This article will provide an in-depth analysis of zkSync, the first mainnet implementation of zk-rollup technology. It will cover various aspects including the fundamental concepts, data analysis, and ecosystem development, offering a comprehensive overview of zkSync's journey from the underlying blockchain to its ecosystem projects.
zkSync is an Ethereum Layer 2 scaling solution based on the zk-rollup architecture. Its goal is to achieve high-performance and cost-effective smart contracts and blockchain applications. By utilizing zk-rollup technology, zkSync achieves high throughput scalability, reducing transaction costs and improving confirmation speeds. zkSync Era is built on top of the zkSync protocol and offers faster transaction speeds, higher scalability, and greater cost-efficiency. Due to its efficiency and low costs, zkSync has gained significant attention in the capital markets and is experiencing rapid development.
Matter Labs, the development company behind zkSync, has successfully completed four funding rounds, raising a total of $458 million. Venture capital such as a16z, Dragonfly, 1KX, OKX Ventures, Bybit, and Blockchain Capital have participated in the investment. This funding amount is remarkable both in the WEB3 and WEB2 domains, making it a highly notable figure in the blockchain space and positioning zkSync as a leading unicorn project in the blockchain industry.
With a strong funding background, cutting-edge technology, and being one of the early players in the zk-rollup space that Ethereum founder Vitalik Buterin has praised, zkSync stands out as one of the few zkEVM rollups that has already launched. Whether it is in terms of narrative, capital, or practicality, zkSync Era is an outstanding contender. The blockchain industry's thirst for innovation has made zkSync Era one of the most anticipated and hottest public chains of 2023.
The main feature of zkSync Era compared to zkSync Lite is its compatibility with the EVM. It can execute smart contracts written in Solidity or other high-level languages commonly used in Ethereum development. This ability attracts more developers and users, allowing for seamless integration with the existing ecosystem. Additionally, the transaction costs have been reduced by 50 times compared to before, and the speed of 20,000 TPS provides a significantly improved user experience compared to both Ethereum itself and zkSync Lite, making it a significant advancement in the long run.
zkSync's competitors in the L2 space include various public chains. Apart from the well-established Arbitrum One and Optimism, there are several newcomers in the zk-rollup arena that zkSync needs to pay attention to:
Currently, zkSync has a significant advantage as the pioneer in this field. To maintain its leading position and provide users with a good experience in the future, zkSync needs to focus not only on technological advancements but also on nurturing its ecosystem.
Before diving into the detailed introduction of ecosystem projects, let's start by examining the data on Total Value Locked (TVL), the official bridge for depositing and withdrawing, and daily on-chain transaction count. This will provide us with a better understanding of the current state of the zkSync Era ecosystem.
Looking at the on-chain TVL data, zkSync Era has achieved a total TVL of $459 million within just 2 months of its launch. Since its inception, the ecosystem has maintained steady growth in TVL, currently ranking third in the Layer2 Rank, following Arbitrum One & Optimism, which utilize Optimistic Rollup technology.
source: l2beat.com/scaling/tvl
source: dune.com/makaineko/zksync-era-airdrop-criterion
The official bridge of zkSync Era also reflects the upward trend of its ecosystem. The cumulative number of deposit addresses has reached 800,000, with an average of approximately 10,000 new deposit addresses per day since June. This indicates a growing user base and a steady inflow of assets into the zkSync Era ecosystem.
source: dune.com/makaineko/zksync-era-airdrop-criterion
On the other hand, looking at the daily transaction count on zkSync Era, it reached a peak of nearly 100,000 transactions at the beginning of its launch but gradually declined to a low of only 1,300 transactions per day in early May. Currently, it has stabilized and maintained at around 20,000 transactions per day. One possible reason for this is that zkSync Era does not currently have any killer DApps, and the initial surge in transaction volume was mainly driven by the novelty during its early launch period.
source: dune.com/sixdegree/zksync-airdrop-simulation-ranking
In summary, the ecosystem of zkSync Era is still in its early stages, having been launched for less than three months. Achieving such results in such a short period is quite remarkable. The ecosystem has moved past the initial FOMO phase and is currently experiencing stable growth. We can look forward to further breakthroughs as more projects are deployed on the chain in the future.
zkSync Era has received commitments from many projects to deploy on its network even before its launch. These projects include Balancer, Uniswap, Frax, OHM, LayerZero, and other well-known protocols on the mainnet. However, the number of projects that have completed deployment is still limited. Currently, the two most prominent established protocols that have officially launched on zkSync Era are 1inch and iZUMi Finance.
