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The layer-2 scaling solutions industry is seeing a strong foothold in 2022, with more money flowing into the space in the form of institutional investments and mass adoption witnessed by its growing user base.
Just last month, CoinDesk reported that ZK-Rollup solutions, in particular, are reducing transaction costs for users by nearly 40-100x lower than the base layer.
Sequoia Capital, a venture capital firm, has reportedly launched a $600 million crypto fund with previous investments primarily focused on funding layer-2 solutions.
The growth of interest and adoption of layer-2 solutions can be visibly seen on the data tracker, L2Beat, which reports that the total value locked (TVL) in DeFi on layer-2 platforms of the Ethereum ecosystem has grown to $6.72 billion today from a mere $1.5 billion at the peak of the bull run in April of 2021.
This is almost 14 times the increase in TVL held across the entire Ethereum ecosystem (layer-1 and layer-2) for the same period.
This begs the question: ‘What in God’s name is driving this massive migration to layer-2 ecosystems?’
The answer to that lies in understanding the need for layer 2 solutions and the differences between layer-1 and layer-2. Let’s go ahead and break that down.
Layer 1 vs. Layer 2
One of the most highlighted issues in the crypto space over the past year was the extremely high ‘gas fees’ and the inglorious ‘gas wars’ that users had to transact on the Ethereum network.
This was especially painful in 2021, as the bull run brought a fresh stream of users into the crypto ecosystem, driving up transaction volumes and congesting the network.
While whales and early hodlers might have been a little bothered with the extra costs, the real whack on the back was felt by smaller and newer retail traders hoping to gain a taste of that sweet decentralized ecosystem, be it DeFi, NFTs, or gaming on the blockchain. Imagine paying a $30 gas fee for a $20 transaction.
The way I like to think about it is to imagine the layer-1 network as a highway with a huge line of vehicles stuck at the toll booth, charging everyone a huge amount of toll fees for vehicles to pass through.
The problem with this particular toll booth is that it does not charge a fee based on the size of the vehicle to be let through (be it a tiny car or a huge truck); rather, it charges a fee based on the number of vehicles piled up on the line.
A rather inefficient system, don’t you agree?
Layer-2 solutions, on the other hand, are like overpasses on the highway that enable more vehicles to pass through at the same time for a fraction of the cost. ZK-Rollups, in particular, are like mega trucks transporting a bundle of cars in their cargo through the toll booth at the expense of a single vehicle’s toll fee.
In technical terms, ZK-Rollups bundles hundreds of Layer2 transactions into one, which is then submitted to the Layer1 mainnet, therefore reducing the data that needs to be stored on-chain.
Meanwhile, Zero-Knowledge Proofs are generated constantly to ensure the consistency of the Layer1 and Layer2 states, making every Layer2 transaction have the same level of security as on Layer1.
Vitalik Buterin, the man behind Ethereum, believes that ZK-Rollups are one of the best solutions in the Layer 2 space for Ethereum to scale efficiently.
What is ‘ZKSpace’?
Currently, ‘ZKSpace’ is one of the key players in the ZK-Rollups-based layer-2 industry. The ZKSpace platform consists of three main components:
1. ZKSwap – the innovative Layer-2 DEX utilizing ZK-Rollups technology,
2. ZKSquare – payment service that facilitates cheap transfers and payments,
3. ZKSea – an affordable and efficient NFT minting platform and marketplace providing users with low-gas listings.
With an all-new-look user interface, NFT support, unlimited token listing, smoother withdrawal, optimized efficiency, and multi-chain support, ZKSpace aims to implement EVM-compatible ZK-Rollups and bring the community more layer 2-based products soon.
Why is token swapping and NFT minting better on layer-2?
When it became clear that transacting on layer 1 networks like Ethereum was no longer feasible for small and frequent transactions, users quickly adapted to layer 2 solutions like Optimism, Arbitrum, and ZKSpace.
The migration was seamless as most layer-2 solutions that use Rollup technology employ the security of the base layer (Ethereum) to settle the final state of transactions while computing them at a much faster rate on layer-2.
This prompted decentralized applications (DApps) and projects on the Ethereum blockchain to migrate to layer-2 networks to facilitate higher volume and usage of their platforms.
This was especially seen in DeFi DApps and NFT platforms, as they often have a massive volume of transactions that are simply too expensive on a layer-1 blockchain like Ethereum.
DeFi, in particular, is an ecosystem that has remained out of reach for users with smaller pockets due to the high gas fees on Ethereum.
Lower costs and a better user experience will help to democratize access to DeFi beyond the initial group of early adopters.
