ZK Rollups: Building on a $220 Billion Ecosystem

A Deep Dive into Top ZK Rollup Solutions for Unprecedented Scalability

Blockchains, though revolutionary, grapple with challenges in maintaining trust minimization, especially for high-speed, low-cost use cases. The ambition to extend the benefits of trust minimization to a global scale necessitates a quantum leap in transaction processing capabilities while ensuring accessibility for everyday users to participate in the Web3 economy seamlessly.

The limitations are evident; as of now, more than 155,500 Ethereum transactions are pending, showcasing the strain on the system. Paying $25 or more in gas fees for a single transaction becomes a hurdle, particularly for those engaging in DeFi. Here is a deep dive into ZK Rollups that may change the ETH dynamics for years to come.

Scalability as the Key Enabler

Recognizing scalability as the linchpin, blockchain research and development have become more dedicated to overcoming this challenge. The objective is to elevate the technology’s scalability, empowering smart contracts to underpin major industries like finance, insurance, logistics, gaming, and beyond.

The Rollup Solution

Among the diverse approaches to scaling blockchains, the concept of rollups takes center stage. This strategy involves shifting computation and state into off-chain networks while preserving transaction data on the blockchain.

There are two primary types of rollups: Optimistic and Zero-Knowledge (ZK). Our focus in this article will be the transformative landscape of ZK rollups.

Projections indicate that Web3 services will demand nearly 90 billion Zero-Knowledge proofs to be executed by 2030, aiming for a market-wide completion of 83,000 transactions per second. In perspective, the Visa network handles up to 65,000 transactions per second. Moreover, the report also anticipates the market for generating Zero-Knowledge proofs to reach $10 billion by 2030.

Laying the Groundwork: Basics of ZK Rollups

Before we dive in deeper, let’s establish a foundational understanding of the fundamentals that govern ZK rollups.

Rollups

Blockchain rollups are Layer 2 (L2) blockchains that introduce an innovative strategy to transaction processing. Rollups, operating on a distinct network, aggregate individual transactions into cohesive batches before publishing them onto the Layer 1 (L1) network.

At its core, the essence of rollups lies in the combination of individual transactions (akin to consolidating letters) into a batch (like a collective envelope). This consolidated batch is then efficiently posted or recorded on the L1.

The strategic role of rollups is twofold, alleviating computational stress on Layer 1 networks through:

  1. Off-Chain Computation and State Storage: Rollups shift the burden of transaction computation and state storage off-chain, reducing the strain on the primary Layer 1 network.
  2. Data Compression for Efficiency: Another critical function is data compression for each transaction stored on Layer 1. For example, a straightforward ETH transfer consumes approximately 110 bytes on Ethereum, while on a rollup, it occupies a mere ~12 bytes, showcasing a significant reduction in data footprint.

Zero-Knowledge Proof

Zero-knowledge proof (ZKP) is a cryptographic marvel- a technique harnessed to demonstrate ownership or validity of certain information without exposing the information itself.

The intriguing aspect lies in its “zero-knowledge” attribute, where the proofing process unfolds without divulging the underlying details.

Understanding this intricate concept becomes simpler through everyday analogies.

Envision yourself as a baker holding a secret ingredient, promising a unique gold crust when added to a basic pizza recipe and baked in a special oven. Rather than subjecting others to replicate the process 100 times for verification, you present a swift method to confirm the crust’s uniqueness without revealing the secret ingredient.

This baker’s analogy mirrors the zero-knowledge proof—validating a statement swiftly without requiring exhaustive processes or unveiling specific details. Translating this to blockchain is akin to the mining process.

Picture a miner asserting, “I’ve discovered a nonce that, when appended to a specific block’s header and hashed through SHA256, generates a hash value commencing with a set number of zeros.”

Instead of demanding every network participant to compute the hash for validation independently—a resource-intensive endeavor—the miner provides concise proof. This proof enables swift claim validation without extensive hashing computations or the revelation of the exact nonce used. Simple, right?

A Cornerstone For The Future?

Introduced by MIT students Shafi Goldwasser and Silvio Micali in 1985, the concept of ZK proofs has undergone significant evolution. Originally conceived as a theoretical construct, ZK proofs have transcended theoretical realms to find practical applications in privacy and security-focused systems. Notably, ZK proofs contribute to the cryptographic foundation and fortify privacy-centric cryptocurrencies like Zcash.

