ZKsync Overview

Enterprises today face challenges with traditional finance systems, such as high intermediation fees, slow settlement times, and fragmented liquidity. Although blockchain offers potential solutions, many existing tech stacks do not meet the scalability, interoperability, user experience, privacy, and customizability requirements that enterprises need. ZKsync’s Zero-Knowledge (ZK) Stack (discussed below) addresses these challenges by enabling enterprises to easily deploy their own customizable blockchains.

The Challenge - Barriers to blockchain adoption for enterprises

The Opportunity - ZKsync and the advantage of customizable ZK Chains

ZKsync and the ZK Stack are rapidly gaining traction across enterprises and use cases, including adoption from organizations such as Deutsche Bank and Tradable for tokenization,  Abstract/Pudgy Penguins for general consumer crypto, TreasureDAO for gaming, Lens for decentralized social media, QuarkID and the city of Buenos Aires for decentralized identity to name a few.

An Introduction to ZK Chains

To understand how ZK Chains unlock enterprise blockchain solutions, it’s helpful to explore the fundamental architecture of Ethereum rollups, ZKsync Era, and the ZK Stack from a broader perspective.

Ethereum Rollups

A Layer 2 rollup is a blockchain scalability solution designed to improve transaction throughput and lower costs by processing transactions off-chain and then posting the results on-chain. By leveraging Ethereum's L1 security and data availability (DA), L2s can focus on execution and scalability without the burden/overhead of establishing their own validator set and security budget.

There are two main types: Optimistic rollups, which rely on crypto-economic security and fraud proofs in their design, and Zero-knowledge rollups (ZK-rollups), like ZKsync, which use cryptographic ZK proofs as a pillar of their design. As a result, L2 rollups inherit (most of) Ethereum's security guarantees while offering significantly lower transaction costs than L1 transactions.

While both implementations are considered rollups, there are significant differences in their designs and security assumptions. Optimistic rollups assume all transactions are valid unless challenged by fraud proofs, which can lead to long settlement delays (typically ~one week). ZK-rollups, on the other hand, use zero-knowledge proofs (ZKPs) to verify transactions before posting them to the Ethereum mainnet. The use of ZKPs not only provides mathematical certainty that the transactions are valid according to the protocol’s rules but also results in faster settlement times.

ZK-rollups are gaining traction as a superior solution over Optimistic rollups, especially for large enterprises looking to adopt blockchain technology that prioritizes speed of settlement and security.

ZKsync Era

ZKsync Era is a leading zkEVM L2 blockchain solution built on Ethereum and is one of the many chains in the growing network of interconnected ZK Chains. A zkEVM is a virtual machine that seamlessly integrates zero-knowledge proofs and the EVM, providing low-cost transactions with Ethereum-grade security and compatibility. Era provides users with fast finality, cryptographically secured guarantees, and cheap transactions (~$.01). Given its EVM-compatibility, it also enables developers to easily deploy their EVM/Ethereum-based applications with minimal additional development work. With its established DeFi ecosystem, Era acts as the unified liquidity hub that other ZK Chains can rely on for deep liquidity and DeFi primitives (described in further detail in the Elastic Chain section below).

ZK Stack: The Open-Source Blockchain Development Framework

The ZK Stack is designed to empower organizations to launch their own independent yet interoperable blockchains. When deciding to launch products or applications, enterprises can choose between building on the public, permissionless ZKsync Era chain or deploying their own sovereign chain to fit their requirements (e.g., private and permissioned). Some of the most common architecture components of ZK Stack that allow enterprises to customize include:

• Chain Type: Choose between “rollup mode,” where compressed data is published on Ethereum, making data public, or “validium mode,” where data is stored off-chain, offering cheaper fees and more confidentiality.
• EVM Optimization: Launch with full EVM equivalence so developers do not need to refactor Ethereum-based contracts (coming by the end of 2024) or optimize for performance (e.g., speed and cost) and use the EraVM.
• Gas Token: Use Ether for transaction fees, a custom currency (e.g., a native governance token), or go gasless and never use cryptocurrency altogether.
• Transaction Sequencing: Centralize sequencing with a single authority or decentralize sequencing using a network of nodes*.
• Data Availability: Store data on Ethereum for greater decentralization, with a third party for cheaper storage (e.g., EigenDA, Avail, or Celestia)l, or self-host for maximum control and confidentiality (e.g., on a Postgres database on-premise or in the cloud).
• Accessibility: Choose between requiring specific permissioning (e.g., KYC) to access the chain, or make it permissionless.
• Consensus and Number of Nodes: Opt for centralized control or use Proof of Authority (PoA) with pre-elected validators to manage the network*. *denotes features coming in 2025

The degree of interoperability, or the chain's ability to natively communicate with different blockchains, is also customizable. Chain deployers can choose to be fully interoperable with all other ZK Chains or only allow specific whitelisted chains.

Elastic Chain: The Unified User Experience

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In 2024, ZKsync introduced the concept of the Elastic Chain, an ever-expanding network of interoperable chains secured by Zero-Knowledge Proofs. “Elastic” refers to the architecture’s ability to expand its capacity to accommodate any demand by adding new instances. As more users and transactions come in, the system can scale without compromising performance, verifiability, or decentralization.