1inch Network
1inch aggregator is one of the cornerstones of the DeFi ecosystem. It officially joined zkSync Era on 4/20 as the 11th deployed protocol on the network. With the presence of 1inch, users now have a convenient entry point for decentralized liquidity aggregation. They no longer need to think about which DEX to visit when swapping tokens, which effectively promotes ecosystem development.
iZUMi Finance
iZUMi Finance is another multi-chain DeFi project that deployed on zkSync Era from the very beginning. It was one of the first established protocols to actively deploy on zkSync Era. iZUMi Finance has achieved impressive TVL on zkSync Era, currently ranking second among projects on the network. It has emerged as a strong competitor in the zkSync Era DEX space.
source : https://defillama.com/chain/zkSync Era?tvl=true
From the statistics provided by Defillama, it is evident that the development on the zkSync Era is still in its early stages. The top five projects in terms of Total Value Locked (TVL) are decentralized exchanges (DEX), and the top ten consist of eight DEX projects, with the remaining two being lending platforms. More complex sectors such as derivatives and GameFi are yet to have strong competitors. Let's categorize and introduce the projects accordingly.
SyncSwap
SyncSwap is a decentralized exchange (DEX) built on zkSync Era. It features low transaction costs and inherits the robust security of zkSync.
SyncSwap offers various functionalities, including support for gauges, customizable fee structures, advanced routers, voting delegation token models, and governance.
Recently, SyncSwap launched a cross-chain bridge called Move, which is built on the official zkSync Era bridge. Move enables transfers between Ethereum and zkSync Era, supporting multiple assets such as USDC, ETH, USDT, WBTC, LUSD, LSD, MUTE, and more. Essentially, Move can be seen as a third-party frontend for the official zkSync Era bridge, with the same gas costs as the zkSync official bridge. The bridged tokens are 100% native to zkSync without any third-party risks. When users approve or transfer tokens using Move, they interact directly with the official zkSync smart contracts.
iZUMi Finance
iZiSwap is a decentralized exchange (DEX) built on zkSync Era by iZUMi Finance, a one-stop liquidity-as-a-service DeFi protocol. It utilizes iZUMi's Discrete Liquidity Automated Market Maker (DL-AMM), which is similar to Uniswap V3's concentrated liquidity. DL-AMM allows liquidity to be allocated at arbitrary fixed prices, improving capital efficiency.
iZiSwap is an evolution of the Automated Market Maker (AMM) DEX model represented by Uniswap. Its innovative design not only enhances the efficiency of liquidity provision but also greatly enriches the trading experience for users, making iZiSwap stand out in the decentralized trading platform competition.
Notably, iZiSwap introduces a fully decentralized limit order book model. During the trading process, all limit orders on a specific price point are treated as a whole. This approach significantly improves the efficiency of trades, ensuring completion within O(1) time complexity. Additionally, whenever the price crosses a price point, the traded order volume is transferred to a separate storage space called "legacy". This design allows the system to accurately distinguish the order sequence, ensuring the correctness of transactions.
Finally, users need to manually claim their executed assets. This limitation is necessary to ensure users have full control over their assets and to avoid potential security issues associated with automatic asset transfers.
These design choices bring several notable features. Firstly, since limit orders on a specific price point are treated as a whole, trades can be executed within O(1) time complexity, significantly improving efficiency. Secondly, when the price crosses a target price (time point A) and later falls back (or crosses) the target price (time point B), limit orders placed after time point B are not recorded as executed, ensuring transaction correctness. Lastly, when the price is at the target price, the portion of the trade is claimed by the user who initiated the claim first, ensuring fairness in a first-come, first-served manner.
