November 23, 2021

ZK-Rollups – the Next Big Narrative?

Introduction

Since it’s critical to always be a step ahead and anticipate new trends, in today’s update, we want to shed the light on a sector that will likely become one of the hottest narratives of this winter: ZK-Rollups. Although they have been a topic of discussion for months and years now, the time to pay attention has come as the rollout of the first fully functional ZK-Rollups is imminent!

With Ethereum’s L1 being practically unusable in its current state, alternative L1s like Solana, Avalanche, Fantom, and BSC have been all the rage this year. Especially gaming projects need a highly scalable and cheap while still decentralized blockchain network to run on.

However, there are reasons to believe that most if not all L1s will not be scalable enough (and sufficiently decentralized) for mass adoption – especially for blockchain gaming that basically requires 0 fee transactions.

Many in the industry believe that the only solution for this problem are L2s. The L1 settlement layer – no matter from which blockchain – should focus on maximum security and decentralization while L2s can focus on specialized use cases such as gaming… This is the theory.

While we have already seen the rollout of optimistic rollups (Optimism and Arbitrum) recently, they are yet to gain significant traction. This is mainly because of two reasons: The 7-day withdrawal period and the lack of token incentives. All of this is going to change with ZK-Rollups…

It is here where StarkWare’s StarkNet and StarkEx (used by Immutable X, dYdX, and Sorare) and MatterLabs with zkSync 1.0 and 2.0, leading projects in the ZK-Rollup space, come into play!

polynya @epolynya

@DCbuild3r @0xTomoyo Yeah, I think information about the rollup space will blow wide open once the rollup tokens start rolling out. We have seen what the DYDX token did - literally made it the highest volume smart contract in the industry. I'd expect rollups to mature and release tokens thru 2022.

Metaverse Projects Are Stealing the Show

• Before we dive into today’s main focus ZK-Rollups, we can’t ignore what’s happening in the markets. Facebook’s “Meta” announcement really set the crypto metaverse space on fire! Metaverse projects – if newer or older, rolled out or only envisioned – have performed tremendously well in the last couple of weeks.

• With the imminent launch of Sandbox’s alpha version and its metaverse having been in construction for years now (regardless of the recent metaverse hype), the Sandbox has deservedly been the best performer of the category this week.

• But not just metaverse tokens are hot right now: We also see land prices in the biggest metaverse projects shoot through the roof.

Crypto Gucci 🦇🔊| crypto-gucci.eth @CryptoGucci

The largest #Metaverse land purchase ever just happened! Fashion Street Estate in @decentraland was bought for 618,000 $MANA ($2,428,740) by @tokens_com & @Metaverse_Group

• On the back of the blistering hot metaverse trend, ETH might be gearing up for some strong outperformance after months of consolidation and FUD.

skYY7 @sk_yy7

#ETHBTC 6 months of accumulation about to break to the upside! $ETH is about to run soon

Crypto Gucci 🦇🔊| crypto-gucci.eth @CryptoGucci

#Ethereum non-zero addresses just hit another ATH of 68,226,427 📈

Immutable X Is Gaining Traction

• Now, onto today’s main topic. One of the best-known ZK-Rollup-powered protocols that are already live is Immutable X. Although Immutable X only launched its protocol a short while ago, the NFT activity on the lightning-fast L2 has been growing nicely in the last few weeks. In the bigger scheme of things, the $30 million trading volume is of course still quite a bit lower than the volume traded on OpenSea, which averages between $50 and $100 million per DAY. There is still a LOT of room to grow for Immutable X…

Immutable | $IMX | We're Hiring!👇 @Immutable

October was a blockbuster month for community projects on @Immutable X: 🔥USD 30M+ traded GAS-FREE on L2 🔥20 new collections dropped Here are some of the most innovative projects launched last month @MoonshotGP @BadGrandmaNFT @cryptocrappies Blog link👇 bit.ly/3qZjY1R

bit.lyCommunity Project Spotlight: October 2021October was a blockbuster month for community projects on Immutable X, with a massive uptick in the number of projects launched and trading volume. October also saw some incredible projects joining…

• If you are asking yourself if you should buy IMX now, there are several things to consider: Yes, IMX could benefit tremendously from the increased ZK-Rollup hype and the growing adoption of its protocol in the months to come. However, you also have to take into account IMX tokenomics:

Crypto Maxi @cryptoMaxi420

So should you buy $IMX? @Immutable Some of the information is not so obvious and easy to find but here it goes 🧵👇

Crypto Maxi @cryptoMaxi420

2/ There is a huge amount of tokens (51.74%) that are assigned to the ecosystem development section. Developer grants should be alright but Daily rewards is what scares me the most. People will be given tokens every 24 hours just for using the platform...

