Compared to the slow, saturated network that Ethereum is circa early 2021, using ZKSwap feels magical - it feels like you're using early generation ETH or what ETH was intended to be.
Today I'll be providing the world's first review of the ZKSwap App and DEX (Decentralized EXchange), which is the front end for the first Ethereum Layer 2 DEX/AMM built on ZK-Rollup technology. It's based on a ZKSwap protocol that is open source and available for use by others that has had proprietary development work from the ZKSwap Organization, which is a loose confederation of Defi entrepreneurs, programmers, and engineers with plans for decentralized government via a DAO and utility coin called ZKS.
Launched on Valentines Day as a Version 1.0 DEX/AMM, ZKSwap is meant to be a very high speed ETH "side chain" and marketplace that features much higher Transactions Per Second (TPS). This higher throughput is combined with much lower fees than a typical Ethereum transaction on a DEX such as Uniswap, 1inch, or Sushiswap. ZKSwap currently supports 30 different tokens, with support planned for 100 tokens.
While Ethereum 2.0 is meant to help with the scaling and network congestion issues seen on the ETH network, high gas fees have become consistently problematic for DEXs and Defi, with no relief in sight in the near term. This problem has become so big that it becomes an existential problem for DEXs and Defi adoption and use.
Enter ZKSwap
For active traders using Layer 2 supported tokens such as UNI, ETH, and ZKS, repetitive trades (or moves) of L2 tokens can cost as little as 1 to 2% of the cost on the Layer 1 Ethereum mainnet for that same transaction.
ZKSwap is one solution that addresses high gas fees that's available today, and not in a year or two. What's different about this solution is that being feature complete: it's both production ready and available today, unlike ETH 2.0 which won't be complete for multiple years. For active traders using Layer 2 supported tokens such as UNI, ETH, and ZKS, repetitive trades of supported tokens can cost as little as 1 to 2% of the cost on the Layer 1 Ethereum mainnet for that same transaction.
Like many investors in Defi, I allocate or reallocate my funds based on new or existing opportunities, which means that to do these trades I must incur high gas fees (or wait for slower periods when gwei prices are lower). I'm not a day trader, but I also don't sit idle when there's crypto to be made during a bull run. I'm not afraid to take profits or cut my losses from time to time, and I'm active in both Cefi and Defi in about equal measure.
As a side-chain to Ethereum, ZK-Rollup technology allows an L2 DEX like ZKSwap to match or exceed the transaction speed of the entire Ethereum network on its own.
Instead of spending 32% of my ETH on gas to buy about $151 worth of ZKS, I only spent 3.6% of my funds - or about one-tenth the percentage of a smaller Uniswap trade by moving my ETH to ZKSwap and executing a larger ZKS trade there (vs. ZKS trade at Uniswap.)
Below is a picture of an example of a proposed trade $151 worth of ETH on Uniswap for 41.9 ZKS tokens. In addition to being a protocol, ZKS is also the native utility and governance token of ZKSwap.
At this very early stage in the project's development ZKS is only available on a few select exchanges and DEXs, meaning that you're not buying this particular (potential) rocket ship microcap token on a CEX like a Coinbase, where you could purchase crypto with minimal transaction fees. Gas fees were about 105 gwei for standard speed transmissions at the time.
If I had gone through with this proposed trade on Uniswap, about one-third of my available ETH for this trade would have been taken up with gas fees instead of being used to buy more ZKS!
However, now that ZKSwap is now available, what if I could take advantage of the lower gas fees to spend less on gas and more funds on actual tokens? This picture below shows that I even though I moved 5.5x more ETH than this proposed Uniswap trade, I was able to use about a third less in gas fees by moving my ETH over to ZKSwap first, and then using the much lower gas fees at ZKSwap to do my ETH to ZKS trades.
Therefore: the ZKSwap method saved me from 50% higher gas fees in this example:
- $31.66 @ ZKSwap vs. $48.10 @ Uniswap:
- Purchasing 8.3x more ZKS while using about 1/10th less gas (percentage wise vs. Uniswap)
- While using 5.5x more ETH than this proposed $151 Uniswap trade.
Instead of spending 32% of my ETH on gas to buy about $151 worth of ZKS, I only spent 3.6% of my funds - or less than 10% the percentage of a smaller Uniswap trade by moving my ETH to ZKSwap and executing a larger ZKS trade there, instead of on Uniswap.