Overall, iZiSwap's innovative approach to limit order management brings significant improvements in terms of security, efficiency, and fairness, providing users with a high-quality trading environment.
Maverick Protocol
Maverick Protocol is a DeFi liquidity infrastructure that aims to provide a liquidity marketplace for traders, liquidity providers, DAO funds, and developers. It is supported by the Maverick AMM.
Users can trade and provide liquidity on the Maverick AMM. There are four different liquidity modes available: Mode Right, Mode Left, Mode Both, and Mode Static. Once a mode is chosen, the AMM automatically adjusts its liquidity based on a set of specific rules to track the price movement. Maverick Protocol allows LPs to create Boosted positions, which attract liquidity with precise incentives. Other users can add liquidity to the Boosted positions to purchase shares. LPs can earn returns from trading fees and LP incentives.
Mute
Mute.io is a zkRollup-based DEX on zkSync Era. It offers various modules including limit orders, staking platform, and bond platform. Mute.io supports wallet integration, trading, LP pools, Amplifier, bond issuance, and DAO governance.
One of Mute's innovations is its bond mechanism. Users can purchase MUTE tokens at a discounted price (bond) from Mute DAO using their LP tokens. After purchasing a bond, MUTE tokens are released after a 7-day period. If the ROI is positive, users can earn more MUTE tokens compared to their LP tokens. Through the bond mechanism, Mute DAO can increase protocol liquidity, generate treasury income, and provide long-term liquidity for the protocol. dMUTE is the DAO token of the Mute.io ecosystem. Users lock MUTE tokens for a period of 7 to 364 days and receive dMUTE tokens as rewards. After the lock-up period, users can redeem their MUTE tokens.
SpaceFi
Velocore
Velocore is the first ve(3,3) Solidly fork DEX on zkSync Era.
The core functionality of Velocore allows users to trade digital assets with low costs and low slippage. Users can provide liquidity in LP pools, which are divided into Stable Pool and Volatile Pool, and receive VC token incentives in return. VC is the native token of Velocore, and VC holders can stake their tokens to receive governance tokens called veVC (veNFT). veVC can be transferred, merged, and split. The lock-up period for VC can be up to 4 years, and the longer the lock-up period, the higher the voting weight and rewards for veVC holders. veVC holders also receive protocol fees, bribes, and kickbacks. Bribes can be used to incentivize other users to vote for LP pool rewards. Velocore also features a Launchpad and has introduced the memecoin WAIFU.
veSync
veSync is also a ve(3,3) DEX on zkSync Era and a fork of Solidly. veSync currently has a TVL of approximately $4.85 million, ranking seventh, with a growth rate of nearly 20% over the past 7 days.
The native token of veSync is VS, and the governance token is veVS (veNFT). veVS can be transferred, merged, and split. Using the ve(3,3) incentive model, token holders can stake their tokens to receive veNFT, which grants them voting power and rewards based on the length of the lock-up period. veSync's liquidity pools are divided into Stable Pools and Volatile Pools, with transaction fees ranging from 0.02% to 0.05%. In the future, veSync plans to introduce Concentrated Pools, allowing users to provide liquidity within customized ranges and participate in voting to receive bribes.
eZKalibur
eZKalibur is a new DEX that just launched this week. During its token fundraising stage, it raised a total of 653 ETH. It is a fork project based on the popular Arbitrum DEX, Camelot, and adopts a unique token lock-up dividend mechanism similar to Camelot xGrail. Additionally, it features a launchpad functionality. Since the project is relatively new, it is important to be cautious of security risks.
Lending has always been an important infrastructure in various public chains, apart from DEXs. However, in zkSync Era, the lending sector is not as prominent as DEXs. This is mainly due to the absence of Chainlink integration in zkSync Era and the limited variety of assets available, with only ETH and USDC being the main assets supported. Additionally, the current use of Redstone Finance as an oracle provider raises concerns for whale users, further limiting the adoption of lending platforms in zkSync Era. As a result, the lending sector in zkSync Era is relatively less active, with most users likely being airdrop farmers or DeFi farmers.
