Submitted by: DODO Research

Edited by: yaoyao & Lisa

Author:dt

Ethereum's second-layer expansion mechanism is a popular topic in today's blockchain and a battleground for strategists.

This article will introduce zkSync, the first layer 2 network to go live on the mainnet using zk-rollup technology, from the introduction of the public chain itself to the development of ecological projects, and provide a comprehensive analysis from fundamentals, data to the ecosystem.

I. Introduction to zkSync Era

zkSync is an Ethereum Layer 2 scaling solution based on the zk-rollup architecture, designed to enable high-performance, low-cost smart contracts and blockchain applications. It uses zk-rollup technology to achieve high-throughput scaling to reduce transaction costs and increase confirmation speed. zkSync Era is built on the zkSync protocol and features faster transaction speeds, higher scalability, and more cost-effectiveness. It is applied to multiple fields such as DeFi, cross-chain bridges, and NFTs. Due to its high efficiency and low cost, zkSync has received widespread attention from the capital market and is developing rapidly.

Matter Labs, the developer of zkSync, has completed four rounds of financing, with a total financing amount of 458M USD. Well-known venture capital firms such as a16z, Dragonfly, 1KX, OKX Ventures, bybit, and Blockchain Capital have all participated in the investment. Looking back, this amount of financing is an unparalleled amount in both the WEB3 and WEB2 fields, and it is also the leading unicorn project in blockchain projects.

With a strong financing background and cutting-edge technology, it is one of the first players in the zk-rollup technology that Ethereum founder Vitalik once highly praised, and is one of the few zkEVM rollups that have been launched. Whether in terms of narrative, capital, or reality, zkSync Era is a leader. The blockchain world's desire to pursue new things also makes zkSync Era the most watched and hottest public chain in 2023.

zkSync Era History

  • zkSync 1.0 - zkSync Lite was launched on the Ethereum mainnet on June 15, 2020, achieving a transaction throughput of about 300 TPS, but is not EVM-compatible.

  • zkSync 2.0 - zkSync Era was launched on March 24, 2023, supporting Solidity (via zkEVM) and Zinc (rollup's internal programming language) to implement arbitrary smart contract functions; secondly, through zkPorter - a protocol that combines zk-rollup and sharding, the throughput increases exponentially to 20,000+ TPS.

The biggest selling point of zkSync Era compared to zkSync Lite is that it is compatible with EVM and can execute smart contracts written in Solidity or other high-level languages ​​used in Ethereum development, which can attract more developers and users to seamlessly connect to the ecosystem. In addition, the transaction cost has been reduced by 50 times compared to before, and the speed of 20,000 TPS has also made the user experience a long-term improvement compared to Ethereum itself or zk lite.

zkSync’s Competitors

The rivals of zkSync are undoubtedly various public chains in the L2 track. In addition to the mature and temporarily leading Arbitrum One & Optimism, many latecomers using zk-rollup are the rivals that zkSync needs to pay more attention to:

Including the currently launched Polygon zkEVM, the well-known Starkware with huge capital investment, Linea developed by Consensys, Scroll also committed to the development of zkEVM, Aztec focused on privacy, two second-layer solutions funded by exchanges, Taiko invested by OKX and Mantle invested and developed by bybit. Even the already launched Optimistic Rollup Metis has announced that it is actively developing Hybrid Rollup based on zk-rollup combined with the current Optimistic Rollup. Finally, there is Kakarot, which has attracted attention because Vitalik personally invested in the Pre-Seed round. zkSync can be said to have 100% pioneer advantage at present. How to continue to lead in the future and bring a good experience to users, in addition to the technical aspects, how to cultivate the ecosystem is the most important thing.

II. zkSync Era Data Overview

Before introducing the ecological project in detail, let us first look at data such as TVL, official bridge inflows and outflows, and daily on-chain transaction numbers to better understand the current status of the zkSync Era ecosystem.

