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Trade Ethereum tokens with low commissions thanks to ZK-Rollups

Key facts:

To operate on ZKSwap it is required to use a wallet compatible with ZK-Rollup.

It has security audits, although that does not guarantee that it is invulnerable to attacks or failures.

The decentralized exchange ZKSwap, which allows the exchange of tokens developed on the Ethereum blockchain, has been in operation since February 14, 2021. Its particularity is the incorporation of ZK-Rollups, a second layer solution that favors scalability and eliminates The commissions.

ZKSwap allows exchanges between 30 ERC-20 tokens, among which are DAI, Tether (USDT), Binance Coin (BNB), Chainlink (LINK) and UNI.

Just four days after its launch, the liquidity providers of this exchange have already deposited tokens for a value greater than USD 70 million. More than half of this capital (USD 38 million) is within the WBTC / ETH pool, which allows the exchange between the tokenized version of bitcoin and ether (ETH), Ethereum’s native currency.

The exchanges made so far on ZKSwap They were more than 25,000, worth close to USD 19 million.

Uniswap: a significant development, but with drawbacks

In its white paper, ZKSwap highlights the “significant development” it has had the decentralized exchange (or DEX) Uniswap. This, together with Curve Finance (which specializes in stablecoins), leads the ERC-20 token exchange market.

Even so, ZKSwap recognizes that Uniswap, like other DEXs, has drawbacks, mainly that of the high commissions in Ethereum. It also refers to the fact that you have to wait at least one block for each transaction to be confirmed; and to the limit of transactions per second (TPS) that the blockchain supports.

In order to find a solution for this, those responsible for this new exchange incorporated the ZK-Rollups. As defined by CriptoNoticias, “in a nutshell, a ZK-Rollup is a scalability solution that allows many transactions to be” rolled into one to facilitate their confirmation on the network. “

He mentions the exchange’s whitepaper, on ZK-Rollups: «This solution allows all exchanges to run at layer 2 and thus real-time operations are achieved with zero gas commissions, unlimited scalability, eliminating Ethereum’s TPS restriction and blocking the confirmation time ».

It is worth clarifying that, according to the developers of ZK-Rollup, commissions are not completely eliminated, although they are significantly reduced. This is somewhat analogous, in that sense, to what happens with the Bitcoin Lightning network.

Unlike other decentralized exchanges, ZKSwap cannot be traded directly from regular wallets like Metamask. As they are based on a second layer of Ethereum, assets must first be transferred to a wallet compatible with this technology.

In the absence of compatible developments, the exchange provides the user, on the platform itself, with a web wallet: the ZKSwap wallet layer2. The tokens to be used must be deposited there. It is important to clarify that this deposit transfer, because it is made on the main Ethereum network, will pay commissions like any other.

ZKSwap provides the user with a web wallet to interact with ZK-Rollup. Source: zks.app.com

As reported on the web, within that wallet, “assets are managed by decentralized smart contracts.” «[Los fondos] you can control them independently through your private key, which is secure and reliable ”, says the app, adding that“ assets can be withdrawn to the layer 1 wallet at any time ”.

The platform omits to warn that using web wallets involves a certain risk and operating with smart contracts increases the danger of loss of funds, either by code errors or by hacks. This should be taken into account by the person who, despite everything, wants to use ZKSwap.

The application is audited by ABDK, SlowMist and Certik. This last company was responsible for the audit of Akropolis and bZx, two decentralized finance platforms that were hacked during 2020, after having received security certification.

Thus, it is clear that audits do not necessarily guarantee the security of a platform. In particular, decentralized exchanges are often targeted by hackers. Due to the high amounts that these protocols keep in their vaults, attackers look for ways to violate security measures and, on many occasions, they succeed.

“A big boost for the DeFi ecosystem”

“We believe that AMM-based Layer 2 decentralized exchanges [mercados de dinero automatizados, por sus siglas en inglés] they represent a completely new stage in the development of these platforms, ”said Alex Lee, Head of Development at ZKSwap. For him, this novelty “will be a great boost for a complete ecosystem of DeFi in a second layer.”

DeFi platforms, the Anglo-Saxon acronym by which decentralized finance is known, are mostly built on Ethereum. The high commissions in this blockchain make it difficult for those who want to participate with a small capital to enter. Indeed, as Lee argues, implementations like ZK-Rollups could change this situation.

At the same time, other blockchains strive to grab the attention of users and developers DeFi to get them out of Ethereum. One of them is the Binance Smart Chain, developed by the centralized exchange of the same name, with the DEX PancakeSwap as a featured product. DeFi developments have also emerged in RSK, the bitcoin sidechain devised by IOVLabs. Among them are projects such as Money On Chain and Sovryn.