While ZK proofs play a pivotal role in enhancing privacy and security, their potential in web3 extends beyond. The convergence of ZK proofs and rollups births an ingenious solution—zero-knowledge rollups.

ZK Rollups vs Optimistic Rollups

When diving into scaling solutions for Ethereum, two predominant methodologies have taken center stage: ZK-rollups and Optimistic rollups.

Despite sharing the common goal of enhancing transaction throughput on the underlying blockchain, their operational mechanics set them apart.

It prompts the question: What sets Optimistic rollups and ZK-rollups apart?

Optimistic Rollups

Optimistic rollups derive their name from their inherent assumption: they deem all Layer 2 transactions valid until proven otherwise. This optimism manifests in their approach, where the validation of transactions relies on subsequent verification.

In contrast to their ZK-rollup counterpart, Optimistic rollups don’t utilize validity proofs during the initial validation phase.

ZK-Rollups

In ZK-rollups, the focus shifts to cryptographic validity proofs. This paradigm shift results in a faster validation process as ZK-rollups necessitate only the validity proof, eliminating the need for all transaction data during the initial assessment—a requirement for Optimistic rollups.

Comparative Analysis of Rollups

FeatureOptimistic RollupsZK-Rollups
SecurityOffers lower security compared to ZK-Rollups as transactions occur on-chain and are publicly visible.Provides higher security than Optimistic Rollups by executing transactions off-chain and encrypting details with zero-knowledge proofs.
ScalabilityDemonstrates improved scalability compared to the Ethereum mainchain, enabling off-chain transactions without overloading the mainchain.Exhibits enhanced scalability compared to Optimistic Rollups by consolidating multiple transactions into a single transaction, thereby reducing gas fees and increasing Ethereum network scalability.
InteroperabilityAllows interoperability with other blockchains.Has limited interoperability.
PrivacyAffords limited privacy, as transactions are on-chain and visible to the public.Enhances privacy by executing transactions off-chain and encrypting details with zero-knowledge proofs.
ComplexitySimplified compared to ZK-Rollups, making it easy to implement without requiring a high level of technical expertise.More complex compared to Optimistic Rollups, demanding a higher level of technical expertise for implementation.
CentralizationCan lead to centralization if not implemented properly.Can also result in centralization if not implemented correctly.
ChallengesFaces a long withdrawal period (Layer 2 to Layer 1) due to a dispute period and fraud-proof mechanism, necessitating the existence of verifiers.Requires more expensive hardware and incurs higher costs to generate zero-knowledge proofs for validations.
BenefitsOffers lower rollup costs by assuming every transaction is valid until a fraud-proof claim, eliminating the need for cryptographic proofs for every transaction block.Facilitates a faster withdrawal time with no dispute period, as everything is verified through cryptographic proofs.

While Optimistic rollups have secured an early lead in adoption due to their relative simplicity, proponents of ZK-rollups envision them as the superior long-term solution for scalability. The cryptographic verifiability inherent in ZK-rollups’ validity proofs positions them favorably in the evolving landscape.

In a 2021 blog post, Ethereum co-founder Vitalik Buterin shared his perspective on the future trajectory. He asserted that, as ZK-SNARK technology advances, ZK-rollups will outshine their optimistic counterparts across all use cases in the medium to long term.

With years in the making, the Ethereum landscape is on the cusp of a transformative era. This anticipation is substantiated by the consistent growth in Total Value Locked (TVL) in Layer 2 solutions, signaling the imminent arrival of a new chapter in web3’s evolution.

How Do Zero-Knowledge Rollups Work?

Caption: ZK-Rollups aggregate transactions into batches, which are processed off-chain and verified on-chain through a validity proof.

To unravel the inner workings of zero-knowledge rollups, let’s break down the process into two integral components: the core infrastructure and the execution process. These components play a pivotal role in propelling the scalability of L1.

1. Core Infrastructure

Zero-knowledge rollups rely on a dual-layered core infrastructure.

  1. On-chain Contracts: The on-chain facet involves smart contracts operating on L1. The primary contract is responsible for storing rollup blocks, tracking deposits, and overseeing state updates from the ZK rollup. Another verifier contract validates ZK proofs submitted by block producers, ensuring the integrity and accuracy of the data.
  2. Off-chain Virtual Machine: Complementing the on-chain contracts is the off-chain virtual machine, a dynamic execution engine responsible for computing and storing transactions and chain state. ZK rollups leverage ZKPs to assist L1-based verifier contracts in affirming the accuracy and legitimacy of computations within this off-chain VM.
2. Execution Process

The execution process unfolds through three key stages, starting with sequencing.

