The End of the Beginning: How Does zkSync Become the Home for All Ethereum Users

OKX Ventures
13 min readJun 29, 2023

This content is provided by Sally Gu (researcher @OKX Ventures), and does not constitute any investment advice. Please indicate the source when quoting and contact the OKX Ventures team for reprinting.

TL; DR

  • The whole zksync ecosystem is growing rapidly. OKX DEX has covered the zksync era and will work to provide optimal liquidity for large swaps happening on OKX; Orbiter has integrated zksync zkEVM and works closely with the zksync team to facilitate cross-rollup transactions; De.Fi has also integrated zksync and its supported chains to enable better portfolio tracking.
  • The “Layer1 to Layer2” scalability migration is striking. On the one hand, Layer2 has a cheaper cost and higher throughput in terms of scalability, bringing native traction; on the other hand, the account abstraction capabilities provided by ZkSync and others bring better interoperability and user experience; meanwhile, higher TPS rates and superior performance significantly enhance the time and cost efficiency for project parties.
  • zkSync leads the race with an innovative edge. The native account abstraction brings a more handy development experience than EIP4337; storing and sending over only state differences makes it have lower sending cost and faster modular play than other EVM Layer2 solutions, benefiting oracles and privacy protocols; the recently announced ZK Stack development module further liberates developers’ creativity, laying the foundation for lighter and more interoperable hyperchains.
  • Multiple eco-project milestones are coming up. OKX DEX rapidly expanding and covering as much liquidity and Dexes as possible, exploring collaboration between football teams and celebrities; zkSync moving to Hyperchains at full rate, has partnered with a large bank to build on testnet, claiming to become the home for ethereum users; Orbiter set to launch Maker and zkProver by the end of the year, aiming to become the top cross-rollup bridge for the L2 ecosystem; De.Fi will integrate about 800 protocols by the end of this year, building the DeFi security matrix steadily.

Primer

On June 14, OKX Ventures hosted a Twitter space on the topic of “what zksync brings to L2”. The panel was hosted by Sally Gu, researcher @OKX Ventures, and featured Nicholas Soong, director @OKX DEX ecosystem development APAC, Omar Azhar, head of business development @zksync, Gwen, business development manager @Orbiter, and Sonali Giovino, head of relations @De.Fi. to discuss the development of zk technology and ecosystem, performance improvement by leveraging zksyncthe and milestones for their own products.

To better help our audience understand the progress of zk ecosystem and related projects in depth, we summarized the major insights and viewpoints provided by the guests in this space below for reference.

Panel Review

1.Co-Build zksync Eco: Where We Are Now

OKX DEX — Covering the zksync era for optimal liquidity

Nocholas:Maybe first give a brief intro of okx dex. Fully backed by Okx, what we are building is not a Dex, but rather Dex aggregator, similar to 1inch, ParaSwap etc. So the difference between us and other solutions is that we do two things differently. First, we not only aggregate across dex on one chain, but we also aggregate cross chains through various bridges like debridge or multichain. Second, Unlike our competitors, we do not charge any fees at all per transaction. And we’re able to do this becasue we’re fully funded by OKX. Considering our aim is to be seen as a leader in the web3 space, we focus more on increasing our user base and transaction volume rather than just on profitability.

We currently have aggregated most EVM chains at the moment, such as ETH, BNB, Polygon, etc. Besides, we also cover zksync era, and Polygon zkEVM right now. Specifically on zksync era chain, some of the Dexes we currently have integrated with include syncswap, iZUMI, Velocore, etc. As for Polygon zkEVM, we currently aggregate through Quickswap.

In terms of development, we’re definitely looking to aggregate more Dexes across various zkEVM chains to access the best liquidity for all our users moving forward. We are also looking to work with what we call private market makers to ask APIs that will help provide liquidity for large swaps happening on OKX on one chain or cross chain. So this will help reduce price impact for large swaps happening on our platform and improve the overall user experience with OKX DEX.

zkSync — Enhancing EVM system performance to serve the growing community

Omar: In terms of the progress of zksync, I would say the zkEVM, which we’re currently working on with the tricky thing, that’s been in development for like almost two years now. We were on testnet last February. And we launched about three months ago at the end of March.

