is the most important moment in the long journey of zkSync, and accordingly there will be many expectations for the cash flow and the community to pursue. Those expectations are:
👉 zkSync 2.0 – Prepared for 4 years, with quality team and backer, the technology of zkSync 2.0 is expected to surpass all Layer 2 and Layer 1 other than Ethereum. So this is definitely something to look forward to. Especially, more than 150 Dapps available on zkSync will simultaneously be officially launched later.
👉 Token launch – Launching a large ecosystem will require a large amount of incentive to attract users, so it is almost certain that zkSync will launch tokens in the near future. With the support from the majority of CEX exchanges and a great position, the zkSync token will have a certain degree of FOMO from the community.
👉 Layer 3 – This is a post-launch phase that zkSync plans to deploy in Q1/2023. A completely new Layer 3 definition with Proof of concept, zkSync thinks it will bring 10 times the efficiency of Ethereum.
zkSync Ecosystem
Currently on zkSync there are about 150 projects under construction, including multichain projects. Most of them are still in Beta or pre-mainnet stage. We can see in the main areas such as:
📍DEX – There have been big projects like Mute.io, Zigzag Finance, Trustless for being live compared to beta projects, or famous Multichain projects Uniswap, 1Inch, ...
📍Wallet – There are not too many Wallets connected to zkSync, the only one that stands out is Argent running concurrently on Starknet. In addition, there are other wallets like Onto, Bitkeep, Numio, Im Token, …
📍Lending – Currently there are only 2 Dapps, Yearn Finance and Taker Protocol. In particular, Yearn is neither a native project nor a strong lending project, so the cash flow burden of the system will be placed on Taker.
Looking at other segments such as Perpetual, Infrasstruture, Gaming, we can see that each segment has only a few projects and is not really strong. Mostly large numbers focus on bridge projects that already support zkSync.
➡ It can be seen that this ecosystem is still young. This development needs to be driven by incentive packages and more projects in core areas such as DEX, Lending, Perpetual to attract cash flow. However, this is also a very early opportunity for those who want to find "seed" opportunities.
Summary
zkSync is a very potential project in the future, with all 3 solid elements: technology, people and finance. However, due to the lack of a full mainnet and no token release, the zkSync ecosystem is still in its infancy and has not received much attention from the community. So at the moment, there are no clear investment opportunities, however, for those who often hunt for airdrops or investors with foresight, zkSync is an option not to be missed.