Project Introduction
zkSync Era is an Ethereum-based Layer 2 scaling solution that leverages zero-knowledge proofs and Rollup architecture to offer faster and more cost-effective transaction experiences. By shifting most activities to Layer 2, zkSync Era reduces network congestion and lowers transaction fees while maintaining the security and finality of the Ethereum mainnet. As the 2.0 version of zkSync, zkSync Era significantly improves performance and functionality compared to its predecessor, zkSync Lite (1.0).
Key features of zkSync Era include mainnet-level security without relying on third parties, ensuring transaction reliability. It supports instant confirmation and completion of ETH and ERC20 token transfers on Layer 1, typically within ten minutes. Transaction costs are minimal, with ERC20 token fees approximately one percent of those on the mainnet, and ETH transfer fees about one-thirtieth of mainnet costs. zkSync Era allows receiving funds without registration and facilitates payments to existing Ethereum addresses, including smart contracts. Additionally, it supports multi-signature transactions and permissionless smart contracts, enabling efficient and flexible user experiences with withdrawals to the mainnet in approximately ten minutes.
Core Components
zkEVM
zkEVM is the technology that runs the Ethereum Virtual Machine (EVM) as the smart contract engine on ZK Rollup. Its main goal is to preserve the performance advantages of Rollup while completely replicating the Ethereum experience on Layer 2, providing users with a familiar development environment and operational mode.
Account Abstraction
Account abstraction introduces a new account type by treating accounts as smart contracts to separate transaction verification from transaction execution. This enables each account to have its own logic, achieving seamless compatibility, ensuring user sovereignty, and providing a more secure and smooth user experience.
zkPorter
zkPorter addresses the scalability limitations of zkRollup by ensuring the availability of off-chain data. It does not rely on data publication on the Ethereum base layer, thus overcoming scalability bottlenecks and achieving more efficient data processing and greater scalability.
Team and Investor
Team
Matter Labs, the German company behind zkSync, was founded in 2018 and has grown to over 50 employees dedicated to developing efficient, low-cost, and secure Ethereum transaction solutions. The company is led by CEO Alex Gluchowski, who brings over 15 years of development experience and a passion for personal freedom and decentralized technologies. The team's CTO, along with other core members, contributes extensive technical expertise and development experience, driving innovation and growth within zkSync.
Investor
Since 2018, zkSync has completed 5 rounds of financing, raising a total of $458 million, the most among Layer 2 scaling solutions. A recent Series C round valued the project at $2 billion. Funding comes from top-tier investors and venture capital firms, including Binance, Aave, Curve, Coinbase Ventures, a16z Crypto, Dragonfly, and Blockchain Capital. In 2022, zkSync secured an additional $200 million commitment from BitDAO, further ensuring ample funds for project development and infrastructure construction.
Tokenomics
$ZK is the native token of zkSync, with a total supply of 21 billion.
Token Assembly: 29.3%
Ecosystem Initiatives: 19.9%
Airdrop: 17.5%
Team: 16.1%
Investors: 17.2%
Market Performance
As of June 17th, the $ZK token is priced at approximately $0.25 USD, having launched on June 11th and listed on multiple cryptocurrency exchanges including Binance. Its market capitalization exceeds $900 million USD, with a fully diluted valuation of approximately $5.2 billion USD. According to CoinMarketCap, $ZK ranks 79th in the global cryptocurrency market by market capitalization and 7th among all Layer 2 projects, positioning it between Starknet and Aevo in terms of market presence.
Ecosystem
Since zkSync Era mainnet launched on March 24, 2023, despite maintaining a leading overall scale, there has been a significant decline in user engagement and profit-capturing capability. This phenomenon is closely related to insufficient ecosystem projects and a lack of sufficient focus on the community.
As of June 17, 2024, according to L2 BEAT data, zkSync Era's total locked value is $765 million, down from approximately $990 million on March 12.
Despite the relatively high total locked value of zkSync ecosystem projects, the number and diversity of projects remain insufficient. According to zkSync-dappradar data as of June 17, there are 205 ecosystem projects covering areas such as DeFi, gaming, trading markets, NFTs, social platforms, wallets, and DEXs. However, DeFiLlama data indicates that only 5 zkSync projects have TVL exceeding $10 million, accounting for 58.5% of the total locked value. Among the top 10 projects by TVL, the majority are concentrated in DEX and lending sectors, with a limited deployment of well-known high-quality projects on zkSync.
As of June 17, zkSync Era has accumulated a total of 3,434,121 users, with 2,382,454 bridge users and a bridged total of 3,878,944 ETH, marking an increase of approximately 66.8% since the beginning of the year. However, the average bridge amount per wallet address is relatively low at 1.031 ETH. Over the past two months, on-chain activities on zkSync have significantly declined, with daily bridge transactions plummeting—for instance, only 160 transactions were recorded on June 16, and dropping to just a few dozen transactions between June 12 and 15.