So far, the ecosystem has grown pretty rapidly. I’m pretty happy with that the community has more or less open, as you can see, with the activity that’s on there, all the different projects that are launching, the developers that are building, and then also a lot of the users that are there as well. I would say going forward a lot of the efforts then is going to be in strengthening the system overall, making it significantly faster and more performant. And then also moving forward to the hyperchains and the Layer3s is that comes about fairly soon.

Orbiter — Deploying zksync zkEVM for better cross-rollup transactions

Gwen:For Orbiter, we don’t deploy a zkEVM, what we do with the zkEVM is basically to integrate some rollups or some environment to have those zkEVMs on board. And we have already integrated a zkEVM by zksync era, and for some other zkrollup solutions, we are still doing research at this moment since different zkEVMs may require diverse integration processes. So we need to take a longer period to deploy.

In terms of our product development, as everyone probably can see, Orbiter’s operation has been deployed and integrated with the zksync era, and we have close collaborations with the zksync team. And we supported some dapps on zksync as well to facilitate all the cross-rollups transactions.

De.Fi — Integrating the zksync chain for better portfolio tracking

Sonali: For de.fi, we’re not a protocol that’s built on zksync but a portfolio tracker. We have integrated the zksync and zksync supported chains to help users to be able to track them, so part of the advantages of that is because of its scalability, the fees are a lot less and speed is incredibly great.

2. L1 > L2:Higher Layer, Better Layer

Better Scalability & Interaction Experience & Native Traction

Omar: The main problem with layer1 at the moment is purely the scaling issue right? Ethereum is mostly built around being the settlement layer at the moment. It holds it secure and decentralized. But there is a trade off that it has to make, which is around scalability. And so the idea is that through roll ups, we essentially offload the execution part of transactions. And this way, we can fully scale transactions to the layer2s, which then allow users to transact for much cheaper costs, and much higher throughput and speed.

You can clearly see that the different layer2s are as often as arbitrum, polygon or zksync, they all operate at a fairly high TPS. Last month, we were running, when zkapes did their mints, I think we got up to almost 50 TPS on the network and that occurred without any sort of congestion pricing. And people were still transacting between 20–40s a transaction, that’s just not possible on the layer1. So if you want to go after the mass market, if you want to have a better UX, better experience for your end user, just on scalability and cost alone, they will start building on layer2s.

But then more importantly, the other aspect of layer2 like zksync is that it brings a kind of traction natively. All accounts are smart contracts. And that’s a pretty big deal, because that opens up an entirely new design space for you as a developer, or how you want to actually curate the user experience. If you’re a wallet developer, you can start taking off completely removing seed phrases, you can start thinking, Okay, how do I build 2FA into my wallet for additional security? How do I build additional custom measures like rate limits and other things into my wallet? If you’re a dapp, you can start thinking of how do I essentially do multicoin? How to make the users only do one click for multiple transactions at once? Given current defi, you’re about to do a very complex transaction, which requires adding liquidity, then moving funds around. That can be a pretty cumbersome experience with multiple transactions to sign in, click and approve with multiple accounts, transactions but the user can just click through all those transactions with just one click here.

So the two things that you really want and why you want to be building on a layer2 is the scalability aspect, like significantly cheaper fees much higher throughput, and then obviously, the account abstractions capability, significantly better UX.

Higher TPS Rates & Superior Performance

Gwen: For us, we reckon the advanatages of Layer2 are on scalability and user experiences as well as security. before we set up this project, we along with other founders gathered up and discussed how to provide a better performance based on etherum. If we look at this whole industry from a wider picture, and from the the development of ethereum itself, no matter is for merge or POS, what everyone is trying to do separately is to improve scalability and TPS. The ethereum’s TPS is about 15, even though we put it calculated 64 times, the TPS was still around 900. While the maximum TPS achievable with rollup is around 3000. So I will say, that’s why we need to put an eye on layer2, especially the rollup ecosystem.

