All You Need to Know about ZKsync Era ($ZK)

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KEY TAKEAWAYS

  • Zero-knowledge rollups like ZKsync Era are different from optimistic rollups like Arbitrium, Base and Optimism.
  • A one-time ZK token airdrop distributed 17.5% of total ZK token supply to 695,232 wallets in June 2024.
  • ZKSync also offers developers a rollup development framework called the ZK Stack.
  • Ethereum co-founder says all rollups will be ZK rollups in the next ten years.
  • ZKsync developer Matter Labs faced public backlash after the company tried to trademark the term “ZK.”

ZKsync Era — the world’s first zero-knowledge (ZK) rollup — launched its governance token, called the ZK token, in June 2024.

With zero-knowledge technology being touted as one of the most useful tools currently being developed by the cryptocurrency industry, investors have kept a keen eye on the ZKsync project.

In this article, we study the ZKsync Era protocol and its tokenomics and discuss the Optimistic rollup vs. ZK rollup debate.

What is ZKsync?

ZKsync Era is an Ethereum layer-2 (L2) rollup that uses ZK proof technology to submit transaction data to the base chain.

When transactions are executed on ZKsync Era, the rollup batches them into groups and generates a proof of validity for each group. Once the proof is generated, it is submitted to Ethereum.

ZK rollups like ZKsync Era are different from optimistic rollups like Arbitrium, Base, and Optimism. The former produces cryptographic proofs to verify the validity of transactions being submitted to the L1 chain. This validity proof is created using a zero-knowledge proof system.

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Meanwhile, optimistic rollups assume that all L2 transactions are valid unless proven wrong. Optimistic rollups allow anyone to challenge the validity of an L2 transaction within a dispute period. If a batch of transactions goes unchallenged during the dispute period, the transaction data are successfully submitted to the L1 chain.

ZK rollup transactions are more expensive than optimistic rollup transactions. However, ZK rollups enable instant transaction finality and don’t have seven-day waiting periods to withdraw tokens, as seen in optimistic rollups.

The development of ZKsync Era is led by a corporate entity called Matter Labs. In February 2023, Matter Labs announced that ZKsync Era is free and open source.

As of June 19, 2024, ZKsync Era’s total value locked (TVL) stood at over $138 million, behind established Ethereum rollups such as Arbitrum ($2.97 billion), Blast ($2.09 billion) and Base ($1.62 billion), DefiLlama data showed.

ZKsync Era is the first chain to be developed as part of the ZKsync ecosystem. More ZK rollups are expected to be deployed using the ZK Stack (more on that later).

Introducing ZK Token

In June 2024, ZKsync announced the launch of a native governance token called the ZK token.

$ZK Utility

According to ZK Nation – ZKsync’s community forum – the ZK token will allow token holders to:

  • Pay for network fees.
  • Introduce governance proposals.
  • Vote on protocol upgrades.

$ZK Governance

ZKsync’s governance system is made up of three on-chain bodies. They are:

  • Token Assembly – Token Assembly includes ZK token holders who delegate their voting power. Token Assembly proposes, corrects and approves protocol initiatives.
  • Guardians – According to ZK Nation, at inception, at least five individuals will participate as Guardians. They can exercise their veto and approve emergency actions.
  • Security Council – Security Council is a group of engineers, auditors, and cybersecurity professionals who provide technical reviews for protocol upgrades approved by the Token Assembly. They have the power to freeze the protocol in response to security threats and submit necessary time-sensitive protocol upgrades.

$ZK Allocation

ZKNation said two-thirds or 66.7% of ZK’s total supply of 21 billion tokens will be distributed to its community.

A one-time ZK token airdrop distributed 17.5% of total ZK token supply to 695,232 wallets in June 2024.

Here is how the ZK token is allocated to various parties:

Category Allocation in % of total supply Description
Airdrop 17.5% One-time airdrop with no lockups.
Token assembly 29.27% To be distributed by the Token Assembly
Ecosystem initiatives 19.9% Distributed by the ZKsync Foundation in grants and incentives.
Investors 17.19% 4-year unlock period, including a one-year cliff.
Team 16.14% 4-year unlock period, including a one-year cliff.

$ZK Market Debut

The ZK token debuted on the open market on June 17, 2024 at a price of $0.271.

