Exploring the early ecosystem of zkRollup: 5 different methods using the Ethereum L2 scaling solution zkSync

Written by: William M. Peaster, Bankless

Compiled by: The Way of DeFi

We are optimistic about modular blockchains.

This is how Ethereum scales to millions of users while keeping transaction fees low. Importantly, we believe this argument will become a significant narrative this year.

Layer 2 (L2) is the backbone of modular blockchains. Polygon, Immutable, Starkware, Optimism, Arbitrum, Aztec, and others will play key roles in the unfolding of this topic.

This is also one of Ryan's major predictions for the year, referred to as L2'22.

If 2022 is indeed the year of Layer 2, it will be a tremendous opportunity.

One of the most promising L2 solutions is zkRollups. Some industry leaders call them the holy grail of Ethereum scaling. Why?

They have an interesting design feature: the more transactions processed, the cheaper it becomes. It disrupts the blockchain trilemma.

One of the leaders in zkRollups is zkSync. They are in the early stages, but it is highly likely that they will achieve full production on the mainnet soon.

A key phrase in the tweet above: zkSync will belong to the community. Want to know what that means…?

Now is the time to get ahead. This article shows you 5 opportunities to take advantage of.

5 Opportunities with zkSync

zkSync is one of the most promising scaling solutions utilizing zkRollup technology on Ethereum. As the crypto economy trends towards rollups, and with zkSync's shift towards decentralized governance, the timing is ripe to leverage this emerging L2.

This Bankless strategy will show you some projects you can try on zkSync right now.

Goal: Learn 5 different ways to use zkSync

Return on Investment: Build your cryptocurrency skill tree + future token airdrops

Using zkSync

zkSync is a Layer 2 (L2) scaling solution designed to make Ethereum transactions cheap and nearly instant.

zkSync is built by Matter Labs and belongs to a class of L2s known as zkRollups. This means zkSync uses "zero-knowledge" cryptographic proofs to publish batches of data "on-chain" to Ethereum while executing transactions off the Ethereum base layer, effectively batching and validating Ethereum transactions. (Modular design is at work!)

The design of zkRollups leads to something quite magical: through network effects, zkSync becomes cheaper for users as activity on its network increases. This reality stands in stark contrast to traditional blockchains, which become more expensive as demand for their block space grows. Thus, you can understand why resources like zkSync are seen as a very promising prospect for scaling Ethereum.

Today, according to data from the analytics site L2BEAT, zkSync is the 10th largest L2 by total value locked (TVL), with a TVL of $71 million. As zkSync continues to improve in features and functionality, and as more users begin migrating to zkRollups for a better user experience and cheaper transactions, this number is expected to grow.

The upcoming zkSync token will undoubtedly attract more liquidity and utility to zkSync. However, Matter Labs has stated that they will release the token cautiously and steadily, so its arrival may still be a few months away.

In the meantime, by using zkSync, we can start gaining L2 experience and prepare for the future. This does not guarantee that you will make money. But being at the forefront always has its rewards.

There are 5 potential opportunities to consider:

1. Using the Argent Wallet

Argent is a leading social recovery wallet. It allows you to select "guardians" who can help you update to a new key if you lose access to your wallet's signing key, maintaining your wallet indefinitely.

This system is ideal for both cryptocurrency newcomers and veterans, as it provides strong security and more flexibility compared to traditional cryptocurrency wallet products.

That said, Argent gives us a glimpse into the future of crypto wallets. More importantly, it combines its social recovery system with the fast and low-cost L2 execution capabilities of zkSync.

So, if you want to try zkSync, I think Argent is a great user-friendly gateway.

How to create a zkSync wallet through Argent

Whenever you create an Argent wallet or open an existing one, you will now see an L1 Ethereum account (the "Argent Vault") and a zkSync account, so the first step is to fund your zkSync account.

At this point, you can go directly into L2. There’s no need to send assets to L1, nor do you need to pay expensive L1 activation fees; you only need to pay a $2.50 zkSync account setup fee. Of course, you can create and prepare your L1 Argent Vault first, but depositing directly into zkSync could save you over $100 in fees.

You can achieve this by pressing the "Receive" button in your zkSync account, where you can purchase cryptocurrency via Ramp or receive funds from other Ethereum wallets or zkSync wallets. Execute your preferred method, and your zkSync account on Argent will be funded.