We actually had a research before compared the layer2 with the VISA. I will say VISA is quite commercially scalable around the world, because its tps is 24,000 and the performance of ethereum is definitely far from that. So if we tried to achieve the ultimate goal of significant increase of the TPS of ethereum, it’s obvious that we need to move to another layer. That’s the origin of why we are set up in the layer2 ecosystem. And regarding to why we have the integrations was the zksync, first of all is for the transaction fees, second is for privacy protection,and then also for the time efficiency and the cost efficiency. And regarding to why we have the integrations was the zksync, first of all is for the transaction fees, second is for privacy protection,and then also for the time efficiency and the cost efficiency.

Insights: what makes zkSync distinct from other zk scaling solutions?

Account Abstraction. In zksync’s case, you have native account abstraction, which compared to EIP4337, means that you don’t need external parties to build your accounts, traction UX. So you don’t need external funds or a separate mempool. You can build your own paymaster, can start immediately implementing gasless transactions for your users and can do a number of other things already since it comes right out of the box. That’s very unique to zksync and makes it different from the other EVM layer2s.

State Difference. The other key thing is that is how zksync send data and store data on ethereum Layer1. What the other EVM Layer2s do is they send over the entire input calldata but zkSync only does the state difference. That has a big impact on a number of areas, such as oracle price feeds as well as for privacy.

For oracle, it can make oracle refresh at around 100 per second or even much faster price feeds become a reality because you’re only paying for a state difference, rather than paying for each update to the price feed. So once chainlink integrates and other oracles start integrating, this could be a extremely beneficial for perpetual protocols since it can help update prices significantly faster, cheaper, which means traders can move orders around much faster and cheaper as well.

For privacy, if you’re creating zero knowledge proofs on chain for private transactions, you don’t have to worry about paying for that entire input datacall costs on it, because only the state difference is posted. In that case, the actual zero knowledge proof does not have to be posted to layer one. Whereas for the other layer twos, it could be potentially a significant multi-factor in terms of the costs for private transactions.

Hyperchains. The ZK Stack development module just announced by zksync and the hyperchain that they have been focusing on also makes zksync fairly unique compared with others players. ZK stack looks more or less similar to OP stack but it’s very different from the fundamental designs. The hyperchains built by zk stacks do not need to maintain state and consensus and can directly rely on the security of eetherum. Also, compared to OP Rollup’s fraud proofs schema, zksync’s hyperchains seem to be more interoperable and potentially more responsive to cross-chain calls, considering its ability to directly verify state differences between each other leveraging ZK proofs.

3. Next Big Thing: Arriving Future

OKX DEX — Covering a Full Range of New Chains, Exploring Interesting Partnerships

Nicholas: In terms of future plans, with the backing of OKX, our first priority is looking into increasing our competitiveness. So the lowest hanging fruit would of course, be rapid expansion and coverage of as much liquidity as possible across more Dexes on the various upcoming chains. This includes the zkchains as well. We already have quite a few chains in the pipeline and these extended coverages will be rolled out in the near term. We are also currently working on several key project integrations with some of the leading wallets looking to integrate OKX API into the in App Swap feature. We’re also looking at some interesting partnerships that we will hopefully be announcing soon, including potential partnerships with football clubs, some famous celebrities and singers and some collaborations that will improve our overall branding to continue to be seen as a leader in the next aggregation space.

zkSync — Moving to Hyperchains, Making zkSync a Home for Ethereum Users

Omar: For us the first thing is we want to make the zkSync essentially the home for all ethereum users. So if you’re on etherum, we want pretty much you’d have the same experience and the same dapps available on zksync, you’ll see that very quickly. We’ve got uniswap, we’ve got a bunch of other ones,Aave, Curve, Lido, Rocketpool, essentially all in the works, that should be coming on board very quickly. Rocketpool is already on boarded. So you can actually bridge over your rETH already. You can also do that with coinbase ETH as well. Those are already on the bridge.

