What are ZK-Rollups?

Table of Contents

1. Introduction
2. L1 & L2s
3. How does Layer 2 Work
4. Advantages of L1 & L2
5. Rollups
6. Deepdive into Optimistic Rollup vs ZK Rollup
7. Popular L2s by TVL

Introduction

Welcome to Part 1 of our new Back to Basics series, where we will break down the fundamentals behind ZKX. We're starting with ZK-Rollups — the underlying technology that powers our permissionless protocol.

They say the future of Ethereum will be built on ZK-Rollups. Cheaper, faster, and secure!

Many people believe in this view, and according to Vitalik, Layer 2 scaling and privacy are here to stay.

'ETH2 scaling for data will be available before ETH2 scaling for general computation.' In his tweet, ETH's main man insinuated that rollups would be the dominant scaling paradigm for at least a couple of years.

Many of us have heard the term 'ZK-Rollups' before alongside 'Ethereum' and Scalability, but what exactly are they? Let's take a deep dive into the world of Layer 2 scalability, starting with the origins:

L1 and L2s

Layer 1 is the underlying architecture of the main blockchain, i.e., Ethereum. It is the foundation upon which L2 networks are built. Layer 2 is an extension of Ethereum, which provides scalability through faster, cheaper transactions without compromising the security of the main-chain.

Instead of directly putting all activities on L1 and clogging the network, you can now conduct your activities off-chain on L2. A smart contract on-chain processes withdrawals and deposits and guarantees that everything happening off-chain is following the rules of the mothership!

Example

• L1: Bitcoin, Ethereum -L2: Lightning Network, Polygon, Arbitrum, Optimism, and StarkWare

Ethereum intends to use both Layer 1 (sharding) and Layer 2 (rollups) solutions to solve the scalability trilemma. Smart!

How does Layer 2 work?

Layer 2 interacts with Ethereum (Layer 1) and takes the transactional burden off of it. Layer 2 then posts finalized proofs back to the main-chain. By removing this transaction load from Layer 1, the base layer becomes less congested, and the ecosystem becomes more scalable. A perfect example of this is how sending a regular Ethereum transaction can run into hundreds of dollars during times of congestion. Layer 2 serves to clear this congestion and keep transaction fees low.

Advantages

1. L1 — Decentralization, Security, and Data availability
2. L2 — Scalability, Speed, and Cost-effective

Now that we’ve got the origin story, let’s talk about Rollups!

Rollups are the preferred Layer 2 solutions for scaling Ethereum. Rollups bundle hundreds of transactions from L1 off-chain, dispersing transaction fees among all users in the rollup. By posting transaction data back to L1, rollups take advantage of the security of Ethereum.

Watch this Finematics video for a visual explanation of Rollups.

If you want to figure out how to move your funds from L1 to L2 and learn about bridging, you can refer to Paper Ape's blog on What does Layer 2 mean?

A deep dive into Optimistic Rollups vs ZK Rollups

ZK rollups are considerably quicker and more scalable than Optimistic rollups, and there are many 'betting' on ZK Rollups' growth. One such advocate is polynya, who offers a long-term view of their potential in the tweet below.

Popular L2s by Total Value Locked

1. Arbitrum — $9.94b
2. Optimism — $5.74b
3. Base — $733m
4. zkSync — $547m
5. dYdX v3 — $356m
6. Linea — $182m
7. Starknet — $139m
8. Polygon zkEvm — $114m

Source: l2beat.com (as of 4th January 2023)

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