Daily active users on zkSync have also sharply decreased, with zkSync Era recording 183 active users on June 16, and zkSync Lite only 12, totaling 195 users. This represents a decline of about 98.73% compared to January 15, 2024, highlighting a substantial reduction in user engagement.
Data source：Dune @outputlayer
Data source：Dune @sixdegree
Furthermore, prior to the announcement of the airdrop rules, the significant participation of "rug pullers" brought substantial profits to zkSync Era but also impacted the overall health of its ecosystem. As of May 1, over the past four months, zkSync Era generated approximately 1848 ETH in profit from gas fees, accounting for 10.3% of the total profits on Rollup chains. However, compared to chains like Base, Arbitrum, and Scroll, zkSync Era still shows a noticeable gap in monthly profits, which have been declining.
Data Source： Dune @niftytable
ETH Layer 2 Landscape
The daily total transaction volume on Layer 2 has significantly surpassed that of the Ethereum mainnet. Currently, Layer 2 solutions include six main types: state channels, sidechains, Plasma, Optimistic Rollup, Validium, and zkRollup.
Among these solutions, Optimistic Rollup holds the majority of the Layer 2 market share. Arbitrum, a leading Optimistic Rollup project, accounts for 40.4% of the Layer 2 TVL; Base and OP hold 17.12% and 15.67% respectively. In contrast, zkRollup’s zkSync captures only 1.76% of the Layer 2 market.
Optimistic Rollup projects like Arbitrum and OP launched their mainnets early, gaining a head start in ecosystem development. Arbitrum's ecosystem quality is notably superior to other Layer 2 solutions, with well-known native projects such as Radiant Capital, GMX, Camelot, and Treasure DAO. In comparison, zkSync’s ecosystem development remains relatively weak.
According to L2 Beat data, zkSync Era’s TVL ranks 9th among Layer 2 projects, following Manta. The market share of Layer 2 is predominantly occupied by Rollup solutions, with Arbitrum’s TVL at $2.4 billion, accounting for 51.6%; Optimism’s TVL stands at $1.43 billion, representing 30.56%.
Regarding the stages shown in the chart: To better differentiate and define Rollup solutions, Vitalik and others have categorized Rollups into three stages based on their reliance on fraud proofs/interactive mechanisms. zkSync Era is classified as Stage 0, which means it fully relies on fraud proofs, meeting the minimum standards for a Rollup implementation.
Community Development
Community Scale
zkSync boasts a large-scale community with over 2 million members. It has 1.4 million followers on the X platform and a Discord community of 779,000 members. This substantial user base demonstrates zkSync's influence in the market and the vibrancy of its community.
Airdrop Controversy
Recently, zkSync released its airdrop rules, triggering widespread dissatisfaction within the community. The airdrop criteria heavily favor on-chain interactions, on-chain asset values, and holding periods, with a simplistic approach to identifying eligible addresses. Ultimately, only 10% of over 6 million wallet addresses qualified for the airdrop, far below expectations. Additionally, exclusion of many ecosystem projects from the airdrop list raised significant questions. Members of the Chinese community expressed disappointment in Matter Labs' leadership, citing a perceived imbalance in community interest considerations.
NFT marketplace ElemenT also tweeted that, as the largest NFT marketplace on ZKSync, they did not receive any airdrop, questioning the seriousness of the initiative. Similarly, zkApes tweeted that despite generating $15 million in gas fees, they did not receive any airdrop.
Rug Events
The airdrop controversy is not the first instance of zkSync neglecting community interests. Previous rug events resulted in user losses, causing discontent within the community. For example, the zkSync lending protocol Eralend suffered a $3.4 million loss due to a flash loan attack, xBank Finance lost $550,000 in liquidity due to a hack, nearly reducing liquidity to zero, and the ZKasino incident. Despite some projects being sold or attackers being arrested, zkSync has failed to adequately protect user interests. Community members believe that the zkSync team has been negligent in ecosystem development and is more concerned with gas income. Such mismanagement and disregard for user interests pose significant challenges for zkSync.
Summary
zkSync, developed by Matter Labs, is an Ethereum Layer 2 scaling solution leveraging zero-knowledge proofs and Rollup architecture to achieve faster and cost-effective transactions. Key components like zkEVM, account abstraction, and zkPorter highlight its innovations in security and usability. However, due to the complexity of its technical implementation, zkSync requires more time and resources compared to Optimistic Rollup projects. Despite having a large community and substantial funding, zkSync faces challenges in ecosystem development and user engagement, particularly concerning controversies over airdrop distribution and handling of rug events, impacting community trust and market performance.