SIn the short term, I would say in forms of defi perspective, we want pretty much zksync to become the home for defi at the moment. The other things that are hyperchains and those will be coming fairly soon. We have already been working with a large bank on a testnet for that right now. And then hopefully, some more enterprises will start adopting it and start actually building on their own hyperchains very soon this year. Beyond that, I would say we have a lot in store. You’re gonna see quite a bit from us in the coming weeks that I an’t say too much now, but you can stay tuned and follow our Twitter.

Orbiter — Launching Maker and zkProver, Building the Best Cross-Rollup Bridge

Gwen: obviously, our next milestone will be the trustless bridge protocol, and we’re aiming to serve as as the top cross-rollup bridge for the L2 ecosystem. The first thing I’d like to share with all of you is about the launch of our Maker system. It is expected to be launched probably in the second half of this year. Once the Maker system is available, everyone who’s quite interested in providing liquidity can just apply for that. And as long as your assets meet the criteria, one is liquidity and the other one is the access margin that deposits in the smart contract that we have, you can be a market maker to provide liquidity on our network.

And then another highlight of us this year is the zk provers that we’re trying to build. The zk provers are like automated scaling solutions for the whole ecosystem and will function as an aggregated middle layer. The first part of zk approver is made up of aggregated zkps from zk rollups, and the rest comes from all the transaction messages from retail users. The final target of zk provers is to reduce the gas consumption and improve the TPS. So it will improve the current performance of our protocol to a large extent. Ideally, we expect the zk provers to launch at the end of this year. So instead of being a solo bridge protocol, what we’re trying to do is to function as scaling solutions to make more contribution to the whole ecosystem.

De.Fi — Accelerating Ecosystem Integration, Creating DeFi Security Matrix

Sonali: in terms of the roadmap, right now we’ve integrated some of zksync’s protocols like syncswap, xy finance, gemswap, and we plan to integrate a lot more protocols. Going forward, we have a lot of really exciting things that are coming into the pipeline. We currently have 43 chains that we’ve integrated for about 450 defi protocols, integrated 8 CEXs and our goal is to have about 800 protocols integrated by the end of the year. And our internally developed cross chain bridge, app for Android and iOS are all coming out this year as well.

We aim to be the top portfolio managing dashboards that make it a lot easier for users to be able to track not just their EVM related tokens, but be able to track and manage legitimately cross chains & ecosystems from EVM to Cosmos, Cardano, Solana all the ecosystems. And then next we have our DeFi security and we’re really excited about that. We recently just launched our crypto antivirus, which is a security suite of tools that alerts users or users of risky tokens and NFT’s that have been detected in your portfolio. And we also have a browser security browser version of the antivirus coming out, it’s a much more advanced version of the Shield. And that allows you not only check the security and safety of a token or NFT, but also do this on staking contracts, liquidity pools, vaults, etc.

The End of the Beginning

As the development of zk Layer2 ecosystem gradually enters the fast lane, an increasing number of developers and community resources have been flowing in, which indicates that the summer of L2 ecosystem is about to approach. By the end of this month zksync era TVL has exceeded $600M, growing rapidly by nearly 1000% in only three months. Its accumulated number of deposits has jumped from 10k to about 800k, achieving an 80x user expansion, with about 20k accounts contributing over $27M in transactions in three months. While there is still a big gap in TVL compared to Arbitrum and Optimism, zksync has gradually surpassed the former two in terms of daily fees paid by users.

Additionally, the recently announced ZK Stack, zkSync’s modular open source framework for building custom zkRollup, further liberates the autonomy of developers who participated in the ecosystem. Developers can use the ZK Stack for free and shape all aspects of the zkRollup chain, including the choice of sequencers to the setting of the token economy in a low-latency, trustless, environment. Also, as mentioned before, despite the earlier move of OP’s hyperchain, a custom ZK Stark-based hyperchain would be more interoperable and potentially more responsive to cross-chain calls due to zksync’s ability to transmit only state differences.

We look forward to zkrollup protocols like zksync finally helping web3 move into a new era of higher performance, lower gas fees, and better user experience, and hold the belief that ultimately, zksync will become a desirable home that benefits all ethereum users.

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OKX Ventures

OKX Ventures is an investment institution under OKX.com, focusing on exploring the best blockchain projects across the globe.