Eralend
Eralend, formerly known as Nexon Finance, is a Compound fork protocol in zkSync Era. The project was mentioned in the official zkSync Era Twitter thread introducing ecosystem projects. Currently, Eralend has not issued a governance token, which may have attracted a large number of airdrop farmers to participate. Its Total Value Locked (TVL) is on par with ReactorFusion, both reaching $5 million, making them the top lending markets in zkSync Era.
ReactorFusion
ReactorFusion is the first project launched by Velocore launchpad. The protocol itself is a Compound fork with a unique bribe rewards token mechanism. Its token ecosystem is closely tied to Velocore. Currently, the Total Value Locked (TVL) of ReactorFusion is approximately $5 million.
Overnight USD+
Overnight is a multi-chain project that originated on Polygon and currently supports five different blockchains, including Polygon, BSC, OP, ARB, and zkSync Era. It is one of the few protocols that rapidly deployed across multiple chains when zkSync Era launched. The main products of Overnight include the USD+ stablecoin pegged to USDC and the ETS treasury for delta-neutral yield generation strategies. The project has been live for about a year and the team is considered reliable, making it suitable for DEFI farmers seeking stablecoin high yields.
Unidex
Unidex is also a multi-chain deployed project, primarily focused on decentralized onchain perpetual trading. Its distinguishing feature is the ability to aggregate the order books of other onchain perpetual exchanges and provide functionalities such as limit orders, take-profit, and stop-loss orders. In addition to trading cryptocurrencies, Unidex supports commodities like US stocks and forex. It serves as an on-chain perpetual aggregator. Other products offered by Unidex include spot trading aggregation and limit orders.
Kreatorland
Kreatorland is an Opensea Fork project on zkSync Era, offering a one-stop NFT platform. It is one of the projects mentioned in zkSync Era's official Twitter post. Kreatorland provides users with services to mint and release NFTs, as well as features a launchpad and a trading marketplace. However, currently, only one NFT called Poop Genesis is listed on the platform.
Goal3
Goal3 is a gambling platform project on zkSync Era, which was also mentioned in zkSync Era's official tweet. Its token, $ZKG, conducted a Lockdrop event that attracted a total of 2.8M USDC in participation. The addresses that locked their tokens for one year accounted for nearly 50% of the total. The funds locked in the Lockdrop event are used to provide liquidity for the gambling market. Currently, the beta version of the project has been launched, allowing users to place bets on various sports events on the platform.
zkSync has a rich development history and a promising future. With the continuous advancement of Ethereum technology, the competition in the zk-rollup and zk-EVM fields is intensifying. zkSync Era has established its ecosystem as a pioneer, which has been proven both in terms of data and ecosystem development. The overall public chain of zkSync Era is currently in a stable upward phase.
From the perspective of the number of protocols, the DEX sector is the most mature in the zkSync ecosystem. Both traditional Uni v2 forks, ve(3,3) solidly forks, and CLAMM DEXs have achieved remarkable results. However, in sectors such as lending, derivatives, NFTs, and GameFi, there haven't been innovative applications that can attract users. We can expect more interesting DeFi Lego projects to emerge as more infrastructure projects, including cross-chain bridge, oracles, and stablecoins, are deployed.
At the same time, it is important to note that along with the flourishing development of the ecosystem, there have been numerous Rug Pull incidents, and there have been cases where user funds were locked due to code compatibility issues. When participating in the ecosystem, it is crucial to consider various factors, such as the background of the project team. However, new opportunities abound with new developments, and active participation in the ecosystem may lead to the discovery of early-stage quality projects.
https://foresightnews.pro/article/detail/33720
https://www.odaily.news/post/5187161
https://www.crunchbase.com/organization/matter-labs
https://www.alchemy.com/overviews/zkevm
https://l2beat.com/scaling/tvl
https://dune.com/makaineko/zksync-era-airdrop-criterion
https://dune.com/sixdegree/zksync-airdrop-simulation-ranking
https://defillama.com/chain/zkSync Era?tvl=true
*For project introduction source, please refer to the project official document