How to Invest in ZK-Rollup Coins
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Have you ever wondered what went into making blockchain ecosystems like Ethereum scalable? Many factors go into it, but an ultimate scalability solution consists of ZK rollups, which are smart contracts that enable transactions on the blockchain to be validated quicker, with reduced gas fees. ZK-rollups enhance the performance of the blockchain ecosystem and are better than layer 1 solutions, seeing as they are able to combine on- and off-chain processes. They serve to increase transaction throughput and decrease gas fees.
Zero-knowledge rollups (ZK-rollups) enable hundreds of transfers to go through at once, in a bundle or a “roll-up” to reduce congestion on the network.
In order to be able to validate transactions faster and better than Layer 1 solutions, ZK-rollups use a mathematical structure called a Merkle Tree, which help prevent data falsification from tainting the on-chain records of a ZK-rollup.Only the most important data from the smart contract make up the Merkle Tree. The cryptographic data structure of a Merkle Tree resembles a tree that enables blockchain data to be stored securely and efficiently.
There are two types of rollups: optimistic rollups and zero-knowledge rollups. The main difference between these two is the verification process. Optimistic rollups are “optimistic” because they assume that all the rolled-up transactions going through are valid. In the case of a fraudulent transaction, the dispute needs to be settled on Ethereum network and both parties involved would lose the amount they have staked if the transaction is deemed non-valid.
ZK rollups, or Zero-Knowledge Proofs, are more scalable than Optimistic Rollups as they occur on the mainchain rather than on the sidechain. In this instance, transactions can only be part of the rollup if they are deemed valid.
What Problems Do ZK Rollups Solve?
ZK Rollups aim to provide the best layer 2 scaling solution, with cheaper transaction fees. As transactions are “rolled up” and processed altogether, users can share the gas fee and subsequently pay less. Additionally, because all transactions are compiled into one single rolled-up transaction, ZK-rollups serve to increase throughput and scalability. With the high gas fees and scalability issues experienced by Ethereum, scaling solutions like ZK-rollups come in handy, leveraging other platforms to settle part of the transaction before providing the main Ethereum blockchain with the information regarding the transactions that need to be processed.
Benefits of Investing in ZK Rollup Coins
Different ZK-rollup platforms exist, offering scaling solutions and enhanced security for better payment systems. They also often come with native ZK-rollup coins, which can be good investments as it enables investors to back a promising technology. With blockchain being in its early developmental phase, ZK-rollups have great potential and offer a solution for blockchain platforms to achieve greater scalability. Since ZK-rollup coins power blockchain platforms and ecosystems, they are great investments and are a gateway of sorts for investors looking to back the budding tech industry.
Risks of Investing in ZK Rollup Coins
The crypto industry has been undergoing massive innovation and with that, many projects have been popping up. However, not all are here to stay. With ZK-rollup coins, the same narrative applies. With the sheer volume of ZK-rollup coins coming to life, it is important to do one’s own due diligence and research before investing in a particular coin. Many projects tout themselves as being the best and for having a unique approach to zero-knowledge cryptography, but the truth is many whitepapers are similar in nature. Additionally, many overexaggerate the results that they can achieve.
Top 4 ZK Rollup Coins To Invest In
All this being said, there are definitely pros and cons to investing in ZK-rollup coins. As mentioned before, there are a huge variety of ZK-rollup projects out there. To get you started, here are the top 5 ZK-rollup coins that you should consider when investing in this layer-2 scaling solution.
Founded by CEO Daniel Wang, Loopring (LRC) prides itself on being Ethereum’s first ZK-Rollup layer 2 solution. With Loopring, transactions are fast, secure, and can potentially be processed with “100x lower fees.” Loopring is open-sourced and trustless. It also boasts of having a high throughput, providing solutions for processing thousands of off-chain requests without the bottleneck experience sometimes associated with Ethereum. The project reassures users that both security and performance can be experienced on the platform, and having one does not compromise the other. Loopring’s ultimate goal is to design and provide the best ZK-rollup exchange and payment protocol on Ethereum that can be leveraged by all globally.
