Due to the lack of smart contract support, ZkSync 1.0 has a low adoption rate compared to other general-purpose L2, making the utility of aggregation beyond Token transfer and exchange minimal.

The Matter Labs team is aiming to launch their alpha zkEVM on the main Web on October 28, making them the first team to launch ZK rollup, an EVM-compatible universal smart contract.

The first team to launch zkEVM could gain a significant first-mover advantage, especially if soaring Ethereum transaction fees push users away from the base layer.

The zkSync team believes they have made a significant breakthrough in reducing the hardware requirements, becoming an active participant in the proof process.

zkSync's ultimate goal is to be driven by their proven technology and the will of the thriving L3 ecosystem, while maintaining a focus on expanding Ethereum.

Launched by Matter Labs in 2020, ZkSync 1.0 is a zero-knowledge summary (ZKR) that relies on Ethereum security and is primarily used for Token exchange or transfer. It does not support smart contracts, so the products available on zkSync 1.0 today are limited, resulting in a low adoption rate relative to other Ethereum extension solutions. The Matter Labs team hopes to solve this problem by launching their alpha zkSync 2.0 (a zkEVM) on the main Web on October 28. In addition, Matter Labs announced that L3 will be available on the beta web in the first quarter of 2023.

ZkSync 1.0

Despite the lack of support for smart contracts, ZkSync 1.0 has managed to attract more than $54 million in funding. Most of the TVL on zkSync is ETH and various stablecoins because of the lack of utility on the network beyond Token transfer and exchange, and the failure of NFT casting to gain significant traction. Many users with pooled funds may be preparing for the inevitable Token airdrop, which should capture the future growth of the zkSync economy. Optimism and Arbitrum, two of the most popular Ethereum expansion solutions, are seeing more user activity given the fact that they already support smart contracts. While daily volume is not a perfect indicator, it provides some insight into the amount of activity zkSync is missing because it doesn't yet support smart contracts.

All funds on zkSync are protected in smart contracts on Ethereum, with computing and storage performed off-chain. Transactions are rolled into a batch and settled on Ethereum to amortize the cost of gas among all L2 traders, and then settled simultaneously. All state changes that occur in the summary are published to Ethereum as calldata and SNARK proof to ensure that the state changes are valid. The call data published to Ethereum enables anyone to reconstruct L2 state and is much cheaper than storing the entire L2 state on the EVM. Compared to the Ethereum base layer, SNARK is able to validate high-volume transactions in a cost-effective and timely manner (instant confirmation and 15-minute completion), and provides zkSync with tremendous transaction throughput (e.g. ~2,000 and ~15 tps, respectively).

ZKR offers a number of advantages over other extended architectures. ZKR inherits Ethereum's security, while side chains like the Ronin network are subject to vulnerabilities in their own set of validators. ZKR also does not rely on proof of fraud such as Optimism or Arbitrum, where honest third parties must monitor the block for malicious transactions and require a seven-day challenge period to delay withdrawals of funds. Furthermore, regardless of the state of the verifier set, funds on the ZKR can always be retrieved by its rightful owner, unlike the case of plasma chains that require the verifier to safely monitor withdrawals.

zkEVM's opportunity

The zkEVM race between Scroll, zkSync and Polygon has been heating up, but zkSync looks set to launch its main Web alpha at the end of October. It's hard to underestimate the potential impact of a first-mover advantage on a team crossing the finish line first. MATIC was launched in 2017 as one of the first EVM compatible chains, then renamed Polygon in February 2021, and attracted a large number of DApps and users at a time when Ethereum transaction fees were skyrocketing. Migrating an application to an EVM compatibility chain is relatively easy by redeploying similar code. Whichever team launches zkEVM first is likely to see an explosion in dApp deployment and user activity, creating a strong network effect like Polygon did in 2021.

As mentioned earlier, side chains are less secure than ZKR, and the leading ETH L2, Arbitrum and Optimism are all optimistic aggregates that require a 7-day official bridge exit period. L2 adoption continues to take hold, with total L2 gas payments to Ethereum trending upward. The launch of zkEVM will be a tailwind for this trend, given its security and UX superiority over its Ethereum side chain and optimistic summary peers.

The vision of ZkSync

The mainnet alpha release of ZkSync 2.0 will be limited to developers who register their projects to participate in the fair release. The choice to exclude users was made to ensure that the dApp team had enough time to ensure the smooth operation of their product, protect users from any errors, and to give the Matter Labs team more time to iterate on the design of their zkEVM. Notably, Starkware's Starknet is another chain of generic ZKR smart contracts in alpha. Starknet uses their own language Cairo optimized for ZKR, rather than focusing on EVM compatibility. However, Warp is developing a Solidity to Cairo translator that can be put into a bucket similar to zkSync's zkEVM. Cairo's developer tools, best security practices, and open source libraries will lag far behind Solidity. In addition, Polygon launched their zkEVM on the test web on October 10, although zkSync has been running on the test Web for about nine months.

ZkSync achieves EVM compatibility by compiling Solidity, the source code for advanced smart contracts on Ethereum, into Yul; An intermediate language that can be compiled into bytecode for different virtual machines. The Yul code is then recompiled using the LLVM compiler framework into a custom, circuit-compatible bytecode set designed for zkSync's zkEVM. This approach bypasses the need to zk proof all steps in EVM execution by starting directly with higher level code, making it easier to spread out the proof process while maintaining high performance. In the future, you can add flexibility to your zkEVM architecture by building a new compiler front end to add support for Rust, Javascript, or other languages. It should be noted that zkEVM and EVM are compatible, but not equivalent at the bytecode level. Thus, while almost all Ethereum smart contract code can be ported directly to rollup, some code needs to be changed and may need to be re-reviewed under certain exceptions, and debugging tools are not compatible without minor tweaks.

