Introduction
You need to know about the ZKSync project during the last bull cycle we saw all sorts of projects try to come for Ethereum's spot as the largest layer 1 blockchain and so far none have been able to come close but if Ethereum wants to stay on top for the long term it needs to fix some major problems particularly around scalability. Over the last few years, we've seen all kinds of projects develop new technology to combat these issues and one of the early leaders has been none other than ZKSync.when Ethereum went live in 2015 it was still a very early era of the crypto industry like most first-generation blockchain networks Ethereum is designed to be super decentralized and secure but this resulted in it being a slower blockchain compared to the newer ones and it's no secret that these scalability issues have resulted in heavy network congestion and super expensive transaction fees during peak periods so even though Ethereum remains on top for now it needs to fix these issues or risk getting surpassed by alternative layer ones that's why for years
Ethereum developers have been working around the clock to resolve these issues and once Ethereum is as fast as cheap and as reliable as today's internet it will have a much better chance of seeing mainstream adoption. The good news is projects like ZKSync offer promising solutions for these issues without having to change the main Ethereum network with a scary hard fork. These types of solutions are called layer twos and you've probably heard of other layer twos like Polygon and Arbitrum. That's why today we're covering all things ZKSync and how its ecosystem stacks up in the layer 2 wars.
zkSync History
Alright, let's get into ZKSync and why I expect this project to play a massive role in Ethereum's long-term success. ZKSync was born out of a German-based engineering team known as Matter Labs, founded in 2018. Matter Labs was one of the first companies that set out to fix Ethereum's scalability issues, and by 2020, Matter Labs released their first Ethereum layer 2 scaling solution known as ZKSync V1. If you're unfamiliar with what layer 2s are, feel free to check out my Arbitrum video where I explained them in much more detail. But the TL;DR is that layer 2s help take the load off of the layer 1. They then batch many transactions together and process them in a faster and cheaper environment, then eventually commit the transaction results back to the layer 1, such as Ethereum. This allows for high scalability without sacrificing security.
So, ZKSync Version 1 went live in 2020, and this specific layer 2 was capable of running 300 transactions per second, which was 20 times more than Ethereum's capacity. While 300 isn't that fast by today's standards, it was a sign that ZKSync had real technology to help Ethereum scale. Since the very early days, combined with the fact that ZKSync had a much bigger plan to launch a much more powerful scaling technology, it's no surprise that ZKSync caught the eyes of some pretty big investors. Some of the most notable investors behind ZKSync are the Ethereum Foundation, a16z, Union Square Ventures, and Blockchain Capital. Between these big names, Matter Labs raised a whopping $458 million over a series of funding rounds between 2018 and late 2022. Perhaps one of the most significant aspects of this raise was the staggering $200 million ecosystem fund that will be used to bring new promising projects and get them through the next bear market phase.
zkSync Technology
So you guys think version 1 has been live for over two years now, and it's a layer 2 scaling solution that offers faster and cheaper transactions than the main Ethereum blockchain. But the recent hype around ZKSync isn't about its old version, version one. It's actually the anticipation for the upcoming release of ZKSync version 2, which will consist of two main parts.
The first part is their CK EVM, which is a ZK roll-up that has full support for the Ethereum Virtual Machine (EVM). This kind of CK EVM roll-up has been all the hype recently, as the EVM compatibility means that users and developers can seamlessly onboard onto the network. You just need to add a new network to your MetaMask wallet, and you're in and ready to use the ZKSync 2.0 network. For developers, CK EVM also allows any project to migrate their existing Ethereum application onto ZKSync with ease. All the programming language tools and everything else remain the same.
The CK EVM of ZKSync also has full on-chain data availability, which means there is no compromise for security and decentralization. Even though some transactions are being batched together and periodically quickly committed to Ethereum, in the end, all that data is still available on Ethereum's backup if you want to access it and verify it later on.