  1. Sequencing: Analogous to node operators on L1, ZK rollups enlist sequencers responsible for executing transactions. Rollups consolidate these transactions into batches, a process aptly termed sequencing. Once compiled, it submits these batches to the ZK rollup contract.
  2. Proof Generation: Following sequencing, ZK rollup operators step into proof generation. Their role is to produce validity proofs, offering a mechanism to verify the correctness of a batched transaction.
  3. Proof Verification: The final stage, proof verification, involves employing validation mechanisms such as zk-SNARKs or zk-STARKs. These mechanisms rigorously assess the integrity of the ZK proofs submitted on-chain. The proof must convincingly demonstrate a sequence of valid transactions from L1’s pre-state root to the ZK rollup’s post-state root. Once validated, the ZK rollup’s post-state root attains the status of ‘valid’ and is published on the L1, marking the successful completion of the execution process.

Pros And Cons Of ZK Rollups

ProsCons
Dramatically improves scalability.Requires a high level of technical expertise, especially for existing blockchain networks.
Maintains transaction privacy through zero-knowledge proofs.Users must trust rollup operators for off-chain transaction handling.
Increases overall transaction throughput on the Ethereum smart contracts ecosystem.Necessitates additional storage space for off-chain transaction data and cryptographic proofs, potentially incurring higher storage costs.
Variable consensus process ensures transaction validity.May suffer from limitations of the base layer.
Enhances computational bandwidth of L1, reducing the need to execute every single transaction.Fragmentation of liquidity poses challenges in permissionless composability.
Possesses key security-enhancing mechanisms.Some rollups have compatibility issues with EVMs.
Lowers user and consensus transaction costs.Relatively new, requiring more studies for comprehensive understanding.
Minimizes trust requirements.Carries upgradable risks.
Some ZK-Rollups use a supernode, a single operator, which may result in centralization, censorship and affect transaction order.

Despite the limitations outlined in the table, ZK-Rollups emerge as highly promising technologies crucial for scaling the blockchain economy. Their distinctive feature lies in their ability to maintain the security and censorship resistance of the base layer.

Leaders in Ethereum-Compatible ZK Rollups

Within the Ethereum-compatible ZK rollup domain, four prominent innovators are spearheading promising solutions: Polygon, Scroll, zkSync, and StarkWare.

Let’s explore each of them.

Polygon zkEVM: Pioneering ZK Tech

Polygon zkEVM is an early pioneer in ZK technology, adopting them as L2 scaling solutions. Polygon laid the foundation of the Polygon ZK ecosystem in 2021 by establishing a $1 billion strategic fund, focusing primarily on zero-knowledge rollup research.

In March 2023, Polygon introduced its open-source zkEVM Ethereum scaling technology to the mainnet. Before this release, Polygon had acquired zk-focused projects such as Hermez and Mir (now Polygon Zero). Consequently, Polygon zkEVM emerges as an enhanced iteration of Hermez, enriched by contributions from Polygon Zero.

Source: Polygon

The ZK suite of Polygon currently encompasses four products.

With these products, Polygon provides a diverse range of ZK rollup solutions characterized by

Source: PolygonScan

These robust ZK rollup solutions, coupled with Polygon’s zkEVM, position themselves as noteworthy contenders in the race towards Ethereum scalability.

Scroll: A Community-Driven Zk-Rollup

Scroll emerges as an L2 scaling solution for Ethereum, leveraging zk-rollup tech to enhance the efficiency of Ethereum applications across various domains. As a general-purpose zk-rollup, Scroll is a versatile solution supporting any Ethereum application.

Established in 2021, Scroll embarked on a mission to forge an open-source, scalable ecosystem, harnessing the inherent capabilities of a zkEVM.

Over the past two and a half years, Scroll has collaborated with the Ethereum Foundation’s Privacy and Scaling Explorations (PSE) group. This partnership has resulted in substantial contributions, with Scroll contributing around 50 percent of the upstream PSE zkEVM codebase.

Moreover, from its inception, Scroll has been unwavering in its commitment to building an open-source, peer-reviewed, and permissionless project.

Three-Part Architecture

Source: Scroll

From a technological standpoint, Scroll stands on par with Polygon zkEVM, adopting a similar bytecode-level approach. Notably, Scroll leans towards being more EVM-compatible than its counterpart.

