ZK-Rollups are smart contracts that evolve the Ethereum network by processing multiple transfers from the main blockchain. They then send a proof of validity back to the mainchain as proof of validity. This reduces the amount of data sent through the main block, allowing for faster and cheaper transactions. ZK Rollups are one of the options developed for building Layer 2 to increase scalability. Loopring (LRC) is a ZK Layer 2 rollup solution that enables high-speed, low-cost exchanges and payments over Ethereum.
When it comes to investing in cryptocurrency, stories often play an important role in identifying promising investment opportunities.
In 2017, we had Initial Coin Offerings (ICO), Ethereum Killers (NEO, for example), Interoperability (Wanchain & Icon), and Zero Transaction Fees (IOTA & Nano / Raiblocks).
From 2020 to 2021, Decentralized Finance (DeFi) was the new narrative, attracting interest from cryptocurrencies like MakerDao, Uniswap, Avalanche, and more.
Other cryptocurrency stories in 2021 included:
- Non-fungible tokens / NFTs (Enjin, Bored Ape Yacht Club, Galactic Geckos, etc.)
- Meme Coins (Dogecoin, Shiba Inu, Floki Inu, etc.)
- Algorithmic currency protocols (Olympus DAO, Titan Finance, Wonderland, etc.)
- Binance Smart Chain “Moonshots” (Safemoon, for example)
- Metaverse & Crypto Gaming (The Sandbox, Decentraland, Axie Infinity, Illuvium, My Neighbor Alice, etc.)
Savvy investors picked up on these stories early on and made dramatic gains on their investments.
However, that doesn’t mean you always have to pursue the next big story. In fact, I think it’s best to focus on the fundamentals of a cryptocurrency instead and build a long-term position.
But at the same time, it’s important to understand which stories get the most attention, as the money usually follows soon after.
Once you know what the next story is, you can research cryptocurrencies within that story and build a position with the projects that have a great team and fundamentals behind them.
One story that’s gaining a lot of attention right now is ZK-Rollups, and we’ll be looking at that technology in this article.
We will also take a look at three cryptocurrencies that use ZK-Rollup technology, with a bonus secret cryptocurrency linked to one of the mentioned platforms. Read on to the end and see if you can find it.
ZK-Rollups: Explain As If I Was Five (ELI5)
Explained simply, a ZK-Rollup is a smart contract that pulls hundreds of transactions off the main blockchain and aggregates them into a single transaction. It then sends a proof of validity back to the main blockchain.
This reduces the amount of data sent through Ethereum’s main blockchain (Layer 1), enabling faster and cheaper transactions.
For a more detailed explanation of ZK-Rollups, read the next section or skip ahead if you already understand how they work.
What are ZK-Rollups and how do they work?
Zero-Knowledge Rollups (ZK-Rollups) are smart contracts that evolve the Ethereum network by processing multiple transfers from the main blockchain.
ZK-Rollups work by taking hundreds of off-chain transfers and combining or “rolling” them into one transaction. It then submits a SNARK (succinct non-interactive argument of knowledge) back from the mainchain as proof of validity.
Validating a block with a ZK-Rollup is faster and cheaper because less data is included.
ZK-Rollups are one of the options developed for building Layer 2 to increase scalability. Another option under development is optimistic stacks.
If you would like to see a more detailed explanation of ZK-Rollups and Rollup technology in general, I recommend the following resources:
3 ZK-Rollup platforms with their own cryptocurrencies
As of this writing, there aren’t many ZK-Rollup based platforms with their own native token, which is why only three are included in this article.
Loopring (LRC) is a ZK-Rollup Layer 2 solution that enables high-speed, low-cost transactions and payments over Ethereum.
It aims to enable anyone to create non-custodial exchanges based on Ethereum order books by leveraging zero-knowledge evidence.
With ZK-Rollups, Loopring claims that its exchanges can offer faster settlements for traders.
Instead of settling transactions directly on the Ethereum blockchain (like other DEXs do), ZK-Rollups allow Loopring exchanges to complete off-chain calculations.
This reduces the number of transactions submitted to the Ethereum network, increasing speed and reducing costs for traders.
Loopring has its own token (LRC), which you can find at Binance. US investors can use Kucoin invest in LRC.
zkSync is a Layer 2 scaling solution that offers cheaper and faster transactions than the main Ethereum blockchain (Layer 1).
It uses ZK-Rollup technology to process transactions outside the Ethereum blockchain while maintaining its security and purpose.
zkSync was developed by Matter Labs which received $ 50 million in funding from investors such as Andreessen Horowitz (a16z), Crypto.com, Blockchain.com, Aave, etc.
The advantages of zkSync include:
- Low gas charges: Gas charges are 1% of Ethereum gas and cheaper than using optimistic stacks
- High speeds: more than 2000 transactions per second (tps) against 14 tps on Ethereum
- Security: secured by the main Ethereum blockchain
- Frictionless transfers: Easily move your crypto between Layer 1 and Layer 2 without delay
- Censorship Resistance: You can move your assets to Layer 1 at any time
zkSync does not currently have a native token, but they plan to release one. I recommend you follow their social media if you don’t want to miss a thing.
X immutable (IMX)
Immutable X is a Layer 2 scaling solution for Ethereum NFT trading. It uses ZK-Rollups to enable instant confirmation of transactions, over 9,000 transactions per second and no gas charges.
Since Immutable X is a Layer 2 for Ethereum, the ownership of NFTs is not affected as it inherits the security and purpose of the Ethereum blockchain.
Immutable X was developed by the company behind God’s Unchained, a free-to-play NFT collectible card game similar to the popular Hearthstone.
The Immutable X Marketplace will initially be used to trade God’s Unchained cards, but over time they intend to open up the market for assets from other games.
The advantages of Immutable X include:
- No gas fees for peer-to-peer trading.
- Set your own trading fees.
- No risk of custody; users keep their private keys.
- Up to 9,000+ TPS.
- Not a centralized sidechain.
- Secured by Ethereum. A true Layer 2 inheriting the security of Layer 1.
- Any NFT created or traded on Immutable X is 100% carbon neutral.
One of the huge advantages of Immutable X is the absence of gas fees for trading NFTs. This simplifies the process of exchanging NFT between users, thus facilitating their mass adoption.
Immutable X looks very promising, especially since it covers three major narratives in the cryptocurrency space: ZK-Rollups, NFT, and Gaming. It is also backed by an NFT collectible card game which has the potential to be mass adopted.
As the Immutable X exchange matures and attracts more game developer assets, I can see this project grow huge.
Immutable X has its own token (IMX), which you can find at Kucoin. As a bonus recommendation, you’ll also find God’s Unchained Cryptocurrency (GODS) on Kucoin.
You can find Loopring (LRC) on Binance. If you live in the United States, you can find it on Kucoin.
X immutable (IMX) is available on Kucoin with God’s Unchained (GODS).
zkSync has yet to release a token for its platform, but you can follow its social media to stay informed on the release date.
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