Judging from the on-chain TVL data, the total TVL of the zkSync Era ecosystem has reached 459M USD in just 2 months since its launch. Since its launch, it has maintained a steady growth in TVL and currently ranks third in the Layer2 Rank, second only to Arbitrum One & Optimism, which use Optimistic Rollup.

source: l2beat.com/scaling/tvl

The official bridge data of zkSync Era also conforms to the growing trend of its ecosystem. The cumulative deposit addresses have reached 800K, and the average daily new deposit addresses from June to now are about 10K.

source: dune.com/makaineko/zksync-era-airdrop-criterion

On the other hand, judging from the daily transaction TX number of zkSync Era, it has dropped from a high of nearly 100K transactions at the beginning of the launch to a single-day minimum of only 1,300 transactions in early May, and is currently rising steadily to around 20K transactions per day. The reason may be that there is currently no killer DAPP on zkSync Era, and the transaction volume surged only due to the novelty in the early days of its launch.

source: dune.com/sixdegree/zksync-airdrop-simulation-ranking

In summary, its ecological profile is still in a very early stage. It is not easy to achieve such results in less than three months after its launch. It has passed the early stage of fomo and is steadily rising. We expect that there will be breakthroughs when more projects are deployed on the chain.

III. Introduction to zkSync Era Ecosystem Project

Old Project

Before zkSync Era was launched, many projects promised to deploy it, including Balancer, Uniswap, Frax, OHM, LayerZero and other well-known old protocols on the mainnet, but not many have completed deployment so far. Among the old protocols that have been officially launched, 1inch and iZUMi Finance are the largest.

  • 1inch Network

    The 1inch aggregator is one of the cornerstones of the Defi project. It officially landed on zkSync Era on April 20 and became the 11th public chain deployed. With 1inch, the liquidity of the split on the chain has a good entry. When users exchange tokens, they no longer need to think about which DEX to go to, which effectively promotes the development of the ecosystem.

  • iZUMi Finance

    iZUMi is also a multi-chain Defi project that was deployed at the beginning of zkSync Era’s launch. It is one of the first batch of old-brand protocols that most actively deployed zkSync Era. iZUMi has a very impressive TVL on zkSync Era and is currently the second-ranked project on the chain, becoming a strong competitor in the zkSync Era DEX track.

Looking at zkSync Era’s top projects from the perspective of TVL

From the statistics of Defillama, we can see that the development of on-chain is very early. The top five in terms of locked-in volume are all DEX decentralized exchanges, and there are eight DEX projects in the top ten. The remaining two are lending projects. There are no strong competitors in more complex tracks such as derivatives and GameFi. The following is an introduction to the projects by category.

DEX Decentralized Exchange

1.SyncSwap

SyncSwap is a decentralized exchange built on zkSync Era. It has the characteristics of low transaction fees and inherits the complete security of zkSync.

SyncSwap’s features include support for pool gauges, custom fee structures, advanced routers, voting custody token models, and governance.

Recently, SyncSwap launched Move, a cross-chain bridge based on the zkSync Era official bridge, which allows transfers between Ethereum and zkSync Era, and supports multiple assets such as USDC, ETH, USDT, WBTC, LUSD, LSD, MUTE, etc. In fact, Move can be understood as a third-party front-end of the zkSync Era official bridge, with the same gas cost as the zkSync official bridge. The bridge token is 100% zkSync native asset, without third-party risk. When users approve or transfer with Move, they interact directly with the official zkSync smart contract.

2.iZUMi Finance

iZiSwap is an on-chain order book DEX launched by the one-stop liquidity-as-a-service DeFi protocol iZUMi Finance on zkSync Era. It uses iZUMi's discrete liquidity AMM (DL-AMM), which is similar to Uniswap V3 centralized liquidity. DL-AMM can allocate liquidity at any fixed price to improve capital efficiency.

iZiSwap is a continuation of the automated market maker (AMM) DEX represented by Uniswap. Its innovative design not only improves the efficiency of liquidity supply, but also greatly enriches the user's trading experience, making iZiSwap stand out in the competition of decentralized trading platforms.

It is worth mentioning that iZiSwap has launched a completely decentralized limit order book model. During the transaction process, all limit orders on a single point are treated as a whole. This method can greatly improve the efficiency of transactions and ensure that transactions are completed within O(1) time. Secondly, every time the price crosses a price point, the volume of the traded order will be transferred to an independent storage space called legacy. This design enables the system to clearly distinguish the order sequence, thereby ensuring the correctness of the transaction.

Finally, users need to claim the traded assets themselves. This is a necessary restriction because it ensures that users have full control over their assets and avoids security issues that may arise from automatic transfer of assets.

This design brings a series of good features. First, since the limit orders on a single point as a whole can be traded in O(1) time, this greatly improves the efficiency of the transaction. Second, when the price passes through the target price (time point A) and then falls back to (or passes through) the target price (time point B), the limit orders after time point B will not be recorded as the transaction status, which ensures the correctness of the transaction. Finally, when the price is at the target price, the traded part is obtained by the user who first initiates the collection operation, which ensures fairness in the sense of first come first served.

