The encryption economy is not just a technological revolution

The periodic fluctuations and extreme volatility in the encryption economy make it difficult for many practitioners and enthusiasts to adapt. During a bull market, ordinary people may achieve returns of tenfold or even a hundredfold, but in a bear market, they may also suffer significant losses. No matter who it is, once entering this field, investment knowledge is a required course.

The main reason for the current bear market is the tightening of funds caused by the Federal Reserve's interest rate hikes. The yields of mainstream lending protocols have fallen below 2%, while the yield of real-world U.S. Treasury bonds has exceeded 3%. This has prompted institutional investors and stablecoin projects to transfer funds to purchase government bonds.

Since the 1980s, the Federal Reserve has experienced six interest rate hike cycles, each lasting 1-3 years, with an average of 10 rate hikes. A slow rate of increase often yields poor effects and struggles to curb inflation. The sixth rate hike from 2015 to 2018 was relatively slow, leading to a rise in raw material prices, primarily driven by crude oil, rather than a decrease. After October this year, crude oil prices continue to rise, which may prompt the Federal Reserve to maintain a strong interest rate hike policy. In 2023, the global stock market and encryption market may continue to be under pressure due to institutional fund withdrawals, and the bear market bottom has not yet arrived, making it unwise to easily catch the bottom.

The Prospects of Ethereum zkRollup Scalability Solutions

Setting aside the large cycles of the capital market, from the perspective of the transformation of encryption technology and the potential wave of Web3.0, Ethereum and its zkRollup scaling solutions, especially those based on the new generation zkEVM solutions, demonstrate tremendous potential.

After the Ethereum merge, scalability has become the next key goal. zkRollup achieves scalability by bundling a large number of transactions and verifying all transactions in a single task. Compared to Optimistic Rollup, zkRollup uses zero-knowledge proof technology, which has more technical advantages.

However, the EVM was not designed to support zero-knowledge proofs, making it difficult to build a virtual machine that is compatible with Solidity and supports zero-knowledge proofs. To address this issue, several teams are developing zkEVMs that support zero-knowledge proof computations and are compatible with Solidity.

Redesign of zkEVM

The existing zkEVM systems still face efficiency issues in production environments, with handling a small number of transactions potentially taking tens of minutes. By optimizing the zkEVM architecture, efficiency can be significantly improved. The key lies in adopting a well-designed layered structure, compressing redundant space and polynomial size in the circuit, thereby reducing the time required to generate proofs.

Faster Zero-Knowledge Proofs

The speed of zero-knowledge proofs is the bottleneck of zkEVM. STARK is faster than SNARK, but still not as good as the latest FOAKS technology. FOAKS achieves linear proof time and sub-linear verification time, reaching theoretical extremes. It does not require a trusted setup and maintains the highest level of security.

The Necessity of Independent Data Availability Layers

The current zkRollup primarily focuses on reducing the computational burden of validating transactions. However, Ethereum nodes still need to store the original transaction data, which may become a new bottleneck. Establishing an independent data availability layer can prevent smart contract freezes caused by failures of zkRollup servers or Ethereum nodes, and further reduce the transaction costs of zkRollup based on zkEVM.

With the development of these technologies, the Ethereum ecosystem is expected to achieve more efficient and secure scalability, laying the foundation for large-scale applications in the future.