What is zkSync (ZK)?
What is zkSync?
zkSync is a high-performance Layer 2 (or L2) blockchain platform based on zkRollup technology. It is designed to reduce the Ethereum network load to provide users of both ecosystems with faster and cheaper transactions.
The zkSync v1.0 core network was launched in June 2020. Its throughput was limited to 300 transactions per second (TPS), although this was significantly higher than the Ethereum blockchain, which could not process more than 15 transactions per second at the time.
How does zkSync work, and how does it differ from other tier 2 solutions?
zkSync utilizes zk-Rollup, a zero-disclosure proof-of-concept technology to secure transactions. Zk-Rollup enables rapid transaction authentication; simplistically, this technology assembles transactions into "packets," which are then validated on the underlying Ethereum network.
As of July 2024, there are two separately operating zkSync core networks:
- Era,
- Lite.
zkSync Lite is an earlier network prototype aimed at a single task: making fast and cheap crypto payments. It lacks the smart contracts that enable DeFi protocols such as decentralized exchanges and lending platforms (hence the name Lite — a simple, "light" blockchain with minimal features). In addition, this network is considered less secure than the zkSync Era.
The zkSync Era network is essentially an improved version of Lite. It inherits all the best features of its predecessor but has its own smart contracts and is compatible with the Ethereum Virtual Machine (EVM). This allows applications to be easily migrated from the base blockchain to the second-layer network, and the zkSync Era is considered more secure.
The zkSync ecosystem
Despite a large number of DeFi protocols (117 according to DeFi Llama), zkSync ranks 40th among all blockchains in terms of blockchain value (TVL), just over $102 as of July 2024.
Among the protocols known to the crypto community, the zkSync ecosystem includes:
- Uniswap V3,
- PancakeSwap,
- SyncSwap,
- Koi Finance,
- Zero Lend,
- Maverick Protocol and others.
However, only two DeFi protocols have TVL over $10 million in this network.
zkSync cryptocurrency
ZK is a native token of the second-level network zkSync, initially distributed in a free token distribution (airdrop) to active ecosystem participants: developers, influencers, users, and all those who contributed to the ecosystem in one way or another.
However, the zkSync airdrop later caused a storm of anger in the community as many users did not receive the promised tokens despite fulfilling the primary conditions of the giveaway. Although the team denied all the allegations and claimed they were unfounded, some community members found plenty of evidence of violations of the airdrop's terms and conditions. For example, crypto researchers have discovered developers' wallets that received the maximum number of ZK tokens (100,000). However, they did not even make a single transaction on this network, which was one of the mandatory conditions for the airdrop stigma.
Although zkSync now has its token, the ETH token is still used to pay commissions. The ZK token is actively used on the DeFi market in liquidity pools such as credit and exchange protocols (DEXes).
A total of 21 billion ZK tokens have been issued, and all of them are already traded on the market. In terms of capitalization, which is just over $63 million, the zkSync token is not yet even in the top 100 cryptocurrencies despite the multi-million dollar investments and great hype in the info pole.
Outlook for zkSync
zkSync has become a very telling example of what happens to projects that do bad things to their community. After listing on the exchanges, zkSync's capitalization started to decline, and in just one month, it decreased by about 1.5 times.
After an airdrop and a high-profile trial caused by the unfair distribution of ZK tokens to community members, other project metrics declined, such as trading activity and several active users. While back in April 2024, the zkSync Era network counted up to 1 million transactions per day, in July, this figure had already dropped to 320 thousand, showing steadily decreasing dynamics despite very cheap commissions, which amount to about one cent.
This happens against growing competition among L2 projects, such as Blast and Mantle, which demonstrate higher activity rates. So far, zkSync, apart from very low commissions, does not have any clear advantages over the leading second-tier networks such as Polygon, Optimism, and Arbitrum.