Crypto Maxi @cryptoMaxi420

6/ The chart from their witepaper for the emissions is quite important. Essentially try to not keep this token for longer than 6-9 months from release or you will be diluted to insanity. Short term play? Maybe

Crypto Maxi @cryptoMaxi420

7/ I recommend farming the daily rewards or paying people to farm the daily rewards (A bit different from @AxieInfinity but the basics are still the same) and either stack them up or dump them onto the market. Seems like a good short-mid term strategy.

The Fulminant Rise of dYdX

• Another ZK-Rollup-powered protocol that has been gaining massive adoption is dYdX. With over $1 billion in TVL, the derivatives trading protocol built on StarkWare’s StarkEx (just like Immutable X), is one of the best early demonstrations of the power of ZK-Rollups.

polynya @epolynya

@eip1559 @zhusu Also dYdX, literally zero gas fees & instant confirmations, not to mention the highest volume crypto dapp. It's going to take some time, but I'm confident the narrative will change as people realize Ethereum is the settlement layer, and rollups are the transactional layer.

ZK-Rollups Are Coming Sooner Than Expected…

• While ZK-Rollups have been worked on for years now, only a handful of them (with limited functionality) is live today. Among them are Immutable X, dYdX, and Sorare which are restricted forms of ZK-Rollups with specific use cases, not allowing for complex smart contract transactions or EVM compatibility. StarkEx is by far the most used rollup overall when measured by total transaction volume – beating the likes of zkSync, Optimism, and Arbitrum by over 10x.

• Besides StarkEx by StarkWare, there is also zkSync 1.0, a ZK-Rollup solution developed by Matter Labs. zkSync 1.0 in its current form is also not offering full smart contract functionality though.

• However, all of this is going to change with the release of StarkNet and zkSync 2.0, both fully-fledged ZK-Rollup L2s that will offer full smart contract functionality. While StarkNet is live on testnet and set to be released next week (!) zkSync 2.0 will roll out sometime early next year.

StarkNet is StarkWare’s next iteration of a zkRollup, with a planned alpha mainnet launch this month. Doing so will make it the first zkRollup to feature general smart contracts on a fully composable network – a feat thought to be years away. (Source: Bankless)

• Several projects – yes, also gaming projects – are already starting to build on StarkNet’s testnet… so, it’s time to pay attention!

StarkWare @StarkWareLtd

✨ @ZigZagExchange is coming to StarkNet!

ZigZag Exchange @ZigZagExchange

Developer Update: Our Starknet contracts are complete! Integration of these contracts into our trading interface (https://t.co/0Rhm8AKnNZ) will begin tomorrow. Link below for those interested: https://t.co/qlUaPScBaI

Realms (for Adventurers) @LootRealms

We are pivoting from Arbitrum to @StarkWareLtd Starknet for our Settling game - read on to learn why. A quick thread about ZK-Rollups 👇 1/12

Realms (for Adventurers) @LootRealms

8/12 StarkNet is a ZK STARK smart contract rollup launching mainnet in a few weeks. It allows for massive computationally intensive contracts on-chain that are provable, along with innovative data storage methods. This is what we will be exploiting in Settling.

• With the launch of StarkNet this month, StarkWare will have produced a ZK-Rollup that features full composability with general smart contracts. (Source: Bankless)

• For many observers, the rollout of the first fully functional ZK-Rollup L2 marks a watershed moment for the crypto space overall and the Ethereum ecosystem in particular! Will they steal the spotlight from the currently hyped L1s? Possibly, but ultimately user adoption will be the final verdict... (Don’t take this meme too seriously 😄)

Argent @argentHQ

It's really this simple

polynya @epolynya

@alexmedin1 Rollups like dYdX and Immutable X are already cheaper than Avalanche. StarkNet releases in a week's time. zkSync 2.0 & alt-DA on StarkNet in early 2022 gets fees down to $0.01. You don't get 10,000x at once at the end of 4 years, it's incremental - see Justin's tweet.