Its native token LRC is designed to incentivize users to contribute and support the Loopring ecosystem. LRC also serves to make the transition to Ethereum’s layer 2 more seamless. To begin trading LRC today, head over to AAX. You can also take advantage of AAX Savings to earn an APY of 2.5%-4% on LRC.
Immutable X (IMX)
Immutable X is a layer 2 solution for developers looking to build NFT projects on Ethereum. With Immutable X, you can also opt to trade NFTs on the layer 2 protocol through its marketplace. The NFT-focused ecosystem aims to provide a scalable solution to elevate Ethereum’s attractiveness as a host platform for NFTs by tackling the blockchain's key challenges. Immutable X’s vision is to resolve the limitations of Ethereum without compromising its security - a mistake often made by other blockchains. The key challenges of Ethereum are low scalability, poor user experience, and slow developer experience. Immutable X aims to address this and provide an enhanced user experience through the implementation of a ZK-rollup scaling engine, an API abstraction layer, NFT-enabled wallets, and platform SDKs.
Immutable X believes that NFTs should be hosted on Ethereum as the blockchain ecosystem has already secured its reputation as a decentralized and trustless network. Furthermore, as Ethereum is community developed, users’ assets are safer on the platform and there is a lower risk of exit scams occurring. Immutable X is focused on making the NFT experience on Ethereum seamless, enjoyable, and scalable.
Immutable X’s ecosystem is powered by the platform’s native utility token IMX. IMX token can be used to vote for future proposals on Immutable X and to settle transactions on the platform. It can also be used to stake, trade NFTs, and reap rewards. IMX’s total supply is fixed at 2 billion. According to the NFT project, 51.74% of IMX tokens are used to maintain the ecosystem, 25% are reserved for project development, 19.26% are allocated to public and private token sales, and 4% are stored in the foundation’s reserve. IMX can be traded on leading exchanges, including AAX, Binance, and Kraken, to name a few.
zkSync is a blockchain project headed by Matter Labs that focuses on using cutting-edge cryptography to deliver scaling solutions. Its mission is to scale Ethereum to billions of users, all the while preserving the ecosystem’s permissionlessness, trustlessness, and resilience. zkSync prides itself in using mathematical solutions instead of validators to carry out transactions “with zero security compromises” and a focus on prioritizing user experience. Along with many other blockchain industry players, it believes that ZK-rollups are the future and that there is still a lot of innovation to be expected of this technology.
zkSync prides itself in being a project created by developers for developers. One of its main ambitions is to break financial barriers and accelerate the mass adoption of public blockchains.
Currently, it is working on releasing its own native token. Once it is out, however, it is worth looking into as the protocol is actively working to improve rollups, which are essentially the future of blockchain.
Another token to look into is SYS, the native token of Syscoin. Syscoin is unique in that it looks to combine Bitcoin and Ethereum’s strengths to build a more collaborative, powerful, and secure protocol. It is also the first layer-1 blockchain to have integrated EVM functionality, which enables codes from other blockchains to be compatible with that on Ethereum.
Syscoin enables startup projects to scale their applications with ZK-rollups, masternodes, and chainlocks, which provide scalability and added security. Founded in 2014 by Blockchain Foundry and maintained by the Syscoin Foundation, Syscoin is an open-source protocol for developers looking to create modular blockchains, which are blockchains that levy another chain for at least one of its components.
Final Thoughts on ZK Rollups
While there is still room for improvement when it comes to ZK-rollups, these zero-knowledge cryptographic solutions have made the blockchain industry better as a whole. They play a crucial part in achieving scalability, which is still one of the main pain points of Ethereum. Additionally, they provide a faster processing time and lower fees, increasing the efficiency of blockchain ecosystems. With more research and the constant innovation akin to the tech industry, ZK-rollups will scale to new heights of innovation in the coming years.
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