Now you are ready to explore early in-app L2 investment and staking opportunities, such as Yearn vaults or staking ETH through Lido. Press "Invest" to see available options, and you can start taking action.

Trading on ZigZag

ZigZag Exchange is a decentralized order book exchange that has quickly gained fame as the first DEX running on zkSync. Therefore, if you want to trade on zkSync in its early stages, ZigZag is currently the action hub.

⚠️ Warning! The exchange is currently unaudited, proceed with caution!

While it is still in its early stages, this newcomer plans to do a lot, such as a native bridge UI, fast withdrawals to Ethereum, limit orders, and fiat on-ramps through Banxa. Additionally, the project is developing permissionless pair listings, NFT marketplaces, and more.

If you are interested in trying ZigZag but feel overwhelmed by the order book interface, consider trying the exchange's new Argent integration.

If you have set up a zkSync account in Argent, you can press the "Trade" button and trade through ZigZag's simplified UI. Supported assets currently include ETH, DAI, FRAX, USDC, USDT, and WBTC.

Donating on Gitcoin

Every quarter, Gitcoin hosts Gitcoin Grants, a donation-oriented event where Ethereum community members can fund open-source Web 3 projects through donations. What makes Gitcoin unique is that all donations are matched through a quadratic funding (QF) mechanism.

Over the past few years, Gitcoin Grants have proven to be a tremendous collective force. The project is also noteworthy because it has supported donations made through zkSync since 2020. This is a show of support for early zkRollups.

If you want to donate to a project through Gitcoin, you can do so at any time without waiting for the next round of Gitcoin Grants (though without quadratic funding).

Simply go to Gitcoin, press "Add to Cart" on the project you want, and when you're ready to check out, select the "Checkout with zkSync" option and follow the on-screen instructions.

✏️ Please note that if you want to make L2 Gitcoin donations now, you must first set up a wallet through the zkSync main website.

Creating NFTs with zkNFT

If you create a wallet through the zkSync main website, another application you can try is the NFT platform zkNFT.

zkNFT, created by Sudoswap creator 0xmons, is a proof-of-concept alpha version, so treat this platform as an experiment. At the same time, zkNFT does a great job of showcasing how zkSync's early NFT API works, allowing us to get a preliminary feel for the early NFT scene on zkSync.

The platform allows you to affordably mint, manage, and exchange zkSync NFTs. The mint dashboard is where you finalize your token metadata, which will then be pinned to IPFS through the nft.storage project.

Before diving deeper, remember that zkSync NFTs have unique nuances, such as becoming "final" within a few hours after minting. 0xmons outlines some key nuances well in this zkNFT introduction article, so make sure you understand the important concepts here to avoid confusion.

Bridging Cryptocurrency with LayerSwap

LayerSwap is a platform that makes it easy and affordable to bridge cryptocurrency from centralized exchanges (CEX) to zkSync.

At its core, LayerSwap leverages the fact that trading between CEX accounts is free and instant for many venues. Once LayerSwap receives your transaction, they will quickly and cheaply deposit your funds into zkSync using L2 liquidity pools.

Currently, supported assets include ETH and USDT, with supported CEXs including Binance, Coinbase, FTX, Huobi, KuCoin, and OKEx.

Please note that LayerSwap's liquidity currently only facilitates transfers of up to 0.15 ETH, but this limit should be lifted over time, especially if the project follows its liquidity mining plan.

Conclusion

The cryptocurrency economy is moving towards zkRollups. They hold immense promise and will help bring Ethereum-based transactions to millions, if not billions, of users in the coming years.

While it is clear that the zkRollup ecosystem is still in its early stages, zkSync stands out as a bright early star in this scene, showcasing the potential of what zkRollups can do.

I want to emphasize that at this time, zkSync is an ongoing experimental work. Dapps like ZigZag and zkNFT are experimental and very early. There are significant risks and frictions, so you should not risk large amounts of capital just yet.

Nonetheless, I recommend that you explore some of these projects in a measured way at the right time and place. First, the technology zkSync offers aligns with the best value in cryptocurrency. Second, as development trends towards rollups, it is important to continuously build your personal crypto skill tree. Gaining experience using zkSync now may provide you with valuable insights to rely on in the coming years.

Of course, there is also the upcoming zkSync token, which L2 creators have been open about. Finally, welcome to L2'22.