At the time of writing, the ZK token was trading at $0.21. Its market cap was over $807.7 million, making it the 85th most valuable crypto in the world.

Understanding ZK Stack

ZKSync also offers developers a rollup development framework called the ZK Stack.

The ZK Stack is an open-source framework designed to build custom ZK rollup chains based on the code of ZKsync Era.

ZK chains created using the ZK Stack will operate independently. Developers will have full rights to the code and can customize every aspect of the chain according to their needs.

The ZKsync ecosystem also has a trustless bridging solution called zkSync Bridgehub, deployed as a smart contract on the Ethereum L1 chain, which connects ZK Stack chains.

In May 2024, decentralized social protocol Lens announced that it will develop its standalone ZK rollup using the ZK Stack’s “​​future-proof technology.

“With ZK, users can trust that if another chain verifies their proof within the same proof system, their state is correct. With Optimistic rollups, there are trust assumptions with other chains leading to a waiting period of seven days, which limits the horizontal scalability that ZK rollups benefit from,” said Lens Protocol.

DL News later revealed that ZKsync offered Lens 0.5% of the total ZK token supply to build its chain using the ZK Stack.

Who is ZKsync Era and ZK Stack for?

ZKSync Era is suited for developers building generic decentralized finance applications or non-fungible tokens projects, said Matter Labs, as it is a “more straightforward process.”

Developers who require tailored customization and those who are comfortable with asynchronous connectivity to the broader ZKSync ecosystem are suited to build their own ZK Chain using the ZK Stack.

Expert Analysis on ZKSync and ZK Rollups

L2BEAT’s Rollup Maturity Assessment Framework

According to crypto analysis website L2BEAT’s rollup maturity assessment framework, ZKSync Era is currently a Stage 0 rollup, which means that the operators are running the rollup at the moment.

Stage 2 is the final stage of a rollup’s development when it is fully managed by smart contracts, has a permissionless validity/fraud-proof system, and when ​​users are given ample time to exit in the event of unwanted upgrades.

Arbitrum One and Optimism Mainet were labeled as Stage 1 rollups by L2BEAT, as of June 19, 2024.

ZK Rollups vs OP Rollups

Optimistic rollups and zero-knowledge rollups are often pitted against each other by the crypto industry.

At the time of writing, optimistic rollups like Arbitrum and Base are among the most popular Ethereum-based L2 in the world. However, Ethereum co-founder Vitalik Buterin expects ZK rollups to become the preferred Ethereum scaling solution in the future.

“IMO in 10 years, all rollups will be ZK and will commit blocks with finalized state roots to L1 every slot.It will take a lot of infrastructure and prover optimization to get there, but that’s the clear endgame,” said Buterin.

 

Elsewhere, Michael Nadeau of The DeFi Report newsletter, said both technologies are relevant and leading projects are building ZK solutions as well as optimistic solutions.

“We haven’t seen anything to indicate clear consensus has formed in the market just yet — an indication that we are still in the sandbox/experimentation phase of innovation,” said Nadeau.

“​​Optimistic rollups (Arbitrum, Optimism, Base) have largely dominated the discussion as it pertains to Ethereum rollups/L2s — but we are expecting the narratives to shift toward zero-knowledge rollups this year,” added Nadeau.

Earlier in 2024, ZKsync developer Matter Labs faced public backlash after the company tried to trademark the term “ZK.” They later decided to drop the trademark applications.

After all, ZKsync is not the only crypto project to champion zero-knowledge technology. There are many ZK rollups under development, including Linea, Scroll, Polygon zkEVM, and Starknet.

The Bottom Line

Projects such as ZKsync are in the limelight, with Vitalik Buterin giving a prediction that ZK rollups are the direction that Ethereum will take.

If Ethereum is the dominant chain in crypto, then the tools that make it more efficient and cheaper for the end-user will continue to flourish.

Each will also seek to be a major part of the puzzle in powering blockchain transactions.

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Mensholong Lepcha
Crypto & Blockchain Writer
Mensholong Lepcha
Crypto & Blockchain Writer

Mensholong is an experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has previously contributed news coverage and in-depth market analysis to Capital.com, StockTwits, XBO, and other publications. He started his writing career at Reuters in 2017, covering global equity markets. In his free time, Mensholong loves watching football, finding new music, and buying BTC and ETH for his crypto portfolio.