The data surge on the zkSync Era chain is due to the wool party or the fundamentals?

Author | Joyce

Produced | Vernacular Blockchain (ID: hellobtc)

The main network of zkSync Era was opened to everyone on March 24. In just over two months, the TVL has reached 480 million US dollars, and the weekly growth rate is nearly 20%. **Currently, the number of independent addresses of zkSync Era has reached 920,000, far exceeding popular Layer2 networks such as Arbitrum, Optimism and Starknet. **

Layer2 project TVL ranking, currently zkSync Era ranks third, second only to Optimism, data source: L2beat

Although these dazzling data are not unrelated to zkSync Era’s Token distribution expectations, in any case, after the popularity of the Bitcoin ecosystem led by BRC-20 has faded, zkSync Era has become a rare hot spot and topic successor in the market.

So what is the current ecological development of zkSync Era? What is the usability of ZK Rollup, which has always been criticized for its technical difficulty and slow progress? After the expected end of Token incentives, can zkSync Era continue to maintain high popularity and high TVL growth?

01, Layer2 war spreads, what are the advantages of zkSync Era

The high fees, low speed and even congestion of the Ethereum mainnet have brought about the explosion of the Layer 2 sector. Especially in the past six months, Arbitrum, Optimism, etc. have successively released token airdrops, and a large number of stories about getting rich have attracted the wool party to turn their attention to Layer 2 projects that have not yet released tokens. Layer 2 has become the focus of financial resources and topics in the industry. ConsenSys and others have successively entered the Layer2 sector, and the blessing of giant funds has made Layer2 a highly anticipated encryption narrative.

**So, what is the position of zkSync Era in the crowd of Layer2, and what advantages does it have? **

At present, the Layer2 that the industry focuses on is mainly the Rollup solution, including Optimistic Rollup and ZK Rollup. The basic principle of both is to package some transactions in Layer2 and then submit them to the Ethereum main chain, but the difference lies in data verification. form.

Optimism Rollup first assumes that all transaction data is ok, but provides a period of inspection gap. Once someone finds transaction data involving fraud, they will be rewarded with penalty funds pledged by audit nodes.

ZK Rollup adopts the method of zero-knowledge proof. After the data is packaged, the zero-knowledge proof of the data generated by a large number of calculations is submitted to the chain together with other relevant core data to verify whether there is any error. Compared with the tortuous game process in the middle of Optimism Rollup, it is indeed much better to produce a deterministic result. **

However, the problem with ZK Rollup is that the technical implementation is much more complicated than that of Optimism Rollup. Therefore, when the main network of Optimistic Rollup projects such as Arbitrum and OP goes online early to seize the opportunity, other ZK projects can only be anxious, after all Technical problems require real investment of time and resources, and there is no rush.

**However, whether it is a public chain or a Layer2 project, ecological construction is particularly important. Moreover, the construction of many projects is the process of maintenance while flying the plane. It is difficult to wait for a project to be perfect before going online. **Bitcoin is an exception. After all, the functions and incentive mechanisms of Bitcoin are very simple.

**For most projects, it is a process of running and iterating after going online, **Ethereum is a typical example. Today's Ethereum, compared with when it was first launched, has undergone great changes in terms of performance, architecture, and even the consensus mechanism. However, the continuous construction of the ecology has made Ethereum a giant in the industry.

Therefore, it is not difficult to understand that some public chain or Layer2 projects are eager to go online before the technical solution is fully mature.

Judging from the current overall ecological structure of Layer 2, after Arbitrum's mainnet launch in September 2021, TVL quickly soared to more than one billion US dollars in just a few days, although OP launched a month earlier than Arbitrum , but the stability and experience of the mainnet were not as expected when it was launched, and the TVL growth was not as rapid as that of Arbitrum. But in any case, compared with ZK projects such as zkSync and Starknet, which launched the main network a year later, they have indeed seized the opportunity in ecological construction. **

However, as the first ZK Rollup to be launched on the mainnet, the data after zkSync Era is also remarkable.

Unlike Starknet, which uses an independent contract language, the language tools used by zkSync Era are highly compatible with the existing Ethereum mainnet. Such high compatibility allows projects on the Ethereum mainnet to migrate to the zkSync Era mainnet quite smoothly,* *Similar to the early Arbitrum, the TVL of zkSync Era has risen rapidly after the mainnet launch. In just 20 days, the TVL has exceeded 2 billion US dollars, which is not inferior to the current state of Arbitrum's initial launch. **

Therefore, although the current TVL of zkSync Era accounts for less than 5% of the entire Layer2, with the current weekly growth rate of nearly 20%, is the future promising?

02. zkSync ecological overview

Arbitrum currently has a TVL of 5.6 billion US dollars, accounting for about 65% of the TVL of all Layer 2 projects. After a year and a half of ecological construction, there are currently more than 500 DApps on Arbitrum, especially GMX, which once continued to dominate the list of hot spots in the bear market (2021 Launched on Arbitrum in September), it is also the flagship project of Arbitrum's ecological native.

