The rapidly evolving landscape of decentralized finance (DeFi) has spurred a surge in interest among individuals seeking efficient and user-friendly platforms. Among these innovative solutions is ZKSwap, a decentralized exchange (DEX) that harnesses the power of ZK rollups to enhance the user experience. This Coincu’s guide delves into the workings of ZKSwap and uncovers the advantages it brings to the DeFi ecosystem.
What is ZKSwap?
ZKSwap is an asset swap protocol employing an automated market maker (AMM)-like approach, granting Ethereum users seamless access to its services.
The DEX was founded by developers at L2 Labs in August 2020. The testnet was launched in November 2020, and the mainnet on Ethereum was started on February 15, 2021. In February 2021, the exchange conducted an airdrop, distributing 80 million ZKS. Its roadmap includes a series of upgrades that will make the network a widely used DEX and AMM.
By eliminating the need for explicit permission, ZKSwap empowers users to engage in the DeFi ecosystem with ease, fostering greater control over assets and transactions.
At the core of ZKSwap’s architecture is the ZKSP token, a layer 2 decentralized exchange (DEX) fueled by zk-Rollup technology. This innovative approach seeks to accelerate exchange operations while preserving a robust security framework. The primary objective of ZKSP is to facilitate rapid and cost-effective exchanges, providing users with heightened efficiency while upholding security standards.
Central to ZKSwap’s prowess is zk-Rollup technology, which propels ERC20 tokens to level 2. This leap enables ZKSwap to replicate the functionalities of an Automated Market Generator (AMM), akin to Uniswap, at layer 2. This transition translates to unparalleled scalability and privacy, affording users an environment where transactions can flourish sans gas fees.
ZKSwap caters to both liquidity providers and traders by furnishing them with an ultra-high throughput swap infrastructure. This architecture expedites swaps while entirely eliminating gas fees, making transactions more accessible and attractive. The integration of zk-Rollup technology significantly bolsters transaction throughput, potentially elevating transactions per second (TPS) by substantial margins.
Pioneering Zero Knowledge Rollups
The name ZKSwap itself derives from its innovative technology, which incorporates Zero Knowledge Rollups to provide a seamless and private layer 2 swap functionality, introducing unparalleled scalability and privacy into the ecosystem. One of the standout features of the DEX is its revolutionary approach of conducting transactions without imposing any gas fees, offering users a cost-effective alternative.
Gas-Free Transactions and Cost-Effective Alternatives
ZK-Rollup presents an innovative Layer 2 scalability solution that surpasses previous methods like Plasma in terms of security, cost efficiency, transactions per second, and overall usability. The intricate ecosystem comprises on-chain smart contracts, an off-chain ZKSwap server, a robust zero-knowledge proof system, and a front-end user interface that collectively empower users to navigate the platform seamlessly.
This innovative approach positions ZKSwap at a considerable advantage when compared to other DEXs, a fact made evident by its distinct attributes.
Chief among these advantages is the unwavering commitment to decentralization. Users engaging with ZKSwap retain complete autonomy over their cryptocurrencies, bypassing the need for any central entity to authorize transactions. This not only amplifies privacy safeguards but also enhances liquidity opportunities, fostering a robust and user-centric environment.
ZKSwap’s capacity for high throughput stands as another testament to its prowess. Drawing strength from the ZK-Rollup technology, ZKSwap has the potential to exponentially increase the number of transactions per second (TPS), a game-changer in the realm of DEXs.
Functioning as a version of Uniswap on Layer 2, ZKSwap capitalizes on the advantages of both worlds. It inherits the well-known features of Uniswap while harnessing the scalability and gas-fee-less nature of Layer 2 solutions.
Diverse Consensus Mechanisms
Several consensus methods protect the network. They utilize Proof-of-TransFee (PoT), Proof-of-ZK-Snarks (PoZK), Proof-of-Gas (PoG), and Proof-of-Liquidity (PoL) mechanisms in addition to Proof-of-Stake (PoS). Users may learn more about these techniques by visiting the exchange’s whitepaper, however below is a basic overview of their applications:
- PoS: ZKSwap will enable staking into smart contracts to reward users that keep their currencies locked on the network.
- PoT: There is a proof of transaction fee mechanism that enables ZKSwap to encourage and reward users with ZKSP tokens in accordance with the amount of fees they have paid.
- PoZK: The ZKSwap network can create mineable zero-knowledge proofs, enabling it to communicate with the Ethereum Layer 1 network.
- PoG: Third parties may pay users’ gas costs in exchange for ZKSP tokens.
- PoL: Users are compensated for providing liquidity for certain trading pairs, similar to Uniswap and other DEXs.
How does it work?
The core principle behind ZK-Rollups is the generation of a cryptographic proof known as SNARK. This proof validates and authorizes transactions at the layer-1 level without exposing sensitive internal details. By leveraging this approach, ZKSwap ensures that transactions occur swiftly while maintaining security and privacy.
The DEX empowers users to deposit layer 1 digital assets like Ethereum (ETH) and various ERC-20 tokens into a smart contract residing on its platform. This contract operates on layer 2, a strategic move that substantially enhances transaction speed and throughput. The result is an optimized trading experience that benefits both centralized and decentralized exchanges.