On the other hand, ZKSync will also soon launch ZK Porter, which is the second part of the ZKSync 2.0 network. This is a similar scaling solution to the ZK EVM but uses off-chain data availability. This means that ZK Porter sacrifices a bit of decentralization but, in exchange, offers much higher speed and cost improvements.
The ZK EVM of ZKSync will allow for 2,000 transactions per second, which is already on par with alternative layer ones like Binance Smart Chain (BSC) and Avalanche. CK Porter, however, can scale up to 20,000 transactions per second, and as a benchmark, a Uniswap transaction will only cost 3 cents in gas fees.
This dual-branch design of ZKSync 2.0 will allow for both the ZK EVM and CK Porter to be interoperable with each other to allow for both ultra-secure and ultra-cheap and fast transactions on the same protocol. And to be clear, CK EVMs are not different from CK Roll-Ups, rather an upgrade to them.
The launch of the CK EVM represents an essential turning point for crypto because, for a very long time, a fully EVM-compatible CK roll-up environment was only considered a theoretical possibility that would take years to complete or might not even be feasible at all. So the fact that ZKSync already has the CK EVM on Alpha mainnet and will soon open it to the public is a huge testament to how far the CK roll-up technology has come throughout the crypto space.
I should also mention that ZKSync uses what is called a snark as a zero-knowledge proof or ZK proof. All ZK Roll-Ups rely on some form of ZK proofs, which are cryptographic tools used to verify that transactions are correct without having to store and reveal large amounts of data back on the L1. Generating this proof is the real hard technology that all the ZK Roll-Up teams are trying to achieve and optimize. But once it is generated, the process to submit and verify the transaction back on the layer 1, such as Ethereum, is relatively easy.
zkSync Updates
TKSync: Let's look at some of the most important Partnerships and Milestones of TKSync over the years. After all, the technology alone is nothing without real adoption.
In January of 2022, BitDao, the investment arm of the Bybit exchange, passed a proposal to form the DKDao, which is an accelerated fund dedicated to expanding the ZKSync ecosystem. This was the fund we talked about, which hosted $200 million of the ecosystem fund, all aimed to help developers onboard the CKSync.
In February of 2022, CKSync launched its DK EVM and CK Porter on the testnet and was warmly welcomed by the Ethereum developer community to test it out. Then, later on in October of last year, CKSync announced its Layer 3 protocol called Pathfinder, which will launch on the testnet in early 2023. This prototype will demonstrate ZKSync's roll-up technology as a fractal hyper-chain, as they called it, with potentially limitless speed. This sounds cool, but I'd like to see the Layer 2 launch on the mainnet first.
During the same month in October, DKSync version 2 supposedly launched on the mainnet, although this launch was heavily criticized by its competitors as it was named the "baby Alpha" and wasn't exactly ready. While CKSync's technology is connected to the Ethereum mainnet now, it is still not open to external projects. Rather, the system is going through a series of real money stress tests that will help verify the production system. So basically, it's like a testnet but only with real money. The full CKSync launch, which is open to outside teams, will come later in 2023.
During the same month in October of 2022, the biggest decentralized exchange, Uniswap, passed a proposal to deploy the platform onto DKSync. Nearly 100% of all votes approved this proposal, and it's a big deal as Uniswap support is the biggest test of a decentralized application on every new network.
Then, from October to December of 2022, TKSync announced a series of high-profile DeFi and infrastructure partnerships, including Chainlink oracles, OneInch, Curve Exchange, Anchor, and The Graph Protocol. These partnerships are crucial for the growth and development of the CKSync ecosystem.
Shortly after the "baby Alpha" launch in November of 2022, TKSync announced their commitment to release all software as open source, further cementing their position as a public good project for the Ethereum ecosystem. Ethereum fans love open source as it promotes transparency and community involvement.
