The ZKSwap protocol is a layer-2 decentralized exchange protocol on Ethereum. The protocol aims to solve the issue of scalability using zero-knowledge proofs (zkRollups). It aims to offer lower transaction costs and faster transactions. The protocol also plans to dive into the NFT world by facilitating minting, sale and airdrops features.
As articulated by Vitalik Buterin, the founder of Ethereum, there is a scalability trilemma that every blockchain faces. The trilemma is to juggle the three fundamental properties of a blockchain – security, scalability and decentralization. The trilemma says that a blockchain can only attain two at max. For example, Bitcoin has security and decentralization but lacks scalability. This is why there was a dire need for scalability solutions which came as layer-1 and layer-2 solutions. Similarly, ZKSwap is layer-2 solution designed to solve scalability issues of layer-1 decentralized exchange (DEX). Let’s dive right into what ZKSwap is!
What is ZKSwap?
ZKSwap is layer-2 DEX that is compatible with Ethereum. It uses zero-knowledge rollups (zkrollups) and an automated market maker to provide its functionality. Loopring is another cryptocurrency that uses zkrollups, which allows users to build DEX on the Ethereum blockchain. These proofs let a program make a claim about data without actually sharing the data i.e zero-knowledge. With ZKSwap, it allows users to exchange tokens without exchanging transaction data on the Ethereum Chain. Additionally, the automated market maker providers a swapping function to layer-1 DEXs. This offers lower gas costs, quick confirmation and lesser transactional bottlenecks.
How does it work?
The primary aim of ZKSwap is to solve scalability issues with layer-1 DEXs. In order to do that it solves transaction bottle-necks, high transaction costs and transaction time issues. ZKSwap does this by performing transactions off-chain and then batching them together. Then, it verifies layer-2 transaction state proof with layer-1 using zkRollups. The fee that it charges for the swap is 0.3%.
Additionally, the automated market maker provides arbitrage opportunities. Thus, keeping the prices stable to the real world. Layer 2 stores and processes the swaps that take place. Moreover, the withdrawal and deposits that take place are always on layer-1. Layer-1 is used to store transaction data. Layer-2 provides proofs to follow through with transactions.
The ZKSwap Token, ZKS
ZKS is the native governance and monetary token of ZKSwap It is an ERC-20 token. You can use the token for fee distribution, editing liquidity pools and voting on proposals. Additiaonlly, the protocol used ZKS for buybacks of the tokens for token burns. Users that hold ZKS can use it for liquidity mining or staking based mining. You can earn ZKS token as rewards for staking or mining activities. If you stake for 360 days at a stretch, you can earn gZKS, which is the governance token that controls listing and voting on the ZKSwap protocol.
The ZKSwap protocol plans to form a new Layer-2 NFT protocol set to be realized in the first half of 2022. After the update, you can enjoy NFT issuance, minting, airdrops and low-cost sales. Not just that, you can enjoy batch minting, NFT verification, mystery box auctions and bidding in the second half of 2022. Moreover, the protocol also plans to deploy on other blockchain platforms other than Ethereum.