The architecture of ZKSwap encompasses three essential components: a user-friendly front-end interface, an on-chain smart contract, and an off-chain ZKSwap server. This server infrastructure encompasses a memory pool, block proposer, state maintainer, and proof server, collectively working in tandem to efficiently process and validate transactions.
A pivotal technological advancement within ZKSwap lies in its dual developments: the layer 2 server and the Plonk zero-knowledge system. This sophisticated server interacts seamlessly with users through WebSocket, granting access to transaction tracking functionality. Approved requests flow into the ZKSwap memory pool and subsequently undergo processing by the swap engine.
At the core of ZKSwap’s robust security framework is its zero-knowledge proof system, intricately designed with a distributed architecture. This system operates in conjunction with parallel developments, particularly the Plonk zero-knowledge proof algorithm. The DEX state tree acts as a repository, meticulously documenting all account balances within the ecosystem.
ZKSwap bringa a range of distinctive features that set it apart. This next-generation system is composed of several integral components, including on-chain smart contracts, an off-chain ZKSwap Server, a robust zero-knowledge proof system, and an intuitive front-end user interface.
ZKSwap Smart contract
At the heart of the ecosystem lies its groundbreaking smart contract infrastructure. These meticulously designed smart contracts, hosted on the Ethereum blockchain, serve as the cornerstone for storing user-deposited tokens while meticulously documenting and authenticating related Layer 2 and Proof state updates. Acting as the central nexus for both internal and off-chain interactions, these contracts facilitate seamless connectivity throughout the network.
ZKSwap Layer 2 Sever
Complementing the on-chain smart contracts is the ZKSwap Layer 2 Server, a pivotal module responsible for overseeing on-chain transactions. Leveraging WebSocket technology, the ZKSwap server seamlessly engages with users, meticulously tracking transactions taking place on the Ethereum blockchain.
Upon initiation, valid transaction requests seamlessly flow into the ZKSwap memo pool, subsequently undergoing processing by the innovative Swap Engine. Familiar transaction types, akin to those employed by Uniswap, populate the memo pool, reflecting the system’s commitment to user familiarity. The consolidation of transactions is orchestrated by the block proposer, culminating in the creation of a new block. Simultaneously, the State Keeper diligently updates the status of Layer-2 devices, ensuring a synchronized network.
Zero-knowledge proof system
A standout feature of the system is its robust Zero-Knowledge proof system. This intricate architecture, characterized by a distributed framework, harnesses advanced algorithms to generate irrefutable proofs. The decentralized nature of this system bolsters security while facilitating efficient verification processes.
- Token Name: ZKSwap Token.
- Ticker: ZKSP.
- Blockchain: zkSync Era.
- Token Standard: ERC-20.
- Contract: 0x7eCf006f7c45149B457e9116392279CC8A630F14
- Token type: Utility, Governance.
- Total Supply: 55,650,000T ZKSP.
- Circulating Supply: 32,550,000T ZKSP.
- Liquidity Incentives: 20%.
- Marketing & Advisory: 5%:
- Liquidity LP: 10%.
- Ecosystem rewards: 6%
- Private Sale: 7.25%
- Public Sale: 32.75%
- Team: 9%
- Development Fund: 10%.
ZKSP is the protocol’s native ERC-20 token, and it drives the network. It is used to motivate all network activity by compensating users for tasks like mining. ZKSP is also utilized in network governance, as well as transaction verification, token listing, and redemption.
Moreover, 0.3% of the project fee will be distributed as follows: The remaining 0.05% is used to purchase ZKSP and burn, while 0.25% is remitted to liquidity providers. All protocol fees will be regularly used to redeem ZKSP, ZKSP received will be destroyed directly and ZKSwap officials will not receive any transaction fees.
Investors and Partners
ZKSwap compared to other competitors
Essentially, ZKSwap is a layer 2 DEX based on zero-knowledge rollup technology that employs the AMM paradigm. Its primary benefits are infinite scalability and secrecy, as well as high throughput and inexpensive gas prices.
Based on zk-Rollup technology, ZKSwap is developing a decentralized DEX system. It seems to be a DEX, similar to Uniswap’s AMM concept, although there are several variations between the two in terms of underlying technology and user experience.
The most notable difference between ZKSwap and the present version of Uniswap is that ZKSwap may drastically cut transaction costs, dramatically enhance transaction speed, create an exchange experience comparable to CEX, and offer Level 1 security. Taking other Layer 2 solutions into consideration, such as optimistic rollups and Validium technologies (which may also dramatically boost transaction speed and lower transaction costs), they make a security sacrifice.
Several rivals, such as Uniswap, PancakeSwap, 1inch, SushiSwap, Binance DEX, and others, have a big number of developers and users. Only time will tell whether ZKSwap will triumph in the epic DEX struggle. Best or worse, there is still a long way to go in this competitive area.
ZKSwap’s launch marks a significant leap forward in the realm of DeFi, offering users a seamless and secure platform underpinned by groundbreaking components. As the cryptocurrency landscape continues to evolve, its innovative approach is poised to usher in a new era of decentralized financial solutions.
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