Users’ strong desire to overcome scaling challenges on the Ethereum blockchain is reflected in the increased use of Layer-2 scaling solutions. Zero knowledge (ZK) rollups are set to become the next big thing in the crypto world.
- Polygon ZK summit.
- What are ZK rollups and why are they important?
- Ethereum Layer-2 month.
Polygon ZK summit
Polygon yesterday announced its $400 million acquisition of ZK rollup startup Mirror Protocol (MIR). As part of the agreement, MIR and Polygon will form Polygon Zero. According to Polygon’s press release, the two protocols will collaborate to produce “a highly scalable, Ethereum-compatible ZK rollup”.
Mirror Protocol, according to Polygon, has the quickest ZK-proof technology, which means it can generate proofs more quickly and validate more transactions in a single proof. The MIR team spent a lot of effort inventing and optimising plonky2, a ZK-proof technology, according to Polygon co-founder Mihailo Bjelic.
Polygon has long been the go-to scaling solution for developers. It provides a framework that makes it simple for developers to create Ethereum scaling solutions and connect them to one another within the network.
In August, Polygon purchased Hermez Network for $250 million. This helped Polygon to create an ecosystem of Ethereum-centric scaling solutions, with ZK rollups verifying transactions faster, lowering gas prices, and enabling off-chain data storage among the ways the Layer-2 protocol is addressing Ethereum’s scaling concerns.
What are ZK rollups and why are they important?
Zero knowledge mechanisms are a way of verification by which one party can demonstrate to another that a condition is true without disclosing any information about the statement. They help create trust for users engaging in a blockchain and considerably speed up transaction verification while keeping information hidden.
Pairing ZK rollups with other technology, like zero-knowledge succinct non-interactive argument of knowledge (ZK-SNARK) solutions, which do not allow the prover and verifier to interact, lays a foundation for greater privacy and security.
The Ethereum blockchain faces a number of issues, one of which is scalability. Gas fees rise exponentially as the network is used by more and more decentralized apps and services, and transactions expand rapidly.
The deployment of ZK rollups is an important narrative in the Ethereum ecosystem and is fuelling considerable enthusiasm. As the mechanism resolves Ethereum’s foundational flaws, an exponential ecosystem is expected.
For example, by 9 December, the daily total value locked in zkSync, a user-centric ZK rollup platform from Matter Labs, had topped $60 million, up more than 600% from mid-June levels, demonstrating increased interest in the disruptive technology.
According to data from Dune Analytics, the cumulative transactions of overall and unique addresses of zkSync on the Ethereum mainnet increased by more than 625,000% and 8,550,000%, respectively, between June 2020 and December 2021.
Ethereum Layer-2 month
The fundamental purpose of Layer-2 scaling solutions is to increase transaction speed (faster finality) and transaction throughput (high transactions per second) without compromising the Layer-1 blockchain’s decentralisation or security.
As in the past, MATIC (the native token of the Polygon network) is expected to be the key beneficiary of the Ethereum scaling (this time with ZK rollups) story. This is likely to fuel rallies as indicated in the chart below.
Layer-2 protocol Loopring jumped 18.9% in a matter of hours last week after the deployment of ZK-rollups. In the coming months, ZK rollups are expected to be the next big thing in crypto.
Ether has weathered the current slump because of a confluence of fundamentals such as ZK rollups, fuelling tremendous optimism in the Ethereum ecosystem.
Ethereum appears to be on its way to become a settlement layer for a variety of Layer-2 efforts, with ZK rollups expected to be the next hot topic.