From a technical perspective, the Elastic Chain functions as a federation of autonomous ZK Chains interconnected at the protocol level (i.e., native interoperability, which is expected to be in production by the end of 2024). This design creates a free movement zone for users and crypto-assets, forming a united multi-chain ecosystem that feels and behaves like a cohesive blockchain.

Elastic Chain benefits:

• Fast: Expand capacity without increasing transaction costs by adding more chains and leveraging quick cross-chain confirmations for transactions across ZK Chains.
• Connected: Tap into the liquidity and users of any ZK Chain (including ZKsync Era); no more fragmented liquidity or users.
• Intuitive and Unified: Provides one uniform experience for all users, allowing them to operate across all ZK Chains with a single address, transact with a single signature, and pay fees in any token, enhancing simplicity and user experience.
• Secure: Eliminates the need for third-party bridges or introduction of other trust assumptions by using ZK proofs to enable seamless messaging and asset transfers across ZK chains.

With these features, the Elastic Chain design presents a compelling argument for any organization planning to use blockchain technology. This is especially true for enterprises (e.g., banks) aiming to benefit from blockchain technology without compromising on privacy, compliance, and scalability.

Advantages of ZK Chains for Enterprises

Additionally, ZK Stack enables native account abstraction and paymaster support which further simplifies the user experience. Paymaster support enables specific accounts to cover the transaction costs on behalf of others, creating the ability to subsidize transaction fees. This could enable fee-free transactions for users and eliminate the need for the L2 operators to handle digital assets themselves.

Examples of Enterprise use cases on ZKsync

Traditional Finance: Asset Tokenization

Deutsche Bank and Memento: Fund Management

Deutsche Bank, in collaboration with Memento blockchain, is developing an interoperable platform on a ZK Chain for asset tokenization and digital fund management designed to improve the process of launching, administering, and distributing digitally native and tokenized funds to accredited investors. By deploying a ZK Chain, the project strives to reduce the cost of issuance, streamline the distribution process, and enhance KYC/AML checks.

Tradable: Private Credit

Tradable, in collaboration with Victory Park Capital (recently acquired by Janus Henderson), developed an institutional-grade platform utilizing ZKsync technology to make private credit more tradable. The platform reduces costs, simplifies deal syndication, democratizes access to private credit, and ultimately enables asset managers to reach a broader pool of investors.

Consumer: Gaming, Social Media, Identity, and More

TreasureDAO: Gaming

TreasureDAO is moving to ZKsync’s Elastic Chain to develop a decentralized game console that focuses on promoting the mainstream acceptance of Web3 games and intellectual property, having initially launched on Arbitrum. This shift enables Treasure to take advantage of ZKsync’s zero-knowledge technology for enhanced scalability and efficiency while its built-in account abstraction streamlines the onboarding process for both users and developers.

Abstract Chain: General Consumer Crypto

Abstract Chain, created by Igloo, Inc.—the team behind the popular Pudgy Penguins NFT collection—is a Layer 2 solution designed to address the challenges of consumer crypto by utilizing ZK Stack to enhance everyday applications. This technology facilitates fast transaction processing and lowers costs while ensuring security and compatibility with the Ethereum ecosystem. By offering a smooth experience for both developers and users, Abstract Chain aims to promote widespread adoption and establish itself as a leading platform for decentralized applications. With a strong emphasis on fun and engaging user experiences, Abstract Chain strives to transform how individuals interact with blockchain technology.

QuarkID and Latin American Governments: Digital Identity

QuarkID is using ZKsync to revolutionize decentralized identity (DID) for millions across Latin America by providing digital identity solutions that prioritize privacy and comply with international data protection standards. Beginning in Buenos Aires, the city has rolled out the digital identity system for its 3.6 million residents. This initiative integrates ZKsync into the city’s miBa digital platform, enabling citizens to take charge of their personal information while enhancing privacy and security.

Lens Protocol: Decentralized Social Media

Lens Protocol, a decentralized social network with over 100,000 users, is leveraging the Elastic Chain to offer a scalable and secure alternative to traditional social platforms like Twitter or Instagram. Created by Stani Kulechov and the team behind Aave, Lens allows developers to build on a decentralized social graph. By utilizing ZK Stack, Lens provides a user experience comparable to web2 platforms while empowering users with ownership of their data, censorship resistance, portability, and secure transactions. Its use of a validium ensures scalability through off-chain data storage without sacrificing security.

Conclusion

ZKsync’s ZK Chains offer a transformative solution for enterprises by addressing key challenges such as performance, privacy, security, interoperability, and verifiability that have historically hindered blockchain adoption. Through the ZK Stack framework, enterprises gain the flexibility to customize blockchains according to operational needs, from transaction sequencing to data availability models, while retaining Ethereum’s security. This innovation has already attracted large enterprises across a variety of use cases spanning asset tokenization, gaming, media, and identity. As enterprises capitalize on the advancements in blockchain privacy and usability offered by ZK Chains, we anticipate a growing number of organizations will adopt the ZK Stack infrastructure in 2025.

Disclaimer: This report was commissioned by Matter Labs. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.