zkRollups Explained - Slashing fees to $0.003 per trade with Loopring

zkRollups Explained - Slashing fees to $0.003 per trade with Loopring

By Li_KungFu | BitGuy | 12 May 2020

The latest scaling innovation to be realized on Ethereum 1.0 is zkRollups, a sophisticated layer-2 scaling solution that increases scalability through the bundling of transfers into a single transaction.

zkRollups, (‘Zero-Knowledge’ Rollups), increase the number of transactions per second/throughput of the Ethereum blockchain network while reducing network fees.

The first implementation of the zkRollups scaling solution is on Loopring’s V3.0 decentralized exchange protocol, a DEX protocol that could revolutionize the way decentralized exchanges (DEXes) operate going into the 2020s.

zkRollups developed from just an idea written by Vitalik Butterin in 2018, to a viable working scaling solution implemented by Loopring. 

How do zkRollups work?

zkRollups bundles thousands of transfers into a single transaction where a Rollup smart contract then deconstructs and verifies all of the transfers held in a single transaction. It does this by using succinct Zero-Knowledge Proofs (SNARKs), which mass-validate the transactions by publicly recording the validity of the block on the Ethereum blockchain.

To break things down further, there are 2 main ingredients to zkRollups:

  • Zero-Knowledge Proof
  • Rollup

Zero-Knowledge Proof 
The “Zero-Knowledge Proof” aspect of zkRollups is needed to reduce the amount of data held in a transaction so that computing and storage resources for validating blocks are significantly reduced.

The “Rollup” aspect, refers to the layer-2 scaling solution in which thousands of transactions are bundled up (rolled up) together in a single Rollup block. This aspect also includes a mainchain smart contract in which data is recorded into two merkle trees that keep a record of accounts, balances, and their states.

How zKRollups Developed by Loopring is a game changer

Loopring’s zkRollups scaling technology is the most promising layer-2 scaling solution implemented on Ethereum today. 

Without working in tandem with other scaling solutions, zkRollups can be used to boost Ethereum’s current transactions per second (TPS) from ~15 to ~2000. With the Loopring 3.0 DEX protocol, this increase in TPS has already been realized today.

DEXes built atop of Loopring 3.0 can currently settle up to 2,025 trades per second while guaranteeing the same level of security as the underlying Ethereum blockchain. Not only that, but transaction costs have been slashed to $0.003 at the Loopring Exchange

This increase in TPS and reduction in tx fees is quite a substantial feat, which has led Vitalik Buterin to repeatedly endorse Loopring’s protocol and its implementation of zkRollups.

In response to a few Twitter users, Vitalik highlighted Loopring’s current transaction performance and confirmed that if zkRollups is combined with sharding – a scaling solution that splits the Ethereum network into multiple portions called “shards” – then the network could theoretically reach 160k transactions per second.

And this is exactly why zkRollups implemented on Loopring DEXes is such a big deal. For the first time ever, we finally have non-custodial decentralized exchanges (Loopring DEXes) that can match the performance of custodial competitors. 

The zkRollups scaling solution could revolutionize the way exchanges operate going forward and as we move through 2020 and the rest of this decade, I think we can expect to see many more game-changing DEXes created with Loopring’s DEX protocol.

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