At this time, the gas fees to move an ERC-20 coin to do a trade on ZKSwap are still much cheaper than using a Layer 1 DEX.
Fortunately, the ZKSwap Organization is working on reducing this move fee to zero.
When this happens and when marketing agreements with partner DEXs are made and continue to be made, this process will be seamless and transparent to the user, which is when this ZKS protocol is really going to take off.
While I purchased 8.3x more ZKS than this Uniswap trade, the total gas fees were still more than 10 times cheaper than this proposed smaller Uniswap trade.
To give you an example of how much gas fees can be saved: on a day where Gwei prices fluctuated from 88 to 306(!) Gwei, I executed 3 separate ETH trades to buy ZKS on ZKSwap yesterday: . Once the funds were on ZKSwap, my L2 gas fees to purchase about 200-350 ZKS per trade. All three transactions cost me only $5.26 total in gas fees:
- 1) $1.36
- 2) $1.36
- 3) $2.54
Pros:
- Save a ton on ETH gas fees once you get funds into the L2 system
- Fast. Feels like using early ETH or when using ETH during low network congestion
- Quickly make DEX trades and move funds around to staking and liquidity pools with minimal gas fees
- Liquidity Mining and Staking incentive programs launch tomorrow
- Even with accounting for the gas fees associated with L1 ETH mainnet fund moves to L2 ZKSwap, it's still cheaper to do a ZKSwap trade vs. a normal DEX.
- It's both a protocol that others can use as well as it's own dApp / AMM Exchange
Cons:
- You have to set up a separate L2 wallet (which fortunately can be the same address as your L1 wallet)
- You must move funds to this L2 wallet to use your coins or tokens at lower gas fees
- To set up or to add funds for each coin and coin type that you want to use costs gas fees to add that coin. (Note: This is being addressed by a Proof Of Gas liquidity incentive program and project improvements to remove this move fee)
- Until the process is both seamless and transparent to the user, an L2 solution such as ZKSwap will never fully take off (Note: this is being addressed by current and future DEX partnerships and project improvements)
Conclusion:
Compared to the slow, saturated network that Ethereum is circa early 2021, using ZKSwap feels magical - it feels like you're using early generation ETH or what ETH was intended to be.
Even when taking into account that it costs gas fees to move your funds over to ZKSwap before you can trade: comparable ZKSwap moves and trades are still much cheaper than at an L1 DEX such as Uniswap and its competitors. 3 out of the 4 Cons on my list will be addressed by future project improvements and DEX partnerships as time goes on, so most of the negatives on my list will be addressed as time goes on.
I think that the the future of Ethereum lies in both Layer 1 and Layer 2 solutions. The ETH ecosystem is broad enough and diverse enough to support multiple solutions to address scaling and congestion issues.
Due to consistently high gas fees, DEXs must adapt - using solutions like BINANCE or ZKSwap - or they will wither away or be absorbed by DEXs that embrace both L1 and L2 solutions. The fundamental "arbitrage"-type advantages of saving immense amounts of fees on an L2 solution like ZKSwap protocol can no longer be ignored because the added profitability of using less gas to accomplish the same tasks is too much of a competitive advantage to ignore.
ZKSwap is feature complete, production ready, and most importantly available today to address high gas fees.
Score:
I give ZKSwap a 10/10 for a well-designed and well-executed Version 1.0 product and launch.
ZKSwap's Future
The future of ZKS is bright. However, at this stage of the project's development, I can only recommend ZKSwap to semi-active / active traders, or those intending to buy coins that can only be accessed through a DEX, such as ZKS. If you're going to do DEX trades, the opportunity to save money on gas fees if your coin(s) are supported are hard to ignore. Once a solution like this is seamless to the user, it becomes a fundamental foundational improvement that can improve the ETH trading experience for everyone. This promising project is just one solution, albeit one that is fully functional and available today compared to its competitors.
Now - besides gas fees and transaction costs - why would one go through all this trouble to set up a Layer 2 wallet and app? Astute Defi investors know by now that potentially profitable opportunities exist when a promising project launches with liquidity incentives.
Tomorrow on February 17, the ZKS Organization is launching a generous liquidity program featuring mining and staking pools of 5 Million ZKS for 5 different programs. One promising sign of project with potential is an adequate and well designed marketing budget. The ZKSwap mainnet launch is both well funded and well designed. The current value for these coins meant as liquidity incentives is well over $12 Million at current ZKS prices.
More details of this program launch can be found at their official ZKS Medium blog.
