If you want more cryptocurrency analysis including full-length research reports, trading signals, and social media sentiment analysis, use the code "Publish0x" when subscribing to CryptoEQ.io to make your first month of CryptoEQ just $10! Or simply click the button above!
1/ To begin, ZKRollups are an Ethereum L2 scaling solution that probably everyone has heard of.
Ethereum is operating at max capacity and L2s are the future. Luckily they are also the present! As many implementations are live and executing millions of txs.
2/ ZKRollups submit txs to mainnet using a cryptographic verification method called a zero-knowledge proof (zkp). ZKPs allow someone to prove they have a particular piece of information without actually revealing the contents of the information.
3/ ZKR's proof links them to ETH mainnet and prevents the rollup from censoring or stealing funds while maintaining the immutable properties of L1. This proof ensures the validity of the off-chain txs, making them instantly verifiable, & removing the need for a challenge period.
4/ Popularized by for enabling anonymous transactions, zero-knowledge-proof technology provides scaling efficiencies for state transitions on the rollup chain that are then submitted to the main chain.
5/ This ZKP approach is also called using validity proofs, i.e. highly complex cryptography to ensure all L2 transactions are valid and correct. The proof is submitted and checked by an on-chain L1 contract.
6/ While validity proofs are expensive (relative to fraud proofs), verification by the L1 is simple &cheaper than a L1 tx. However, due to the complex computation involved in the validity proofs, special-purpose hardware may be needed to run a node, creating a centralizing effect
7/ Validium’s mechanism is nearly identical to a ZKR with the only difference being that data availability in a ZKR is on-chain, while Validium keeps it off-chain. This means ZKRs post data on the L1 itself while Validiums post proofs on-chain, but data on a separate network.
8/ This enables Validium to achieve considerably higher throughput than ZKRU or ORs. By sending data off-chain rather than on-chain, it reduces the cost of each transaction and increases the transactions per second (TPS).
9/ By keeping data off-chain, Validiums also offer privacy benefits as users’ txs are stored with the validium operator instead of publicly on chain. However, because tx data is not published on-chain, users are forced to trust an operator to make the data available when needed.
10/ This key difference makes Validiums more akin to a custodial PoA system where Validium operators could freeze, but not steal, users' funds. The trade-off for storing data off-chain is that it requires trust in the 3rd party who could prevent users from accessing balances.
@StarkWareLtd aims to solve this with a Data Availability Committee (DAC), a committee of 8 independent members that have their own copy of the transactions made. They are also required to maintain this data by making it available at all times.
12/ If an operator prevents a user from accessing their funds, a committee member can override them to confirm their request if it is valid.
Examples of where Validium is used: StarkEx and @loopringorg (LRC).
13/ Multiple projects launched Validiums using Starkware’s StarkEx platform, including:
DEX - June 2020
ImmutableX NFT platform - April 2021
DEX - April 2021
Fantasy Soccer - July 2021
14/ Loopring is a ZKR Validium that was the first ZKR DEX to deploy to the Ethereum mainnet in December 2019. As of Q1 2022, Loopring has over 350 M in total locked value in the protocol and can achieve throughput ~1000x greater than Ethereum mainnet for trades.
@loopringorg is the only ZKR protocol with its own smart wallet, Counterfactual Wallet, with direct fiat on-ramp to its L2. The wallet allows users to store their crypto assets, mint NFTs, trade, and conduct L2 payments.
16/ 1 disadvantage of Loopring is its use of Groth16 vs @zksync's PLONK. The downside to this is Loopring requires a trusted set-up for certain upgrades & protocol changes. PLONK requires just 1 trusted setup at genesis & STARK solutions requires no trusted setup
17/ Volitions are a ZK-rollup and Validium hybrid solution that enables users the ability to choose for data availability either on-chain or off-chain, i.e. either via Ethereum or through validiums.
18/In April 2021, @zksync announced zksync 2.0 and its zkPorter technology which aims to provide ~0.01 transactions by moving transaction data off-chain (Validium style) and offering 20K transactions per second (TPS).
19/ zkPorter will be part of the ultimate zkSync 2.0 vision. With zkSync 2.0, the L2 state will be divided into two distinct options: a zk-Rollup with on-chain data availability, and the zkPorter option with off-chain data availability.
20/ zkPorter is the internal consensus mechanism for data availability within zkSync 2.0, enabling the large TPS numbers. zkSync 2.0 can handle ~1,000 to 5,000 TPS as a standard ZKR, but with zkPorter, it can accommodate ~20k -100k TPS (depending on the complexity of each tx).
21/ However, it should be noted that, when utilizing zkPorter, the user is relying on zkSync's internal consensus mechanism. This requires the user to place their trust in @the_matter_labs & rely on a far less secure or decentralized layer that leverages L1’s consensus mechanism.
22/ The good news is that users are able to choose either option based on their preferences & the trade-offs presented.
Basically, each user is able to choose their own amount of security. zkPorter will offer negligible cost but lower security for trivial transactions.
23/ ZK-rollup mode will offer maximum security. Both parts will be composable and interoperable: contracts and accounts on the zk-Rollup side will be able to seamlessly interact with accounts on the zkPorter side and vice versa.
24/ The primary difference between zkPorter and Starkware’s Volition is that a user must choose with each zkPorter account whether to produce transactions with off-chain data availability, while in Volition, a user can choose for each transaction within an account.