Mainnet Launch and Ecosystem Growth

The Scroll team officially announced the mainnet launch in an October 17 post. However, blockchain data reveals that the mainnet had been live since October 8, marked by deploying the first smart contract on the Scroll mainnet, according to Etherscan data.

Before the mainnet launch, Scroll’s three testnets witnessed the deployment of over 450,000 smart contracts, facilitating over 90 million transactions across 9 million blocks. Additionally, the network generated 280,000 ZK-proofs during this testing phase.

Source: Dune

The burgeoning ecosystem boasts close to 50 projects, with Scroll maintaining its security team to ensure the code’s correctness and ongoing updates.

Looking ahead, Scroll envisions key milestones on its roadmap that align with its commitment to decentralization. Two notable objectives include the establishment of a decentralized prover network and the implementation of a decentralized sequencer.

zkSync Era: A Potent Ethereum Scaling Engine

Developed by Matter Labs, zkSync has undergone a transformative journey from its initial iteration, zkSync 1.0 (now zkSync Lite), to its current state as zkSync Era. This upgraded version is a full-scale zkEVM, introducing cutting-edge features such as native account abstraction and an LLVM compiler.

Since its upgrade to zkSync Era, the platform has performed remarkably, processing over 165 million transactions utilizing ZKPs. Accompanying this achievement is a substantial TVL of over $114 million, underscoring the platform’s increasing popularity and widespread adoption.

Key Advantages of zkSync Era:
  1. Data Compression: zkSync Era prioritizes data availability (DA) and associated costs, a pivotal factor influencing transaction costs. By selectively publishing only state differences on-chain, zkSync significantly enhances data availability, reducing transaction costs, especially for transactions with substantial input data.
  2. Account Abstraction: The concept of account abstraction is native to zkSync, enhancing user and developer experiences. Initially focused on enabling users to pay gas fees in their currency of choice, account abstraction on zkSync opens the door to many use cases, including social recovery, gas subsidy, and the batching of complex transactions.

These features collectively position zkSync Era as a potent engine for scaling Ethereum.

Currently, zkSync operates without a native token, but investors should keep a watchful eye. As zkSync progresses towards complete decentralization, plans are underway to introduce a native token, serving as a reward mechanism for ZK rollup operators and facilitating staking within the blockchain.

Drawing inspiration from the trajectory of Arbitrum, a peer of zkSync that relies on Optimistic rollups, zkSync could launch an AirDrop event for its native token.

Source: Dune

Besides, the substantial backing of zkSync, having raised an impressive $458 million, showcases the confidence major capital ventures like Ethereum Foundation, Blockchain Capital, A16z, Coinbase, and others have in it.

Currently, zkSync Era boasts an ecosystem featuring over 200 deployed projects, signaling robust growth and adoption.

StarkNet: A Revolutionary Zk-Rollup

Starknet, a permissionless decentralized zk-rollup developed by Starkware, entered the live scene in late 2021. Notably, while it’s not EVM-compatible, its unique features make it a compelling player in the evolving landscape of zero-knowledge rollups.

Starknet operates on the Cairo programming language, meticulously optimized for zk-proofs. While StarkNet currently lacks inherent compatibility with the EVM, there are ongoing projects, such as Warp and Kakarot, endeavoring to develop zkEVM on top of StarkNet.

Distinguishing itself through a language-level compatibility approach, StarkNet transpiles EVM-friendly languages like Solidity into a STARK-friendly VM within Cairo. This innovation facilitates smart contracts and composability within the StarkNet ecosystem.

Source: Starkware

Leveraging StarkWare’s ZK technology, StarkNet achieves the scalability to process millions of transactions daily while upholding the robust security standards of the Ethereum network. This breakthrough ensures a seamless user experience without compromising on the fundamental tenets of blockchain security.

STARKs vs. SNARKs: A Nuanced Comparison

StarkNet deviates from the norm by opting for STARK (Succinct Non-interactive Argument of Knowledge) proofs instead of the more conventional SNARK (Scalable Transparent Argument of Knowledge) proofs.

Here is a concise overview comparing zkSTARKs and zkSNARKs:

FeaturezkSNARKzkSTARK
Proof SizeExhibits a low proof size, facilitating EVM data availabilityFeatures a high proof size, contributing to increased costs
Trust SetupNecessitates a trusted setup for implementationOperates without the need for a trusted setup
Verification TimeDemonstrates fast verification timesAchieves faster verification times primarily with large datasets
Quantum SecurityLacks quantum resistanceProvides quantum resistance
TransparencyExhibits less transparency due to the trusted setupOffers more transparency through the use of public verifiable randomness
ScalabilityShows less scalability with a linear increaseDemonstrates high scalability
Use CasesIdeal for systems prioritizing proof size and speedSuited for applications emphasizing transparency and quantum resistance
The Dilemma: zkSNARKs or zkSTARKs?