ZKSwap, an innovative layer-2 decentralized exchange protocol based on the Automated Market Maker (AMM) model by ZKSpace, helps achieve this vision by allowing users to list and swap any ERC20 token trading pairs by reducing gas fees to a tenth of a percent while ensuring the same security as the underlying layer-1 network.
Moreover, users of ZKSwap experience trade settlements in real-time as all transactions on ZKSwap are transferred to Layer-2, and users do not need to wait for the confirmation time of a block.
Unlike layer-1 DEXes, ZKSwap allows its users to pay the gas fee in any of the four following tokens- ETH, ZKS, WBTC, and USDT. Users can also create unlimited token pairs in liquidity pools to enable swaps.
The Ethereum NFT space’s parabolic bull run in the past year saw blue-chip projects like Crypto Punks and the Bored Ape Yacht Club (BAYC) hit record highs in sales every week.
However, since NFT projects on the Ethereum blockchain were an expensive affair to launch due to the high gas fees paid to mint the tokens, most of the projects that came out had a high mint price on top of the ‘gas wars’ that secluded investors, big and small, from participating in the mint.
This gas fee problem also prevented most NFT projects from achieving true price discovery, leading to the creation of artificial floor prices.
The NFT ecosystem was in dire need of layer-2 solutions such as Immutable X and ZKSea that were tailor-made to facilitate an easier mint and trading process for NFTs.
ZKSea, ZKSpace’s native NFT marketplace, supports all ERC721 standard NFTs to be freely deposited and withdrawn between layer-1 and layer-2 directly.
This allows blockchain gaming and metaverses projects to truly leverage the security of being deployed on the base layer while enjoying the low transaction costs of the layer-2 platform.
ZKSea also provides a complete layer-2 wallet, allowing users to manage ERC20 tokens and NFTs easily.
ZKSea allows users to mint NFTs at a gas fee of $5 per creation. After artists mint the NFT, it can be listed for sale on the marketplace for zero gas fees.
OpenSea, a layer-1 NFT marketplace on Ethereum, also charges a 2.5% platform fee similar to ZKSea; however, listings on Opensea are subject to gas fees on Ethereum, which can range from a few dollars to a few hundred dollars.
Moreover, if an artist wishes to delist an NFT on Opensea, he is once again subject to paying a hefty gas fee, which is many times higher than ZKSea’s delisting gas fee of $1.
ZKSpace truly aims to bring a smooth, user-friendly layer-2 experience to users with an ever-evolving list of features through its ZKSwap and ZKSea products.
The protocol is also launching its own mobile application for Android and iOS users that allows users access to all web features via the app. Users of the app can participate in activities such as deposits, withdrawals, transfers, swaps, and mints.
List of supported blue-chip NFTs for the PoD mining program
ZKSpace’s ongoing mining programs allow users of ZKSwap to mine the protocol’s native ZKS token by either providing liquidity or swapping certain token pairs on ZKSwap during the campaign period.
ZKSea users, on the other hand, can mine ZKS tokens by depositing and listing one of the above specified layer-1 blue-chip NFTs on the platform during the campaign period.
All of the mining events on the ZKSpace Web App, ranging from PoS and PoG to NFT PoL, NFT PoT, and NFT PoD, are currently available on the Mobile App as well.
You can now earn daily mining rewards and exclusive bonuses with your tokens and NFTs.
Closing Thoughts and Future Plans
One of the most common misconceptions when it comes to the future of layer-2 protocols is that they will become obsolete once the upcoming Ethereum Consensus Layer (formerly known as Eth 2.0) merges with the Execution Layer (formerly Eth 1.0).
Unfortunately, all the merge does is make the blockchain greener by switching the consensus mechanism to Proof-of-stake (PoS) and kick-starting the deflationary mechanism for the ETH token as a result of EIP-1559.
Scalability, however, remains unchanged. This is because transaction throughput happens on the execution layer, which remains untouched by the merge.
Ethereum’s vision for increasing the scalability of its network is to implement multiple sharding chains along with the existing layer-2 solution currently being deployed on the blockchain.
This is bullish for the layer-2 industry as a whole, as this implies a greater focus on coexistence and dependence on layer-2 solutions to fuel the scalability of Ethereum in the future.
Ethereum’s vision for scalability also aligns with ZKSpace’s mission to provide its users with a more diverse set of features as the protocol develops.
The protocol plans to release features such as NFT verification, batch minting, auction, bidding services, and layer-2 domain services before the end of this year.
However, one goal that sets ZKSpace apart from other layer-2 solutions in the space is its vision to provide cross-chain layer-2 services by deploying other layer-1 blockchains besides Ethereum, such as BSC and Solana.
This will provide users with faster and cheaper cross-chain services and make it accessible to transfer funds on Layer 2 between different chains at a low cost.
Disclaimer
All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
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