In general, iZiSwap's innovative limit order management method has brought significant improvements in terms of security, efficiency and fairness, providing users with a better trading environment.

3.Maverick Protocol

Maverick Protocol is a DeFi liquidity infrastructure designed to provide liquidity markets for traders, liquidity providers, DAO funds, and developers, powered by Maverick AMM.

Users can trade and provide liquidity on Maverick AMM. There are 4 different types of liquidity modes: Mode Right, Mode Left, Mode Both, and Mode Static. After selecting a mode, the AMM will automatically move its liquidity to follow the price according to a set of specific rules. Maverick Protocol allows LPs to open Boosted positions and use incentive rewards to accurately attract liquidity. Other users can add liquidity to Boosted positions to purchase shares. LPs can earn income from transaction fees and LP incentives.

4.Mute

Mute.io is a zkRollup-based DEX on zkSync Era, including modules such as limit orders, pledge platforms, and bond platforms. It supports wallets, transactions, LP pools, Amplifiers, bonds, and DAO governance functions, and allows ETH, USDC, MUTE, WISP, ZKINA, MVX, IDO, WETH, USD+, ZKDOGE, DOF, BOLT, ZKFLOKI and other assets to be traded and liquidity provided. Users can obtain LP tokens after providing liquidity in the LP pool and pledge them into Amplifier to earn income.

Bonds are an innovation of Mute. Users can use their LP tokens to buy MUTE from Mute DAO at a lower price (bonds). After buying a bond, MUTE will be released after 7 days. If the ROI is positive, users can earn more MUTE than LP tokens. Through bonds, Mute DAO is able to increase the liquidity of the protocol, increase treasury income and the long-term liquidity of the protocol. dMute is the DAO token of the Mute.io ecosystem. Users need to lock MUTE for 7 to 364 days and get dMUTE in return. After the lock-up period, users can redeem MUTE.

5.SpaceFi

SpaceFi is a Web3 platform that connects the Cosmos ecosystem and Ethereum Layer 2. Its products include DEX, NFT, Starter, Spacebase, and new products such as Game and Social Network will be launched in the future.

SpaceFi supports ETH, USDC, SPACE, and WETH tokens for trading and adding liquidity. Users can stake single currencies such as xSPACE and LP tokens such as SPACE-USDC in the Space Farm to participate in mining and receive xSPACE rewards. Starter is Space's incubation and fundraising platform. Users can stake LP tokens such as USDT, ETH, or SPACE-USDC to obtain a share of project tokens at the initial offering price. Spacebase is Space's on-chain community. By creating or joining Spacebase, users can get more mining rewards. Planet NFTs are minted from SPACE tokens. NFT holders can publish on-chain proposals, and both Planet NFT holders and xSPACE holders can participate in governance voting.

6.Velocore

Velocore is the first ve(3,3) DEX on the zkSync Era based on the Velodrome Finance and Solidly codebases.

The core function of Velocore is to allow users to trade digital assets at low cost and low slippage. Users can add liquidity to the LP pool (divided into Stable Pool and Volatile Pool) and use LP tokens to obtain VC token incentives. VC is the native token of Velocore. VC holders can vote for custody tokens and exchange them for governance tokens veVC (veNFT). veVC can be transferred, merged and split. The VC lock-up period can be up to 4 years. The longer the release period, the higher the voting weight and rewards obtained by veVC holders. veVC holders can also receive protocol fees, bribes and kickbacks. Bribes can be used to encourage other users to vote for LP pool rewards. Velocore also has a Launchpad and launched the memecoin WAIFU.

7.veSync

veSync is also a ve(3,3) DEX on zkSync Era and a fork of Velodrome Finance. veSync has a TVL of approximately $4.85 million on zkSync Era, ranking seventh, with an increase of nearly 20% in the past 7 days.

The native token of veSync is VS, and the governance token is veVS (veNFT). veVS can be transferred, merged, and split. veSync uses the ve(3,3) incentive model, where token holders can vote to host their tokens to receive veNFTs, and longer vesting periods bring greater voting rights and rewards. There are currently two types of veSync liquidity pools, Stable Pools and Volatile Pools, with transaction fees ranging from 0.02% to 0.05%. In the future, veSync will launch Concentrated Pools, allowing users to customize the range of liquidity provided. Users choose specific pools to participate in voting and receive bribes.