Choosing between zkSNARKs and zkSTARKs is not a straightforward decision. Each has its pros and cons:

  • zkSNARKs boast smaller proof sizes but are susceptible to centralization risks due to the requirement of a trusted setup.
  • zkSTARKs, on the other hand, offer enhanced security against quantum attacks but come with larger proof sizes and higher costs.

While zkSNARKs currently dominate in popularity and application, the ethos of Web3, emphasizing decentralization, leans towards zkSTARKs. Moreover, despite the current challenges, including larger proof sizes and higher costs, many view zkSTARKs as an evolution over zkSNARKs, particularly for their quantum resistance, scalability, and transparency. So, it’s not surprising that StarNet opted for zkSTARK over zkSNARK.

STRK Token and Governance on the Horizon

Source: Dune

Starknet is poised to unveil its native token, STRK, which many anticipate to unlock in April 2024. Deployed on the Ethereum network by StarkWare in November 2022, the devs have capped the total supply of STRK tokens at ten billion. $STRK will serve various functions within the Starknet ecosystem, including covering transaction fees, facilitating governance, and supporting staking initiatives.

StarkNet is currently navigating its initial phase toward achieving decentralization. As it progresses, Starknet aims to empower users and participants in the network by utilizing $STRK.

Cairo: Empowering Developers

An intrinsic highlight of StarkNet lies in its revolutionary programming language, Cairo. Crafted as a high-level language, Cairo ensures accessibility for developers well-versed in common programming languages like Python and JavaScript.

Moreover, tailored for efficient application development on the StarkNet platform, Cairo equips developers with the tools needed to harness the unique capabilities of StarkNet. These capabilities include high scalability, enabling extensive data manipulation, and executing intricate operations off the blockchain.

Despite being in the developmental phase, StarkNet has garnered attention from developers and projects alike. Notable names such as dYdX, Immutable, and DeversiFi have joined the Starknet ecosystem, with nearly 100 applications running on the mainnet.

StarkWare’s Strategic Vision

StarkNet’s appeal lies not only in its technological capabilities and demonstrated results but also in its forward-looking strategies. While other ZK rollup solutions strive to implement zkEVM, StarkWare has chosen a distinctive route.

By constructing its development environment with the STARK-specific programming language, Cairo, StarkWare showcases its faith in the potential scalability improvements achievable by diverging from EVM. The strategic decision also reflects a belief that the significance of EVM will diminish as the Ethereum ecosystem consolidates around Layer 2 solutions in the future.

Considering StarkWare’s technological prowess, demonstrated achievements, and future strategies, it is undeniably the most anticipated ZK rollup solution.

Overview of some ZK Rollups

RollupsProgramming LanguageTechCompatibilityFeesMainnet launch
PolygonSolidityzkEVMFully EVM equivalentETH-onlyMarch 2023 (Beta)
ScrollSolidityzkEVMFully EVM equivalentETH-onlyOctober 2023
zkSync EraPrimarily YUL
Supports Solidity/VyperPLONK, account-basedLanguage compatibility onlyAny ERC-20 tokenMarch 2023
StarkNetCairozk-STARKs, UTXO-basedLanguage compatibility onlySTRK or ETHApril 2023

Conclusion

ZK rollups stand at the forefront of blockchain scalability solutions, offering a promising avenue to scale the blockchain economy while preserving its fundamental principles of censorship resistance and trust minimization.

StarkWare’s strategic vision, Polygon’s diverse suite of products, Scroll’s commitment to a community-driven approach, and zkSync’s continuous evolution collectively illuminate a path forward, promising a future where Ethereum scalability is not just a goal but a tangible reality.

While major players like Polygon, StarkWare, Scroll, and zkSync require further development to maximize efficiency, ZK rollups emerge as the most robust long-term solution for blockchain scalability.

Many anticipate the coming year will be pivotal, defining which ZK rollup will establish dominance in Ethereum’s scalability landscape.

Moreover, as we eagerly await the next chapters in developing these ZK rollup solutions, one thing is clear: the journey toward Ethereum scalability is not just a technical pursuit but a collective endeavor to usher in a decentralized future for the entire Web3 ecosystem.

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