It can be said that the rise of Arbitrum is inseparable from these original high-quality projects. Even though the Token distribution incentives have been completed, **Arbitrum TVL still ranks first. **Although Arbitrum’s high compatibility with the EVM of the Ethereum mainnet allowed a large number of DApps on the Ethereum to migrate smoothly and complete the initial TVL accumulation at the beginning, the real and sustainable competitive advantage depends on its native high-quality DApps.

**So, how is the current zkSync ecology? Are there signs of strong projects like GMX appearing? **

According to the current zkSync official website statistics, nearly 300 Dapps have been connected to the zkSync Era ecosystem. Although there are many star projects such as Uniswap, 1inch, and LayerZero among them, only the projects marked "Live on Era" are actually launched. There are only 58 of them. Moreover, from the list of projects that have been launched, it is basically difficult to see well-known DApps.

Source: zkSync official website

** It can be said that the current zkSync ecology is still in a relatively barren state. Although the TVL has grown rapidly, the total amount is not high. ** SyncSwap, which ranks first, accounts for more than 41% of the DeFi TVL on the entire chain, and the top ten DApp TVL accounts for nearly 96%. Moreover, these DApps are mainly Dex, plus several lending agreements. At present, there is no project with some unique innovation advantages like GMX among the top ten projects.

Data source: defillama

Moreover, although the number of independent addresses of zkSync Era is growing very rapidly, reached 920,700 in just two months,** the number of ETH on the cross-chain bridge has also broken through new highs, exceeding 280,000, but from every Looking at the ETH balance of each address**, more than 61.4% of the address balances are less than 0.1ETH, 30.6% of the address balances are between 0.1~1ETH, 7.7% of the address balances are between 1~10ETH, and the remaining 0.3% The balance of the address is above 10ETH.

**From the balance distribution of zkSync Era independent addresses, it is not difficult to see that the vast majority of users are wool party members who are attracted by the expectation of zkSync Era Token distribution. **

Independent addresses and other data of popular Layer 2 projects such as zkSync and Arbitrum, source: Dune

Schematic diagram of zkSync Era address balance distribution, source: Dune

Deyi is a member of the zkSync Era wool army. When talking about zkSync, he said:

**At present, due to the lack of star projects such as Uniswap and AAVE on zkSync Era, it is difficult to undertake the lock-up of large amounts of funds (participating in DEX liquidity mining or lending agreements), and most of them are wool users. **In particular, zkSync clearly stated that it will issue tokens. Under Arbitrum’s innovative token incentive model, the anticipation of zkSync airdrop has brought a large number of studios to flood in, bringing about an explosive growth in the number of independent addresses.

However, the projects that are really worth participating in the interaction are also limited. They are nothing more than DEX, borrowing, and several commonly used cross-chain bridges with relatively high TVL rankings. As for zkSync’s official cross-chain bridge, because it can only cross-chain from the Ethereum mainnet to zkSync at present, the cost is 5-6U, and even reaches more than 10U when the chain is congested. Therefore, for the wool party, unless it is for the expected interaction of airdrop, Other cross-chain bridges are generally chosen when funds are really needed to cross-chain, after all, the cost savings are more than 70%.

03. Current problems of zkSync Era

As the first ZKEVM project to be launched on the mainnet, although zkSync Era has reached more than 920,000 independent addresses in just two months, surpassing all other mainstream Layer2 projects, and TVL has also achieved explosive growth,but Compared with star Layer2 projects such as Arbitrum, its problems are also very obvious:

**1. It is still in the early stage. Although the official website announces many cooperation projects, the star projects have not really launched. **The number of native projects that have been launched is not many, and the quality is also uneven. It is difficult to rely on star projects that are endorsed by institutions and have a large community base to quickly accumulate TVL.

**2. Dex and borrowing are the top-ranked native projects that have been launched. There are no projects with unique competitive advantages like GMX to break through. **For users, in addition to the attractiveness of Token distribution, There are not many other reasons to use it. After the Token distribution is expected to disappear, how to compete with the first-mover Layer2 giants Arbitrum and Optimism to obtain high-quality TVL is a problem that has to be considered.

**3. The complexity of zkSync Era technology leads to the instability of its block generation. **Compared with Optimistic Rollup projects such as Arbitrum and Optimism, the ZK Rollup project is much more difficult in terms of technical development. zkSync is relatively compatible with the Ethereum mainnet, but there are still some compatibility challenges for DApps on zkSync Era. However, with the further maturity of ZKEVM technology and the arrival of the decentralization stage in the future, these problems will be effectively improved.

04. Summary

In addition to the traditional star Layer 2 projects, the Layer 2 sector that Binance, Coinbase, ConsenSys and other giants have laid out is likely to be the light of the next round of bull market. Can zkSync Era come out? There are still too many variables.