A quick look at the expansion plan of Ethereum ZK Rollup Hermez, which will focus on high-frequency transfer scenarios

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Recently, Vitalik Buterlin, the co-founder of Ethereum, published an article. He believes that Ethereum needs to fully advance Layer 2 technology Rollup before fully entering 2.0 to improve the scalability of the network.

Written by: Pan Zhixiong

As the most potential expansion solution of Ethereum, ZK Rollup, in addition to Matter Labs and Loopring teams that have already launched the mainnet, Aztec and iden3 have also recently released the latest developments, and iden3 is the first time that the Hermez project white paper .

The difference between Hermez and several other ZK Rollup implementations is that their solutions will focus on the specific scenario of “transfer”, and completely abandon the general ZK Rollup technology, because the general ZK Rollup technology is not only difficult to implement in engineering. , Developers may also face secondary development, or learn a new programming language.

They believe that more than 50% of the transactions on the Ethereum main network are transfers, and a large part is the deposit and withdrawal of exchanges. Therefore, if this part of the gas consumption and chain resources can be optimized, the gas price can be greatly reduced. More complex smart contracts on the chain make room.

And from the perspective of improved performance, iden3 is also confident to increase the TPS of the Ethereum main network by two orders of magnitude, reaching the average level of the Visa network. At present, the TPS of Ethereum is about 15 and the average level of Visa network is about 2000 TPS.

At the same time, the Hermez project will also release the token HEZ for the first time as a means of payment for node bidding. The higher bidder will become the node operator (officially called the coordinator or coordinator) for the next round of packaged transactions. The network provides services, and they call this set of mechanisms “Proof-of-Donation.” In order to start the initial liquidity of HEZ tokens, the project team also plans to carry out incentive activities such as liquidity mining.

In the part of token economics, Hermez has not provided very detailed content. “HEZ is used to bid to become a coordinator. The tokens paid for successful bidding will be donated, destroyed or used to incentivize the use of the network. This is currently The only economic design within the core protocol.” In addition, iden3 also stated in the white paper that Hermez is a completely open source and community-driven project.

Why is ZK Rollup worthy of attention?

Recently, Vitalik Buterlin, the co-founder of Ethereum, published an article. He believes that Ethereum needs to fully advance Layer 2 technology Rollup before fully entering 2.0 to improve the scalability of the network. So you can even call the Rollup strategy Phase 1.5. And after ETH 2.0 is fully online (a few years), Rollup can also bring further improvements to the performance of the mainnet.

Rollup is the general term for the latest generation of expansion plans after Plasma and State Channel. In terms of specific plans, it will be divided into ZK Rollup and Optimistic Rollup. ZK Rollup uses cryptographic techniques such as zero-knowledge proof to ensure the security of the network and data, while Optimistic Rollup uses “fraud proof” similar to Plasma to ensure network security with a game mechanism.

“If you want to fully understand Rollup’s past and present and technical advantages, I suggest reading this: Ethereum’s most popular main solution for expansion, Rollup Study Guide

However, under the expansion concept of ZK Rollup, there are also different implementation methods of each team. At present, the fastest development progress is the domestic Loopring protocol and overseas Matter Labs’ zkSync two sets of solutions, which have been deployed to the Ethereum main network. . Loopring protocol cuts from the exchange scenario, and Matter Labs’ goal is to achieve a more general two-layer network, so at the same time, it also invented the smart contract programming language Zinc based on zero-knowledge proof, although it is not Turing complete.

Recently, the privacy technology solution Aztec also launched version 2.0, which is a ZK Rollup expansion solution that pays more attention to privacy. It also launched the privacy smart contract programming language Noir. Currently Aztec 2.0 has been launched on the Ethereum testnet.

The original intention of iden3 to develop ZK Rollup is to use it in the special scenario of “identity authentication”, so it can be regarded as a dedicated expansion solution. However, the Hermez launched by the team this time has changed its direction and will focus on the certain scenario of money transfer instead of identity or other more general applications.

How to achieve Visa-level transaction throughput?

According to some public information, since several R&D institutions of ZK Rollup are based on the same conceptual framework, the performance of expansion is similar, and the throughput can be increased by about two orders of magnitude. Therefore, various project parties also said that this may be comparable to the average value of the Visa network.

A quick look at the expansion plan of Ethereum ZK Rollup Hermez, which will focus on high-frequency transfer scenarios

ZK Rollup can achieve such an improvement, the main reason is the compression of transaction data. The package transaction and verification transaction method are realized through zk-SNARK technology, which can greatly reduce transaction costs, ensure security, and solve the problems encountered by Plasma before.

A quick look at the expansion plan of Ethereum ZK Rollup Hermez, which will focus on high-frequency transfer scenarios

According to calculations in the Hermez white paper, compared to the Ethereum mainnet transaction requiring more than 109 bytes, the “compressed” ZK Rollup transaction only requires 8 bytes. Reducing the amount of data for each transaction can also increase the overall transaction throughput of the network.

A quick look at the expansion plan of Ethereum ZK Rollup Hermez, which will focus on high-frequency transfer scenariosComparison before and after transaction data compression

Proof of donation

For the Layer 2 network, there is generally a role of node/operator/coordinator/verifier, and it is generally responsible for processing transaction data and verifying and packaging. It is the supporter and maintainer of this two-layer network. Hermez calls this role a “coordinator” (coordinator).

In Hermez’s solution, a mechanism called “donation proof” is used to screen the coordinators, and each winning coordinator has the right to publish a Rollup transaction to the Ethereum mainnet next time.

A quick look at the expansion plan of Ethereum ZK Rollup Hermez, which will focus on high-frequency transfer scenarios

It is divided into two stages. The first step is bidding, using Hermez’s native token HEZ to conduct auctions, and the person with the highest bid within a limited time becomes the coordinator of the next round.

The second stage is “donation”. The HEZ bid by the winning coordinator will be invested in a smart contract, and then the contract will divide these HEZs into three parts:

  • 30% burn: This part of HEZ will be permanently removed (this means that HEZ tokens are deflationary);
  • 40% donation: This part of the HEZ will be transferred to the donation account, and these donations may be provided to the developer funding platform Gitcoin or other donation platforms for second-party donations;
  • 30% reward: This part of the HEZ will be used as an incentive for the Hermez network to increase network adoption.

Token distribution

Hermez will issue 100 million HEZ tokens with an initial circulation rate of 8.25%. among them,

  • 65% is allocated to incentive measures or strategic partners;
  • 20% is allocated to the founder of Hermez;
  • 15% is allocated to the Hermez development team.

A quick look at the expansion plan of Ethereum ZK Rollup Hermez, which will focus on high-frequency transfer scenarios

The tokens of the team and founders can take up to 3 years to fully unlock, and the tokens of other parts can be fully unlocked in 2 years.