With the ongoing boom of Layer 2s (L2s) such as Arbitrum and Optimism, we can see that the Ethereum community is eager for L2 scaling solutions. The community has more or less converged towards Rollups as the \u201cHoly Grail\u201d of these L2 scaling solutions – with Vitalik himself having written an entire article<\/u><\/a> describing and endorsing the technology. There are two main types of rollups – Optimistic and ZK-Rollups, and their core offerings have been summarized in the table below:<\/p>\n<\/div>\n [\/et_pb_text][et_pb_image src=”https:\/\/devwp.visibleone.io\/p227\/wp-content\/uploads\/2024\/01\/optimistic.webp” title_text=”optimistic” show_in_lightbox=”on” _builder_version=”4.23.1″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.23.1″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n It is worth noting, however, that the current landscape is dominated by Optimistic Rollups – with Optimism and Arbitrum taking over 80% of market share in terms of TVL amongst all L2s. The reason for this is simple: Currently, ZK-Rollups are application specific and don\u2019t offer general-purpose computation.<\/span><\/p>\n dYdX is a decentralized exchange, while Loopring is a payment and trading solution – both of them are specialized products and don\u2019t offer a broad base of d-Apps like Uniswap, GMX, Aave, etc. that you would see on Optimism and Arbitrum. Optimistic Rollups have hence had the first mover advantage in this space – and with no other competitors, they have taken a large share of TVL. <\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n [\/et_pb_text][et_pb_image src=”https:\/\/devwp.visibleone.io\/p227\/wp-content\/uploads\/2024\/01\/tVl.webp” title_text=”tVl” show_in_lightbox=”on” _builder_version=”4.23.1″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.23.1″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Fig 1. TVL on different Layer2s, L2Beat<\/u><\/span><\/p>\n However, we believe that this situation will see a drastic change over time, especially with the introduction of the zkEVM. zkEVM is a technology that combines two existing technologies: zero-knowledge proofs and the Ethereum Virtual Machine (EVM). Let\u2019s break this down:<\/span><\/p>\n As said above, zero-knowledge (validity) proofs are the core piece of technology in ZK-Rollups. They are a way for one party to prove to another party that a statement is true, without revealing any additional information beyond the fact that the statement is true, using cryptography. <\/span><\/p>\n On to the next part – the Ethereum Virtual Machine (EVM). The EVM is the runtime environment for smart contracts in the Ethereum blockchain. It is a decentralized, Turing-complete virtual machine that can execute arbitrary code provided by a smart contract.<\/span><\/p>\n In essence, the zkEVM is a technological marvel that combines zero-knowledge proofs and the EVM, allowing the creation of zero-knowledge proof-based smart contracts that can be executed on the EVM.Thus, ZK-Rollups no longer have to be application specific and can expand to offer decentralized applications. <\/span><\/p>\n It\u2019s important to not understate the magnitude of building an EVM-compatible ZK-Rollup. Why? ZK-Rollups are recognized as the best scaling solution for Ethereum<\/u><\/a> – not only does it have the shortest finalizing time across other scaling solutions, but it also solves the crucial problem that Optimistic Rollups face: the 7-day withdrawal period of funds. <\/span><\/p>\n Current bridges in and out of Optimistic Rollups utilize the \u201cmint and burn\u201d mechanism which introduces weakness into the system – if the growth of Optimistic Rollups continue, the bridges themselves will be a juicy target for hackers. If the world is to be onboarded to blockchain technology, there must be as few weakest links in the system as possible to minimize damage in the case of a black swan event. <\/span><\/p>\n The creation of a working zkEVM is significant because they represent a new generation of possibilities for Layer 2 scaling solutions. Just like how the creation of Ethereum brought forth a barrage of other Layer 1s that utilize different technologies and have their own ecosystem of d-Apps all wonderfully working together to create De-Fi, the technological innovation of the zkEVM can be viewed in the same light. <\/span><\/p>\n With the zkEVM now supporting general-purpose computation, applications that require high transaction throughput and low fees can now be built – for example, more decentralized order-book exchanges like dYdX, or other possibilities that we can\u2019t fathom right now. In general, the creation of a new technological product is exciting as it opens up new opportunities for businesses and individuals. <\/span><\/p>\n This can also lead to network effects – as Ethereum becomes cheaper with more scalability solutions being open for d-Apps to use, the argument of Ethereum being \u201ctoo expensive\u201d becomes null. And consequently, more users will get onboarded to Web3, leading to a virtuous positive flywheel – more users attract more builders to build more protocols. Thus, the breakthrough of the zkEVM is undoubtedly a game-changer in the space. <\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n [\/et_pb_text][et_pb_image src=”https:\/\/devwp.visibleone.io\/p227\/wp-content\/uploads\/2024\/01\/Sarnoff.webp” title_text=”Sarnoff” show_in_lightbox=”on” _builder_version=”4.23.1″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.23.1″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n Fig 2. Network Effects Infographic, <\/u>Gary Fox<\/u><\/a><\/span><\/p>\n We believe that the zkEVM – a technology that improves upon Optimistic Rollups across every metric, will come to dominate the Layer 2 space. Layer 2s have seen actual adoption, as gas spending reaches all-time highs in recent months. And while Optimistim and Arbitrum have had the first mover advantage due to their ease of implementation, we expect zkEVMs to be the hub for Ethereum activity over the long run – as such, we have backed Scroll: The first EVM-Equivalent zkEVM. <\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n [\/et_pb_text][et_pb_image src=”https:\/\/devwp.visibleone.io\/p227\/wp-content\/uploads\/2024\/01\/layer.webp” title_text=”layer” show_in_lightbox=”on” _builder_version=”4.23.1″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.23.1″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n Fig 3. L2 Gas Spending, <\/u>Messari<\/u><\/a><\/span><\/p>\n But we didn\u2019t back Scroll just because of the technology; more importantly, they have demonstrated the core fundamental values of Web3 – being decentralized and community-owned. As VCs, we know that the team plays a monumental role in the success of a product. Scroll\u2019s team and the values that they uphold are what makes us have conviction on this particular zkEVM – they seek to build in the open – with their community, for their community. <\/span><\/p>\n But before we dive deeper into the qualitative side of Scroll, it is worth explaining the quantitative side of things – in particular, what EVM-Equivalent actually means. <\/span><\/p>\n In short, zkEVMs differ in terms of implementations – in fact, there are 4 main levels to the way zkEVMs are implemented. While we will not be diving deep into the specifics of what each level means, you can read more in Vitalik\u2019s article here<\/u><\/a>, and Galaxy Research\u2019s report here<\/u><\/a>. In an extremely simplified summary, they differ at the level in which they are \u201ccompatible\u201d and \u201ctalk to\u201d the base layer of Ethereum – and they mainly sacrifice compatibility for performance.<\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n [\/et_pb_text][et_pb_image src=”https:\/\/devwp.visibleone.io\/p227\/wp-content\/uploads\/2024\/01\/compatibility.webp” title_text=”compatibility” show_in_lightbox=”on” _builder_version=”4.23.1″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.23.1″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\nzkEVMs: The Next-Generation Of Ethereum Scalability<\/span><\/h3>\n
Introducing Scroll: The EVM-Equivalent zkEVM<\/span><\/h3>\n
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