Account abstraction

The main enhancement to Ethereum's default behavior implemented in zkEVM is the idea of account abstraction. Ethereum's core architecture supports two types of accounts: Externally owned accounts (EOAs), which are public addresses controlled by private keys that can be used to sign transactions (such as Metamask wallets), and contract account transactions that operate on the underlying code and cannot be initiated. The main goal here is to separate the account holding the Token from the signer authorizing the transaction.

The EOA in zkSync's zkEVM can, of course, initiate transactions, but it can also implement arbitrary logic in it like a smart contract account on Ethereum. This is called "account abstraction" and is very similar to the IP-4337, but modified slightly to provide a smoother experience for the user. Accounts that can compensate other accounts for transactions are called Paymasters. In practice, Paymaster accounts should be protocol-enabled to pay transaction fees in ETH or various ERC-20tokens on behalf of their users. As use cases are discovered, account abstraction can open up a new avenue of innovation for wallet providers. It's important to note that this is a novel idea that is still iterating, and users should proceed with caution.

zkPorter

The zkEVM contest is L2's main narrative at the moment, but it's zkSync's zkPorter that's up for debate. While zkEVM will bring an order of magnitude of expansion to Ethereum, it still requires ZKR to publish data to the Ethereum base layer, which reduces their potential scale. The introduction of zkPorter places zkSync's zkEVM firmly in the realm of will, meaning that users can decide whether to store their data on or off the chain. Users who prioritize security over throughput and very low transaction costs will choose to operate on aggregates to ensure data availability. Users who prioritize throughput and reduced transaction costs over security will conduct their activities on zkPorter, publishing data on zkPorter and making it available down the chain.

All zkPorter transaction data will be published to the Guardian Network, a proof-of-interest network protected by the final zkSyncToken. The guardian will track the status of the zkPorter side by signing blocks to confirm that the data is available. The guardian of malicious acts will be reduced, which provides a cryptoeconomic guarantee for data availability. In contrast to Optimistic rollups, malicious operators will be able to steal any funds on the rollup if the data is moved off-chain, while evil guardians can only freeze the zkPorter state, which in turn freezes their own funds. Also, buying all the non-pledged Zksynctokens to launch such attacks would cost a lot of money and lead to significant slip points in the process.

zkSync's dual-account approach to ZKR and zkPorter will provide users with a full range of destinations to conduct their activities while maintaining a high security guarantee. ZKR and zkPorter's smart contracts and accounts will be completely interconfigurable. For example, Aave can start their contract code on ZKR for maximum security, but users can still interact with the contract through their account on the zkPorter side for lower fees and higher throughput. zkPorter's final design is still a work in progress, so plans are subject to change.

Level 3

While there isn't much information available to the public, Matter Labs recently announced their goal of launching Tier 3 powered by their zkEVM in the first quarter of 2023. Known as "Opportunity", the ZKR L3 is likely to be the first ever launched L3 on the test web. Our vision is to have an infinite number of fully customizable "hyperchains," all connected to each other via local Bridges, thus bringing the idea of secure interoperability to life. Pathfinder will be highly experimental, but it is the logical next step in the development of a new blockchain extension architecture.

Third parties building L3 verification will be able to select their publicly available data, thus providing privacy for users. The teams will also be empowered to launch their own tokens to capture the benefits of what they're building. These tokens can also play a key role in decentralizing their proof process, collator, or data availability solution. In terms of customizability, comparisons can be made between Cosmos's application-specific chain and zkSync's L3, with the main differences being the security of Ethereum that supports the latter and fully interoperable assets between chains without the need for a common messaging protocol like IBC.

ZkSync hopes that their breakthrough in lowering the hardware requirements involved in the proof process without sacrificing performance will set them up as an industry standard. This will put their ZKR, zkPorter, and all other zkSync L3 on the same circuit and eliminate the bridge attack vector that has been exploited repeatedly. While the vision is ambitious, it will improve transaction costs and speed, developer and user experience, interoperability and security by 10-100 times. Two major questions remain: Will L2, which is not equivalent to EVM at the bytecode level, become an industry standard, and will L2 and L1 teams competing for a share of user awareness put aside their differences and extend blockchain to the masses?

Final Thoughts

ZkSync has long been a pioneer in zero-knowledge cryptography, and they continue to pioneer the path of expanding Ethereum. They launched their first zkEVM on the main net before the end of October, which can provide them with a significant first-mover advantage and enable them to build strong network effects. Their two-pronged approach of using interoperable accounts for both zkPorter and ZKR is a unique strategy that benefits both developers and end users.

Matter Labs' vision of creating a standard prover for all chains is very ambitious, but could be fruitful if they actually develop the most advanced prover to date. This will open the door to an L3 ecosystem with reasonable sovereignty, high performance and secure interoperability. The main risk associated with their strategy is the underlying architecture they have chosen for zkEVM: compatibility of Ethereum with ZKR at the high-level smart contract code level rather than EVM equivalence at the bytecode level, or by creating a new programming language and eliminating EVM compatibility altogether. There are teams working on all three of the above strategies, and only time will tell who makes the right bets to expand Ethereum.