ZKSwap (ZKS) Layer-2 DEX | Save on Ethereum Gas Fee!

Boxmining avatar Boxmining
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Description

Decentralised Finance (DeFi) have becoming increasingly popular for the past few months. The DeFi boom has caused Ethereum gas fee to spike tremendously. ZkSwap ($ZKS) is a layer-2 token swap protocol...

AI Analysis

Hey there! So, this video dives deep into ZKSwap, which is a new Layer-2 decentralized exchange (DEX) designed to tackle one of the biggest headaches in crypto right now: those ridiculously high Ethereum transaction fees. Basically, it's a solution using zk-Rollups technology that lets you swap tokens on Ethereum way cheaper and much faster, making decentralized finance (DeFi) accessible to a lot more people.

Here's the lowdown on ZKSwap and why it's a game-changer:

* ZKSwap as a Layer-2 Solution: It's a direct implementation of Layer-2 scaling on Ethereum, meaning it processes transactions off the main Ethereum blockchain. This drastically reduces transaction costs and speeds things up, making it much cheaper and faster than doing trades directly on Ethereum's mainnet. It's already working on the Ethereum testnet and is expected to go live on the mainnet very soon.

* The Problem: Ethereum Congestion: The explosion of DeFi has led to massive congestion on the Ethereum network. More people trading, farming, borrowing, lending, and using stablecoins like Tether means more transactions, and since Ethereum can only handle a limited number of transactions per second, gas prices (the fees to send a transaction) skyrocket as users compete to get their transactions processed.

* Why Layer-2 is Necessary: While Ethereum 2.0 is like building a "mega highway" for future capacity, it might not be enough to handle the sheer volume of transactions, especially from high-frequency traders who need to execute thousands of trades per second. Layer-2 solutions are like building networks "above the roads," creating a superhighway that can handle much more traffic and scale infinitely.

* Using ZKSwap's Interface: The ZKSwap interface looks really familiar, almost identical to Uniswap. Swapping tokens is super easy—just input your amount, hit swap, and sign. The transactions are instantaneous because they're processed on Layer-2.

* The Layer-2 Wallet and Deposits: ZKSwap has its own "L2 wallet" where your funds live. To get your assets onto Layer-2, you need to deposit them from your main Ethereum wallet. This deposit step takes about three to five minutes and does incur Ethereum gas fees, similar to any interaction with a smart contract on Layer-1.

* Proof of Gas: A Smart Incentive: To counter the initial deposit fee, ZKSwap has a "Proof of Gas" mechanism. They directly reimburse the Ethereum transaction fee you paid to deposit funds onto Layer-2 by giving you ZKS tokens. This means the initial cost of getting onto ZKSwap is effectively zero, which is a brilliant way to encourage adoption.

* Instant, Free Transactions on Layer-2: Once your funds are on Layer-2, you don't pay gas fees for individual swaps. Instead of broadcasting a transaction and waiting for confirmation, you simply sign a signature. This makes trades instant and eliminates the hefty gas fees that can be $15-25 or more on a congested Ethereum mainnet. It also supports liquidity pools, similar to Uniswap, allowing users to earn fees by providing liquidity.

* How ZK-Rollups Work (The Magic Behind It): The core technology enabling ZKSwap is zk-Rollups, which are based on Zero-Knowledge Proofs (ZK-Snarks). Think of it like bundling tens of thousands of individual transactions into one neat package. Instead of each small trade being recorded on the blockchain, only the "results" of these bundled transactions are reported. This drastically reduces the data stored on the main chain while still maintaining the security and trust of Ethereum's Layer-1. This is particularly efficient for decentralized exchanges where high-frequency trading is common.

* Drawbacks of Layer-2: While amazing, Layer-2 solutions aren't entirely without their quirks.
* You need to use a dedicated Layer-2 wallet, meaning an extra step to deposit funds onto the network.
The biggest drawback is the withdrawal time when moving funds off* Layer-2 back to the main Ethereum chain. This can take longer—the presenter showed an example taking an hour or more—because of necessary safety and proof checks to ensure everything is legitimate before allowing funds to exit.
* However, the presenter feels this isn't a huge problem, comparing it to depositing and withdrawing from any centralized exchange, and believes future wallets will support Layer-2 natively, streamlining the process.

* ZKSwap's Current Status and Incentives: ZKSwap is currently on the Robston testnet, allowing anyone to try it out. The presenter noted early bugs but a smooth experience now. It's expected to deploy on the Ethereum mainnet in January, which is very soon. There's even an incentive program: if you perform 50 withdrawals and 100 swaps on the testnet, you can get a share of 500,000 ZKS tokens, which is a great way to earn by testing.

* The ZKS Token: ZKSwap has its own ERC-20 token called ZKS, which is already live and trading on Uniswap. Its use cases include governance, token listing, transaction verification (a unique Layer-2 function that adds economic value), and buybacks. A significant 60% of the ZKS tokens are allocated for community mining over approximately four years, which means there's a huge opportunity for users to earn tokens as the protocol grows.

* Final Thoughts: The presenter is super excited about ZKSwap and Layer-2 scaling because it brings native support for Ethereum assets and the security of the Ethereum blockchain, but with the massive benefits of faster and much cheaper transactions. The ability to save $15-25 per trade is a huge deal. While there's the minor inconvenience of depositing and the withdrawal delay, the benefits significantly outweigh them, especially for exchanges. The presenter also hinted at covering other Layer-2 technologies like Optimistic Rollups and Plasma in future videos, emphasizing that ZK-Rollups' faster withdrawal times make it particularly strong for DEXs.

Transcript

2021 is bringing some crazy technology out of the oven, and I'm super excited to talk about a lot of the stuff that's going on. This video, we're going to focus in particular on ZKSwap. So as you guys kind of know, one of the biggest issues in crypto right now is that transaction costs are getting all the way up there. And this is a solution that directly tackles that. With ZKSwap, it's the direct implementation of layer 2 scaling. This means that you can now transact, like do trades for much c...