Introduction to Zk rollups

In web3 and cryptocurrency, innovation has been the driving force behind the pursuit of scalability, security, and privacy. As decentralized systems strive to compete with traditional centralized counterparts, a remarkable technological advancement has emerged: Zero-Knowledge (ZK) proofs and their integration into ZK rollups. This fusion has laid the groundwork for addressing some of the most pressing challenges facing blockchain networks, offering solutions that enhance efficiency and safeguard sensitive information. This article explores the transformative impact of ZK rollups on the blockchain landscape from theoretical origins to real-world applications.

The Blockchain Trilemma stands as a fundamental challenge for decentralized technology, presenting a complex trade-off between three critical attributes: security, scalability, and decentralization. As blockchain platforms strive to optimize one aspect, they often compromise on others. This article delves into the nuances of the blockchain trilemma, the basics of Ethereum, and its scaling solutions, paving the way for a new era of blockchain evolution.

Ethereum is a network of computers worldwide that follows a set of rules called the Ethereum protocol. The web is the foundation for communities, applications, organizations, and digital assets anyone can build and use. Anyone can create an Ethereum account from anywhere, at any time, and develop your apps. The core innovation is that you can do all this without trusting a central authority that could change the rules or restrict your access.

Ethereum, at its core, boasts an impressive array of metrics highlighting its remarkable growth and influence in the blockchain space. With more than 1 million Daily Transactions (DT), a thriving ecosystem of more than 4 thousand decentralized applications (DApps), and more than 10 thousand active nodes, Ethereum is a testament to its security and decentralization guaranteed by blockchain validators.

Over 96 million accounts reflect its widespread adoption and engagement. At the same time, its Total Value Locked (TVL) in various DeFi protocols of almost 55 billion dollars demonstrates its pivotal role in shaping the future of web3 finance. As Ethereum evolves through protocol upgrades, the creators’ earnings achieved an impressive 3.5 billion dollars in 2021. and innovative solutions like layer two scalings, its metrics reflect its present success and foreshadow its potential to revolutionize industries and redefine the possibilities of decentralized technology.

With the Paris upgrade in 2022, Ethereum has solved the problem of energy consumption and environmental impact due to its proof-of-work (PoW) consensus mechanism. Nevertheless, the network has struggled with other issues with scalability limitations, leading to high transaction fees and slower processing times during peak usage.

Ethereum’s Transaction Per Second (TPS) is 8 to 13 when writing this article. Moreover, the Price Per Transaction (PPT) is moving from 10 to 40 dollars depending on the blockchain network activity. Those issues hamper Ethereum’s ability to serve as the best solution for decentralized applications (DApps) and stifle its potential for Web 3 and crypto mass adoption.

Scaling Solutions enable faster and more cost-effective transactions of Ethereum by processing them off-chain by aggregating transaction data into a bundle. These innovative approaches introduce mechanisms that will allow seamless expansion of transaction throughput while maintaining fundamental security and decentralization. Through techniques such as layer two protocols (including Rollups, Validium, and Plasma chains), sharding, and off-chain solutions, empower blockchain ecosystems to handle a higher volume of transactions, provides efficiency and accessibility that leads to broader adoption across industries ranging from Decentralized Finance (DeFi) to other crypto startups.

Zero-knowledge (ZK) proof technology is a groundbreaking cryptographic advancement that has redefined the landscape of data privacy and security. At its core, zero-knowledge proofs allow one party, the prover, to demonstrate the authenticity of certain information to another party, the verifier, without revealing any specific details about the underlying data itself. This remarkable concept has far-reaching implications, enabling secure transactions, identity verification, and data sharing in a trustless manner. Zero-knowledge proofs have found applications in blockchain systems and have two main types of Rollups: Optimistic and Zero-Knowledge (ZK).

ZK Sync and StarkNet are two prominent and newest crypto startups in Layer 2 of Ethereum scaling solutions utilizing Zero-knowledge (ZK) proof technology. ZK Sync leverages Zero-Knowledge (ZK) rollups to enable off-chain processing of transactions while ensuring data integrity and security, drastically reducing congestion and fees on the main blockchain. In contrast, StarkNet employs STARK-Based rollup technology to accommodate complex computations. While both ZK Sync and StarkNet share the goal of enhancing blockchain scalability, ZK Sync supports Ethereum Virtual Machine (EVM) — compatible intelligent contracts. It can proceed up to 2000 TPS, focusing on payment scaling, making it ideal for frequent, low-value transaction scenarios. In contrast, StarkNet’s strength lies in its capacity to support a broader range of use cases with up to 8000 TPS and low transaction fees.

ZK-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) and STARK (Scalable Transparent Argument of Knowledge) are advanced cryptographic technologies, yet they diverge in their mechanisms and business opportunities. ZK-SNARK utilizes succinct proofs to validate the authenticity of information without revealing the data itself, offering efficient verification, but requiring a trusted setup during its initialization. STARK operates without a trusted design and employs transparent proofs, enabling robust verification through a more complex and resource-intensive process. While ZK-SNARK is renowned for its compactness and application in various blockchain scenarios, like Zcash, STARK technology excels in scalability and supports broader business use cases. The choice between ZK-SNARK and STARK depends on the trade-offs between efficiency, trust, and EVM compatibility that align with the specific business needs.

ZK Sync significantly reduces transaction fees and confirmation times by relocating transactions off the Ethereum main net and employing succinct proofs. The network had an impressive peek of activity in the second quarter of 2023 and recently achieved the 2 million Bridgers milestone with more than 1.2 million of Ethereum in Total Value Bridged (TVB). This is made possible by creating a secure and trustless environment where users can conduct operations swiftly and economically.

StarkNet, with a unique approach that eliminates the need for a trusted setup and offers transparent proofs, is an ideal solution for intricate use cases where robust validation and scalability are paramount. Starknet metrics are growing actively with almost 670 thousand Bridgers and nearly 210 thousand Ethereum in Total Value Bridged (TVB).

With the?3x Capital?team, I look forward to exploring and using innovative ZK rollup technology, supporting and building blockchain startups, and serving them as a reliable partner and incubator.

Author: Ivan Maltsev