By Kevin Liu, ZKM Co-Founder and CEO
Network effects, as defined by Andrew Chen(a16z) in the book, The Cold Start Problem, describes what happens when products get more valuable as more people use them. As a founder of a hardcore infrastructure project building a general-purpose zkVM to unify liquidity across blockchains, how to achieve network effects for a lower-layer infra project is what I think about all day and night.
2B or 2C?
A lot of investors have asked me the same question: how can a zkVM capture value? It’s a valid question, given 1) there are many different types of zkVM on the market; 2) eventually the code will all become open-source.
Like ZKM, industry peers such as RISC Zero, SP1, and Jolt have made great progress in the past year, with performance benchmarks that have constantly improved. One major differentiator is that unlike RISC Zero and SP1 which mainly target Rust, ZKM offers native support for Golang. Choosing Rust or Golang for a project, especially an infrastructure project, is always a dilemma for developers. Lots of application chains choose Golang for its developer-friendly and thriving ecosystem. For instance, Optimism’s mini-geth and Cosmos SDK are two of the most widely used toolkits written using Golang.
ZKM chose Golang as its first front-end, allowing Golang developers to compile their Golang code into MIPS instructions with the vanilla Golang compiler, and then prove its correct execution with ZKM’s proof network. In this network, a single prover can prove 5.4K instructions per second based on the current benchmark measurement on CPU. On GPU, the speed can accelerate up to 3-5x faster.
Rust, with its rigorous type system and memory-safe design, is being increasingly adopted by infrastructure projects, and the MIPS instruction scale produced by Rust for the same logic is about 6-8x less than Golang. With that said, ZKM’s roadmap includes future Rust support too.
We have seen increasing demand from many partners looking for collaborations, thanks to the strength of our tech stack. Still, to achieve network effects, a company must do more than build great tech; it must also excel at business development, engaging with and encouraging potential partners to build on top of its stack. Our zkVM’s success will depend on how much usage it sees and how well it is adopted – in short, any company’s success depends on the power of its entire ecosystem.
Nonetheless, the key remains differentiation. If numerous players adopt a similar strategy, how can your company differentiate itself and capture its own value?
Optimism provides an insightful case study. If you study the success path for the OP stack, it’s not that the OP stack was perfect from day one – nor were the numerous superchains that use it built immediately. Instead, it was the success of the Optimism L2 that drove the adoption of the OP Stack and attracted the superchains, leading to the future capture of significant value. In the Web3 world, you need to build a killer use case first. That killer use case becomes a powerful showcase not only for your tech, but also product-market fit, community engagement, go-to-market strategy, tokenomics, and many more factors combined that decide a project’s success or failure.
In this highly competitive environment, I don’t believe there are real barriers blocking a competitor from entering your territory and winning market share. Rather, competition is always dynamic. The keys to success are thus the flexibility and adaptability of your tech stack.
With that in mind, we choose to be flexible and adaptable. We choose to build and support a major use case to drive adoption of our stack. We will build our own showcase.
Where to start?
ZKM has published its Entangled Rollup LightPaper, which details the interoperability mechanism we’ve designed to connect with every chain, to unify the blockchain world’s fragmented liquidity. This Entangled Rollup architecture has so far succeeded in supporting verification between Ethereum Layer 1 and Ethereum Layer 2 networks. So which network comes next?
The answer to that question should offer a large amount of asset value, with a strong demand to connect with other ecosystems to generate yield. Major bonus points for a network that is well established and highly influential.
Given all of those criteria, the answer becomes obvious: Bitcoin.
The Bitcoin network does offer a notable challenge, in that it does not support smart contracts. But our Entangled Rollup is designed to roll up the state to the ZKM network and relay the proved state to other ecosystems; we will use the same methodology to help extend BTC. From BTC’s perspective, at this initial stage, the ZKM network acts similarly to a Bitcoin L2.
How will a zkVM-powered BTC L2 be different?
According to L2.watch, there are more than 100 BTC L2s launched or about to launch. So how will ours stand out?
As we are supporting this BTC L2 with the entire Entangled Rollup framework and from the zkVM level, we can offer both Native Security and Sustainable Yield as the key features of this network.
1). Native Security
When I talk to Bitcoin holders and miners, almost all of them ask the same question: how can you guarantee the security of my assets?
The security assurances of a BTC L2 can be determined by two factors. First, assets on L1 should be controlled by the native BTC Multisig script, where any dishonest behaviors would prevent the cheater from unlocking their pledged or deposited assets as long as at least one honest party is active. Second, the L2 transaction inclusion and finalization can inherit BTC’s security standards, which indicates that the sequencer should be decentralized and the execution of the L2’s transaction batches can be verified by BTC script.
ZKM introduces an Optimistic Challenge Process mechanism, abbreviated as OCP, to achieve these security needs. When a user’s assets are deposited to L2, they’re locked into a pre-signed n-of-n Multisig script, where the signers can be any authorized and neutral third parties, or auditors. Then, the Multisig’s redeem script should be activated after a designated challenge period. Then, the signer sends the target user the assets in advance, initiating the challenge phase.
During the challenge phase, the signer pre-signs a transaction that includes both a challenge script and an asset script. To initiate a challenge script, a challenger can pay an input UTXO to start a challenge, requiring the operator to attempt to open its commitment by providing the intermediate computation trace to the asset script.
If the commitment cannot be successfully opened, the verifier receives all of the assets after the challenge period ends, or loses the challenge asset to the signer.
The execution traces are committed via a TapTree, where each leaf of the tree represents an intermediate value. Each intermediate value is calculated using a one-time signature, with the previous value as its input. Using this method, the BTC script can directly perform this calculation and complete the on-chain asset verification.
OCP is thus able to provide native security to any off-chain computation, such as securing the L2’s transaction inclusion in the sequencer network.
2). Sustainable Yield
Regarding yield, most Bitcoin holders are looking for sustainable and stable revenue, rather than the short-lived return of points/airdrops. For the ZKM empowered BTC L2, the introduction of decentralized sequencers into the framework to batch transactions for L2 provides inherent native security, so it is quite natural that these sequencer nodes (with BTC whitelisting) should be rewarded for their contribution.
This upcoming BTC L2 reserves 40% of its lifetime token supply for the mining pool, dedicated to Sequencer Nodes Mining, Liquidity Staking Mining and Proof Network Mining. This ensures that sequencer nodes gain a continuous, sustainable yield from the mining pool, in addition to earning gas revenue from every batch they process. There are also potential MEV opportunities for sequencer nodes, as they are the fastest entities when it comes to processing batch transactions for L2. Thus, the revenue and benefits of this BTC L2 belong to every participant on the network, whether they are node operators, stakers, or users. In addition, BTC L1 miners will benefit from the additional L2 transactions being submitted to L1.
Facing the Future
Our ultimate goal is to unify the segmented liquidity across multiple ecosystems. Having first established connections with the Ethereum and Bitcoin networks, our next targets will include other major networks, such as Cosmos, Ton, and many more.
I see this approach as a model for how a low-layer infrastructure project should fundamentally think and operate. There might be growing pains along the way. But we will learn from our experiences, and offer the best guidance we possibly can.