zkSync and Asset Management

(DOMANI is an oracle-less Digital Asset Management platform that enables users to create, mint and manage ETF-style tokenized funds. The views expressed in the article below should not be taken as investment advice. Always do your own research.)

Introduction

Ethereum average transaction prices reached over $50 in late 2021, that’s because Ethereum’s total fee formula is dynamically adjusted based on the number of users interacting with the network at any given time. This means that as more people use it, the higher the gas fees. 

This presents a scalability problem for Ethereum, which is why Layer 2 scaling solutions exist, to move the bulk of transactions away from Layer 1 whilst still maintaining a link to the network. This means that L2 solutions can create a network that makes Ethereum transactions cheaper and faster, whilst still benefiting from Ethereum’s security. 

Ethereum’s scalability is one of the main reasons why DOMANI started pursuing a multi-chain strategy, in search of an affordable and scalable blockchain which will enable us to pursue the democratization of Asset Management. 

ZK Rollups and zkSync

There are a decent amount of L2 solutions on Ethereum, in this article we will analyze Zero Knowledge (ZK) Rollups, specifically focusing on zkSync, as they begin their road to mainnet deployment. ZK rollups work by holding all funds in a smart contract on the mainchain, while all the computation and storage is performed off-chain. 

The idea is instead of having to verify every transaction separately, transactions can be rolled up into a single item, which is then verified on the main chain and all approved simultaneously. In the case of zkSync, the system works by using a SNARK proof to verify transactions that happen on zkSync on the Ethereum mainnet. 

This SNARK verification method is significantly cheaper than verifying transactions individually on Ethereum, and storing the transaction data off-chain is also significantly cheaper. This is why zkSync estimates that on top of the cost savings, zkSync’s SNARK verification also enables a boost in scalability, up to 200x of Ethereum’s capacity. 

Not only does zkSync’s rollup architecture improve scalability and decrease transaction costs, it also maintains the security guarantees established on Ethereum by:

• Ensuring validators cannot corrupt the state proof or steal funds

• Ensuring that users can always retrieve the funds from the zkRollup smart contract even if validators stop cooperating

• Ensuring that users nor single trusted third parties need to be online to monitor zkRollup blocks in order to prevent fraud

Why Asset Management will thrive on zkSync

DOMANI believes in Ethereum’s fundamentals, unfortunately the scalability is an issue that is yet to be addressed, which is why zkSync plays such a significant role in the path for Asset Management. Moreover, zkSync has the perfect platform to house a successful and thriving Asset Management ecosystem, which is why DOMANI has chosen to launch on the zkSync testnet in mid 2022 and will aim to launch on the zkSync mainnet as early as possible.

One of the main success factors for protocols in Asset Management is reliability and security. A fast blockchain built on the security fundamentals of Ethereum, with 200x Ethereum’s capacity, that's the value proposition of zkSync. Clearly, the ideals of Asset Management and zkSync align, enable the secure and fast transfer of digital assets using Ethereum’s fundamentals, with the scalability potential of zero knowledge proofs. 

With 24 days to go until the launch of zkSync 2.0 mainnet, DOMANI Protocol is committed to join Matter Labs on their mission of helping scale the most secure and adopted blockchain on the planet. Currently on the zkSync 2.0 testnet, more than 5,000 funds have been launched on DOMANI and we look forward to launching on the zkSync mainnet as soon as possible.