Moving on to much more recent developments, in February of 2023, DKSync's biggest competitor, Polygon, announced the launch of their TKEVM on the mainnet, set for March 27th, 2023. Now the race is on between ZKSync and Polygon to be the first to successfully launch a ZKEVM on the mainnet and actually build an ecosystem.
Just two days after the Polygon announcement, TKSync also made their move by announcing the Fair Onboarding Alpha for their new network, along with a full rebrand. The old CKSync 1.0 network is renamed as ZKSync Lite, and the upcoming ZKSync 2.0 is renamed CKSync Era. Starting on February 16th, pre-registered projects can start to deploy their dApps on CKSync Era, which is the new mainnet.
zkSync Ecosystem
Speaking of the mainnet, let's look at the current ecosystem of ZKSync. What is there to play with? The old CKSync version 1, or CKSync Lite, isn't actually that big of a network or very significant, and it only has a total value locked (TVL) of $65 million. For comparison, the top Layer 2 right now, Arbitrum, has $1.4 billion of TVL. If you want to learn more about Arbitrum, check out my other in-depth overview of their ecosystem (the link is in the description).
So, ZKSync still has a long way to go to catch up to Arbitrum, but I believe the massive ecosystem fund of $200 million could help. According to Matter Labs' CEO, during a February interview, ZKSync Era has already over 200 projects lined up to deploy. Once the CKSync 2.0 or ZKSync Era opens up to public developers, lots more projects will start building on it, and they'll get a surge of users as new people come in to participate in the early ecosystem and potentially make some new profits, just like when we first had Binance Smart Chain (BSC) and Avalanche launched during the Layer 1 narrative, and Arbitrum and Optimism launched during the Layer 2 narrative.
On top of that, they will hope to get the ZKSync token airdrop, which we'll talk about in a bit. The goal for ZKSync will be to create an ecosystem worth using and not having a product that people only use to get network incentives, coming from the growth fund, kind of like what we saw with Optimism.
And I think they are on the right track because, according to Dune Analytics, ZKSync has around 500 unique users and has experienced growth of around 50,000 new unique wallets in the last month alone. This is without a token live, and it's likely due to the buildup in hype for version 2, showing just how much potential the community sees in this project.
To get a full sense of the ZKSync user experience and to take advantage of the potential ZKSync token airdrop, you should check out my ZKSync airdrop tutorial video (linked in the description). There are all kinds of applications to try, ranging from decentralized exchange, futures trading platforms, lending protocols, and NFT marketplaces. The added bonus is that it's super easy to onboard; you just need to add it to your MetaMask as a separate network, similar to using Binance Smart Chain for the first time.
Roadmap
Let's look at where I see ZKSync going in the future. As I mentioned earlier, all eyes are on CKSync's upcoming launch of version 2 or ZKSync Era. Here is where we might see it go live.
Currently, ZKSync Era has just started its Fair Onboarding Alpha phase, so it still isn't fully open just yet. Right now, you cannot use ZKSync Era. When it comes to developers, not everyone is able to create new applications on ZKSync Era today. Only the first 200 pre-registered teams can deploy on the network today, and these projects have all gone through an application process and were approved by the ZKSync team. These projects include some pretty big names like Uniswap and OneInch, plus a wide variety of new dApps like decentralized exchanges and NFT marketplaces.
The next stage coming in 2023 will be their full launch, where anyone can start to deploy applications on CKSync without asking for permission. This full launch event is set for early 2023, and I think it has a chance to come in right at the end of March or early April to compete with Polygon's DK EVM launch on March 27th. Although there haven't been any official statements regarding these dates, my speculation is that the earlier they can launch, the more chances they have at grabbing a huge market share from other competitors like Polygon.
The whole ZK narrative will draw a lot of attention from across the crypto space. Regardless of the launch date, I think it's guaranteed that ZKSync will have a large ecosystem because developers and users will want to take advantage of the large ecosystem fund and the airdrop token. So definitely pay attention to ZKSync in the Layer 2 narrative in the next bull cycle, which I think is just about to start now.