Is zkSync Era (ZK) a Good Investment? A Comprehensive Analysis with Fundamentals and Charts

smart zkSync Era investor

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Key Points:

ZKSync Era, a Layer-2 scaling solution for Ethereum, offers improved scalability, lower transaction fees, and a developer-friendly environment. (Check out our Layer-2 guide.)
ZKSync recently introduced its native token, ZK, leading to a rush of airdrop farming and subsequent rapid selling.
Although the team at ZKSync, Matter Labs, has a strong industry background, both fees and user numbers have decreased significantly.

The Origin of ZK:
Vitalik Buterin, Ethereum co-founder, identified scalability challenges early on as the network grew in popularity, facing congestion and high fees. In response, he explored various scaling solutions, focusing on zero-knowledge proofs for transaction verification without disclosure.
In 2018, Buterin proposed ZK-rollups, an enhanced version of the rollup concept, leveraging zero-knowledge proofs to verify transactions off-chain and submit a compressed proof to the Ethereum mainnet. This process significantly boosts transaction throughput.
Buterin’s consistent support for ZK technology over the years has been instrumental in advocating its potential to address Ethereum’s scalability issues. This vision inspired Matter Labs to develop ZKSync Era (ZK).
What is ZKSync Era?
ZKSync Era is a Layer-2 scaling solution utilizing ZK-rollups to streamline Ethereum by batching multiple transactions into a single verification process without compromising privacy or security.
Key benefits for investors include:

Scalability: ZKSync Era can significantly enhance Ethereum’s transaction throughput, potentially processing thousands of transactions per second.
Cost-efficiency: By handling transactions off-chain and submitting compressed proofs to the Ethereum mainnet, ZKSync Era substantially reduces transaction fees.
EVM compatibility: Unlike earlier ZK rollups, ZKSync Era seamlessly integrates with the Ethereum Virtual Machine, enabling developers to deploy existing Ethereum applications with minimal adjustments.
Security: ZKSync Era maintains Ethereum’s robust security while enhancing privacy through zero-knowledge proofs.
Ecosystem growth: Leading DeFi protocols like Uniswap, Curve, and MakerDAO are gearing up to deploy on ZKSync Era, indicating a promising ecosystem expansion.
Innovative features: ZKSync Era introduces native account abstraction, allowing users to pay transaction fees in tokens other than ETH for a more user-friendly experience.

ZKSync Era, as a potential disruptor in the Layer 2 market, could play a pivotal role in accommodating Ethereum’s growing demand while ensuring low fees and high security.
ZK Key Metrics:
ZKSync Era boasts approximately 265.44k daily active users, 1.34 million weekly users, and 3.4 million monthly users. However, user growth has declined since March 2024, likely due to airdrop farmers during the June 2024 activities.

Revenue and fees: ZKSync Era generates revenue from off-chain and on-chain fees. While off-chain fees are fixed at around $0.01 per transaction, on-chain gas fees are charged to senders and used to reward block producers validating transactions on the network.
Despite a promising start in early 2024, ZKSync Era’s fee revenue suffered a setback after Ethereum’s March Dencun upgrade, following a broader trend of decreased fee revenues post-upgrade for Layer-2 solutions.
On-chain transactions: By March 2024, ZKSync Era processed 1 million transactions within 24 hours, with over 409 million transactions by June 2024. Ethereum’s Dencun upgrade also saw an uptick in bridge deposits supporting ZKSync over other solutions.

The Team:
Matter Labs, the force behind ZKSync Era, boasts a team of skilled engineers, researchers, and technical experts with significant industry experience. Co-founder and CEO Alex Gluchowski holds a Master’s in computer science and has served in various tech roles before founding Matter Labs.
Notable team members include chief product officer Steve Newcomb, a co-founder of Loudfire, and company president Nana Murugesan, formerly of Coinbase. With such a talented team, the vision of ZKSync Era appears on track for success.

Launched in June 2024, the native token ZK serves as governance within the ZKSync Era network. With 21 billion ZK tokens in supply, distribution includes an airdrop, allocations for ecosystem initiatives, governance, team members, and investors.
While ZK token prices dipped post-launch, upcoming platform upgrades and ecosystem growth could impact its price trajectory. Additionally, market trends and regulatory developments will influence ZK’s future.

Investor Outlook:
ZKSync Era offers a compelling investment opportunity in Ethereum’s Layer-2 ecosystem, addressing critical scalability issues and paving the way for wider adoption of Web3 apps. Its growing ecosystem, partnerships with major DeFi protocols, and innovative features signal strong potential for future growth.
Investors should remain cognizant of challenges faced by Layer-2 solutions post-Ethereum’s Dencun upgrade, impacting fee revenues. To make informed decisions, refer to our Investor’s Guide to Layer-2s and assess the risks and benefits of investing in L2 solutions.
This analysis aims to enhance investor understanding; it does not constitute financial advice. The future may differ from the past, and all investments carry risks. Learn about our investment strategy for risk management through diversification. Invest wisely and view losses as learning opportunities.

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