polynya @epolynya

@kamilsadik Note: zk rollups can share liquidity. This is just the beginning, I'm sure we'll see a lot of innovation. ZKRs have superior interoperability and liquidity sharing properties than L1s.

medium.comdAMM (distributed AMM)We first presented dAMM in March 2021 as Caspian but, due to a trademark issue, Caspian was renamed (long live dAMM). This release of dAMM represents a collaboration between StarkWare and Loopring…

How to Benefit From the ZK-Rollup Narrative

• If you want to bet on the emerging ZK-Rollup trend (and you missed IMX and dYdX) you can either try to identify early adopters of these L2s and speculate on their success or you can use and try out the different L2s once they roll out (or even before on testnet!) The chances of you getting rewarded with a retrospective airdrop are high…

yams @yamstered

okay so for those looking to participate in zksync ecosystem in the hopes of earning some responsibility, here’s a guide. 1. Connect to zksync and deposit some ETH

wallet.zksync.iozkSync WalletA crypto wallet & gateway to layer-2 zkSync Rollup. zkSync is a trustless, secure, user-centric protocol for scaling payments and smart contracts on Ethereum

yams @yamstered

2. Do some swaps on @ZigZagExchange. It can be a bit buggy sometimes FYI 3. Mint an NFT

0̵̹̯̮͔̘͆̏̒̀̎̀̍͗̄͆̽̎̎̾̽x̸͕̞͇̱͙̭͆̊̽͐̆̚͝ͅṁ̶̒͑̉̾̏̀͐̈̚ @0xmons

I’m excited to announce that ZKNFT is now released for the public! Be warned, this is an alpha release, so some things may be unstable! ZKNFT is a proof-of-concept NFT marketplace showcasing the zkSync NFT API. https://t.co/xVwgjuwmMw https://t.co/UapgQMcaMr

yams @yamstered

4. Use Uni on their testnet

frozenn 🧊 🎩 🔺 🔭 @frozenpixl1

Zksync 1.Use zksync native wallet on both testnet/mainnet. https://t.co/Pyze7mnu77 some swaps on Unisync testnet page.(1st solidity dapp on zk)-uni fork

yams @yamstered

5. Do a Gitcoin donation using zksync (doesn't matter which project u donate to)

dao2.ioHow to fund a project on Gitcoin using zkSync ?Layer 2

yams @yamstered

6. Finally just leave some ETH in the zksync wallet until they announce snapshot. Also be careful about doing this on a bunch of wallets, the team seems pretty sophisticated.

• Another big player in the ZK-Rollup space will be Polygon, which is working hard towards transitioning Polygon from its current sidechain model (with certain security and decentralization trade-offs) to a fully-fledged ZK-Rollup L2.

• While having launched a prototype, Polygon will need some more time than StarkWare for its ZK-Rollup rollout though. With the ZK-Rollup narrative poised to heat up in the weeks and months to come, it wouldn’t be surprising to see MATIC getting some attention…

RYAN SΞAN ADAMS - rsa.eth 🦇🔊 @RyanSAdams

Huge. Polygon's move into ZK rollups recently is extremely bullish for: 1) Polygon 2) Ethereum 3) Decentralization Ultra Scalable Ethereum 🚀🚀🚀

Polygon | $MATIC - We're hiring! @0xPolygon

1/7 💫 We are proud to reveal the newest member of the Polygon family - Polygon Miden, an upcoming STARK-based, EVM-compatible Rollup! The project is led by @bobbinth, former Facebook's lead ZK researcher who led the development of Winterfell. A 🧵 on why this is exciting... https://t.co/5RqAJgnZlP

Polygon | $MATIC - We're hiring! @0xPolygon

5/7 Today, we are announcing the first version of Miden VM, a prototype for early adopters. In the coming months, the plan is to develop Miden VM into a production-grade VM with unique characteristics such as multi-language support and built-in privacy.

github.comGitHub - maticnetwork/miden: STARK-based virtual machineSTARK-based virtual machine. Contribute to maticnetwork/miden development by creating an account on GitHub.

• Overall, there are not many tokens in the ZK-Rollup space just yet. The best thing you can do to spot opportunities early is to follow all the relevant projects and thought leaders to be as close to the alpha as possible!