ZK-Rollup, the Hottest Crypto Narrative of 2023: How to Position?
TechFlow Selected TechFlow Selected
ZK-Rollup, the Hottest Crypto Narrative of 2023: How to Position?
2023 was the year of ZK-rollups.
Navigating Web3 tides with focused insightsWritten by: Miles Deutscher
Compiled by: TechFlow
2023 is the year of ZK-rollups. ZK is the future of Ethereum scaling, and narratives are heating up as zkSync, Starknet, and Polygon zkEVM prepare to launch their tokens. Below are the best released (and unreleased) ZK projects—watch them closely.
In this article, I’ll cover:
-
What ZK-rollups are
-
The ZK narrative (and why it’s gaining momentum)
-
The best released ZK projects
-
The best unreleased ZK projects (including potential airdrops).
What Are ZK-Rollups?
ZK-rollups are Layer-2 blockchain protocols that process transactions, execute computations off-chain, and store data off-chain, while keeping assets secured in on-chain smart contracts.
Due to its design, Ethereum has inherent scalability issues. While there is a roadmap to ultimately solve these problems, the process will take a long time.
ZK-rollups help alleviate congestion by batching transactions and executing them off-chain.
ZK-rollups store all addresses and their respective balances in a Merkle tree. The root of this "balance tree" is stored in an on-chain smart contract.
They have three main functions: processing deposits, transfers, and withdrawals. The image below illustrates a (simplified) ZK architecture.
In summary, ZK-rollups are "hybrid scaling solutions" (off-chain protocols) that operate independently but derive security from the Ethereum network.
Why Is the ZK Narrative Gaining Attention?
Several key catalysts have driven surging interest in this sector this year:
-
Upcoming token launch for zkSync.
-
Imminent @Starknet token launch by StarkWare Ltd.
-
The imminent arrival of Polygon's zkEVM.
This has led to strong performance from ZK-related protocols such as $MINA, $LRC, $IMX, and $DUSK.
Hosseeb, Managing Partner at Dragonfly, called ZK-rollups the most compelling narrative to watch in 2023.
However, the recent rally is likely driven by speculation, as key on-chain metrics (active users, transactions, cross-chain deposits) have not grown alongside price increases.
So, is this short-term rebound unsustainable? Perhaps.
Yet, a sustained rally is more likely to occur before (and after) the launches of zkSync, Polygon zkEVM, and StarkNet. Increased new users and fresh liquidity flowing into the ecosystem will support this.
Therefore, to prepare, I’ve compiled a list of both released and unreleased ZK-related crypto projects (in no particular order).
Released ZK Projects
$MINA
Mina Protocol is "the world’s lightest blockchain," using zk-SNARKs with a Proof-of-Stake (PoS) consensus mechanism.
Mina drastically reduces the amount of data each user must download; ZK-rollups allow nodes to store small proofs instead of the entire chain.
$IMX
Immutable is a Layer-2 scaling solution designed to offer near-instant confirmation and nearly zero gas fees for NFT trading and minting.
IMX leverages StarkWare ZK-rollups for scalability and plans to support multiple L2/L3 ZK-rollups for different use cases. They describe themselves as a "developer platform for Web3 gaming," with popular Web3 games like Illuvium, Gods Unchained, and Kongregate built on IMX.
$LRC
Loopring is a Layer-2 designed to scale and build decentralized cryptocurrency exchanges. They utilize ZK proofs, enabling anyone to build a high-throughput, non-custodial DEX.
The combination of two powerful narratives—ZK and DEX—makes Loopring an interesting project to watch.
$SYS
Syscoin combines Bitcoin’s PoW architecture with Ethereum’s EVM into a single network. Its dual-layer approach enables scalable smart contracts while maintaining network security.
Syscoin uses a modified version of the EVM called NEVM, which leverages ZK proofs to enable “up to 210,000 transactions per second (TPS).” The diagram below outlines Syscoin’s architecture.
$DUSK
Dusk is a privacy-focused Layer-1 blockchain built for programmable, confidential, and compliant securities. Think of it as a privacy blockchain tailored for financial applications.
Dusk Network uses a ZK proof (ZKP) system called “PlonKup” to secure data in a cost-effective manner.
$MUTE
Mute is a ZK-rollup-based decentralized exchange, yield staking platform, and bond protocol built on Ethereum and zkSync, essentially a comprehensive DeFi platform leveraging the advantages of ZK technology.
Summary
It’s important to note that this rally (like many crypto narratives) is largely speculative. Just because a project implements ZK technology doesn’t automatically make it a winner.Look for projects innovating with the technology or learn to trade the hype.
For these projects, like most altcoins, price movements are heavily dependent on Bitcoin. However, if your market outlook is bullish, the strongest narratives will likely outperform—and ZK could be one of them.
How you trade these projects depends on your personal strategy, but consider a DCA-oriented approach and clearly define a) your time horizon and b) financial goals before investing.
While several ZK-utilizing projects have already launched,I’m more interested in upcoming unreleased protocols—some of the most strongly backed projects in crypto (with potential airdrops).
Unreleased ZK Projects
zkSync
zkSync is a ZK-rollup representing the "endgame" for scaling Ethereum.
It’s one of the most well-backed projects in crypto, having raised over $450 million from firms like a16z, Dragonfly, and Lightspeed.
Even before its full mainnet launch, its ecosystem is already massive. It will become a giant in the ZK space.
zkSync’s next phase is the "Fair Onboarding Alpha," where select participants can begin deploying on zkSync 2.0 within a closed environment.
StarkWare
StarkWare is a Layer-2 scaling solution that uses STARK proofs to reduce the volume of data sent to the Ethereum blockchain, thereby alleviating congestion.
Like zkSync, StarkNet leverages ZK-rollup technology to achieve this goal.
StarkWare has also received strong backing, raising over $285 million from institutions like Paradigm, Pantera, Sequoia, and the Ethereum Foundation. Its ecosystem is equally impressive.
Scroll
Scroll is a zkEVM-based zkRollup offering native compatibility with existing Ethereum applications and tools.
Among upcoming L2s, Scroll ranks fourth in pre-launch valuation.
With the token launch, there may be airdrop opportunities. They recently hinted at an airdrop, stating they’re “creating incentives to encourage participation.”
Aztec
Aztec is a privacy-first ZK-rollup on Ethereum, bringing confidentiality and cost savings to the Ethereum ecosystem.
They recently raised $100 million, led by a16z. They may also conduct an airdrop in the future.
Polygon (zkEVM)
Recently, Polygon acquired Hermez Network (a ZK-rollup) to advance its own zkEVM product.
zkEVM is a virtual machine that executes Ethereum transactions—including smart contracts—with zero-knowledge verification, all in a transparent way. zkEVM adds to an already expanded ecosystem that is rapidly growing.Since Hermez has merged with Polygon, the $MATIC token will power the network.
Axiom
Axiom is a ZK coprocessor for Ethereum.
While not strictly a ZK-rollup, I include Axiom here as it exemplifies practical ways to leverage ZK technology.
It allows developers to query on-chain data and receive trustless responses via ZK proofs—enabling developers to efficiently enhance their applications using ZK.
Summary
Whether through airdrops, post-launch investments, or investing in individual ecosystems—there are many strategies to position yourself in these upcoming projects.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
Miles Deutscher
