Ethereum, the most valuable crypto asset after Bitcoin, was envisioned by its co-founder Vitalik Buterin to be an open source platform for decentralized apps (Dapps) through coding. Since its inception, Ethereum has seen huge traction both in terms of price and total value locked (TVL). While its growth is commendable, Ethereum has faced a lot of challenges like network congestion, high transaction fees (gas). Many solutions have been proposed with different approaches and one of them is ZK (zero knowledge) rollups. In this article, we define what a ZK rollup is and the current progress in the ZK ecosystem.
Meaning of ZK proof
Ethereum can be thought of as a group of computers that stores transactions and maintains a global state (who owns how many ETH, what smart contracts are available etc) of those transactions. But it was becoming increasingly difficult to perform these transactions without a spike in the transaction (gas) fees. This is where Ethereum layer 2 solutions like ZK roll ups come in.
A ZK-proof is a cryptographic tool that can be used to create ZK-rollups. With ZK-rollups, transactions can be processed but donâ€™t require all transaction data to be posted on Ethereum. This helps to reduce the block space used on Ethereum, enabling it to scale and reduce gas fees. They achieve this by moving computationally intensive processes from the Ethereum mainnet (Layer 1) to a sidechain (Layer 2). A rollup submits just enough data to the mainchain so that any participant can recreate the transaction states and detect invalidity or errors. Security isnâ€™t compromised, since the transaction data is stored on the Ethereum mainchain.
Top ZK-Rollup projects currently
ZK rollups carry immense potential as an practical scalability solution for Ethereum. Therefore, to take advantage of this fast-developing technology, hereâ€™s a list of protocols that implement ZK-Rollups and their coins.
Polygon network is a ZK-Rollup-based protocol that allows developers to build Dapps which combine the high-security features of Ethereum with the low gas fees and scalability of Polygon Network. MATIC is the native token powering the Polygon Network. Itâ€™s used to pay transaction fees, and can also be staked in the PoS consensus to earn passive income. The main reason to keep an eye on MATIC is the rapid growth of the Polygon network, with more interoperable projects launching on it. Also, Polygon has acquired the Ethereum scaling startup Mir Protocol for $400 million which boasts the fastest and most advanced ZK-proof technology, called Plonky2.
The Loopring network is a ZK-Rollup-powered project that enables developers to create decentralized exchanges (DEXs) with fast settlement for traders on the Ethereum network. Loopring DEXs offer low-cost trading and payment on the Ethereum blockchain, leveraging the high-throughput advantage of ZK proofs. LRC is the native utility token of the Loopring network. Traders pay in LRC when processing each trade. On Loopring, 80% of the funds are sent to the liquidity providers, and the balance is shared between insurers and Loopringâ€™s DAO.
Immutable X (IMX)
Immutable X is a layer 2 scaling solution for non-fungible tokens (NFTs) on Ethereum. It uses ZK-Rollups to scale up trading, and to eliminate gas fees for NFT minting and trading, without sacrificing the security of users and assets. IMX is the native utility token of the Immutable X protocol. Users can earn IMX by trading and carrying out other activities on the network. IMX can be used to pay fees, to stake on the protocol, or as a governance token. Immutable X stands at the intersection of three popular narratives in the crypto space â€” NFTs, ZK-Rollups and Gaming â€• making it a promising asset worth considering.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.