ZK-rollups in focus as quest to scale Ethereum grows

The scalability of the Ethereum network has been a point of contention in the cryptocurrency ecosystem for years, mainly due to high fees and network congestion during peak demand.

The latest solution to emerge as the ultimate solution to Ethereum’s scalability problem is zero-knowledge rollup (ZK rollup), a form of scaling that runs computations off-chain and submits them on-chain with validity proofs.

Zk rollup season

— cryptowarlord.eth (͡°͜ʖ͡°) (@CryptoWarlordd) December 7, 2021

Earlier this year, protocols that chose to use optimistic rollups such as Optimism and Arbitrum grabbed headlines and were touted as the best scaling solutions on Ethereum, but aside from Arbitrum, the hype around these protocols has died down, with traders noting, Even optimistic rollups can incur higher-than-expected charges when the network is at peak demand.

2021 Early Success

While optimistic rollup solutions are gaining traction, protocols employing the ZK rollup model are quietly demonstrating their capabilities.

dYdX, a decentralized perpetual contract and futures exchange, has become one of the earliest adopters of ZK-rollup technology through its cooperation with StarkWare. StarkWare's StarkNet network is a permissionless decentralized ZK-rollup.

So far, the platform has seen considerable success, sometimes having higher 24-hour transaction volume than Coinbase.

Loopring (LRC), another protocol utilizing ZK-rollup to reduce transaction costs and increase its throughput, helped drive LRC’s price to an all-time high of $3.83 in early November.

LRC/USDT 1-day chart source: TradingView

ZK-rollup could be the next "rotation" for traders

ZK-rollup is once again a buzzword in the crypto space following a sharp sell-off across the market last week.

Polygon, the ethereum network’s second-layer platform, made headlines for announcing its acquisition of Mir, the project behind the zero-knowledge proof subcategory PLONK and Halo.

Polygon co-founder Sandeep Nailwal said that Polygon's 250 million MATIC token investment is to "explore and encourage all meaningful scaling methods and technologies at this stage." Polygon offers the lowest fees of any protocol on the Ethereum network.

Another highly anticipated protocol is zkSync, which has been gaining more and more attention lately. It’s a scaling solution created by Matter Labs, which raised $50 million in a Series B round led by Andreessen Horowitz in early November.

Total zkSync Deposits vs. Total Unique Users

According to Digital Delphi, the two main projects on zkSync are decentralized exchange ZigZag and funding platform Gitcoin.

Analysts at Delphi Digital said,

“According to L2 fees, token swaps via ZigZag on zkSync have the lowest fees.”

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