8.eZKalibur

eZKalibur is a new DEX that just went online this week. It raised a total of 653 ETH during the token fundraising stage. It is based on the fork project of Arbitrum's head DEX Camelot and imitates Camelot xGrail using a special token lock-up dividend mechanism. It also has a launchpad. Function, this project will not be online for a long time, so please pay attention to security risks.

Lending Market

Lending has always been the most important infrastructure in all public chains besides DEX. However, because chainlink has not yet been connected to zkSync Era, the oracle provided by Redstone Finance is currently used, and whale users dare not use it. In addition, there are only two major assets, ETH & USDC, in zkSync Era, and there are not many real usage scenarios. Therefore, the lending field is a mediocre existence in zkSync Era, and most users may be short hunters or DEFI farmers.

1.Eralend

Eralend was formerly known as nexon finance. Like ReactorFusion, it is a compound fork protocol with no major innovation in terms of mechanism. The project was once mentioned in the official Twitter account of zkSync Era introducing the ecological project. The protocol has not yet issued a governance token, which may have attracted a large number of short hunters to participate. Currently, its TVL is comparable to that of ReactorFusion at 5M USD, making it the leading lending market on zkSync Era.

2.ReactorFusion

ReactorFusion is the first project launched by the velocore launchpad. The protocol itself is a compound fork and a unique bribe-reward token mechanism. Its token ecology is highly tied to velocore, and its current TVL is around 5M USD.

CDP Overcollateralized Stablecoin

Overnight USD+

Overnight is a multi-chain project started by polygon. It currently supports five public chains, including Polygon, BSC, OP, ARB and zkSync Era. It is also one of the few protocols that was quickly deployed across chains when zkSync Era was launched. Its main products are the yield stablecoin USD+ pegged to USDC and the delta-neutral yield generating strategy vault ETS. The project has been online for about a year. The team is relatively reliable and suitable for DEFI farmers who pursue high returns on stablecoins.

Derivatives

Unidex

Unidex is also a multi-chain deployment project. Its main product is a decentralized perpetual contract exchange. Its characteristics are that it can integrate the depth of other perpetual contract exchanges and provide limit order take-profit and stop-loss functions. In addition to being able to trade crypto assets, it also has commodities such as US stocks and foreign exchange. It is an on-chain perpetual contract aggregator. Other products include spot trading aggregators, limit orders and other functions.

other projects

Kreatorland

Kreatorland is a one-stop NFT project provided by Opensea Fork on the zkSync Era chain. It is one of the projects mentioned in the official Twitter account of zkSync Era. It provides users with the service of minting and issuing NFTs. It also has a launchpad and a trading market, but currently only one NFT, Poop Genesis, is listed.

Goal3

Goal3 is a gaming platform project on the zkSync Era chain. It is also a project that the official zkSync Era accounted for. Its token $ZKG Lockdrop event attracted a total of 2.8M USDC participants, and the addresses locked for one year accounted for nearly 50%. The funds locked in its Lockdrop event are used as the depth of the gaming market. The beta version of the project has been launched, and users can bet on various sports events on this platform.

Summarize

zkSync has a rich history of development and a promising future. With the continuous advancement of Ethereum technology, competition in the zk-rollup or zk-EVM fields is also intensifying. zkSync Era occupies a pioneering position and is able to establish an ecosystem first. At present, it has been proven from the data and the ecosystem that the overall public chain of zkSync Era is currently in a stable upward stage.

From the number of protocols, we can see that the most mature track in the zkSync ecosystem is the DEX track. Whether it is the traditional Uni v2 fork, ve(3,3) solidly fork or the DEX with centralized liquidity, they all have good results. On the contrary, in the tracks of lending, derivatives, NFT or GameFi, there are currently no applications that are obviously innovative enough to attract users. We can expect that with the deployment of more infrastructure projects including cross-chain protocols, oracles and stablecoins, there will be more interesting Defi Lego projects.

At the same time, it should be noted that while the ecosystem is booming, various Rug Pull events are also emerging one after another. There have even been cases where the project party has locked user funds due to code compatibility issues. Participants in the ecosystem need to pay attention to many considerations such as the background of the project party, but new things also represent many new opportunities. Participating in the ecosystem more often may help you discover early high-quality projects.