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60% of ZKSwap tokens will be allocated to community mining, including Gas fee providers, liquidity providers, zero-knowledge proof service providers, and transaction mining participants.
Original Title: “ZKSwap Economic White Paper”
Written by: ZKSwap
ZKSwap is the first Layer 2 automatic market maker model decentralized exchange based on ZK Rollups technology. Currently, trust-free and free Layer 2 payment and transfer (ZKPay) are fully implemented on Ethereum Layer 2, as well as free and fast on Layer 2 Swap trading experience (ZKSwap) that can be expanded infinitely.
In ZKPay, we provide a complete Layer 2 solution that can support all ERC20 free, real-time, and final TPS transfer experience exceeding 2000. The follow-up plan focuses on supporting all stable coins and using ZKPay’s transfer service.
In ZKSwap, users can transfer existing assets on Layer 1 (including ETH and ERC-20 Token) to the ZKSwap contract, and complete all transfers and transactions in Layer 2. The funds on ZKSwap Layer2 have the same security as Ethereum Layer1, transactions can be completed in real time (no need to wait for a block confirmation), no additional gas fees are required, and almost unlimited scalability, getting rid of Ethereum The limitation of TPS and block confirmation time will surely bring about great changes to all existing DEX and CEX.
However, to achieve the above-mentioned secure, real-time, zero-gas, and scalable decentralized exchanges, a complete set of Token economic incentive mechanism is required to enable all participants in the ecosystem to jointly maintain the operation of the ZKSwap system: On the one hand, Tokens need to be allocated appropriately In order to give full play to the initiative of project parties, developers, investors and community participants, the ZKSwap system can start smoothly and achieve long-term development; on the other hand, it needs to provide for liquidity providers and gas fees. And zero-knowledge proof service providers to provide incentives to achieve zero-gas real-time transactions and improve system security and scalability.
ZKS is an ERC20 token, as the ZKSwap protocol Token, it is the most important factor that motivates the normal operation of the ZKSwap system, and is also a certificate for users to participate in governance, currency listing, transaction verification and repurchase. This article will describe the ZKS Token economic model in detail.
ZKS Token distribution and unlocking
ZKS Token distribution
ZKS ( contract address ) is the protocol token of ZKSwap, with a total of 1 billion ZKS. The distribution ratio of Token is as follows:
(ZKSWap token symbol: English: ZKS, Chinese: Zero Zhidui, nickname: Lingzhi)
Community mining 60%
A total of 600 million ZKS, 50% distributed in the first 3 years, and the remaining 10% long-term incentives, of which:
- 20% of the total amount of tokens distributed in the first year, 15% in the second year, 15% in the third year, and 10% in the fourth year and beyond;
- Distribution method: 1. Proof-of-Liquidity-Mining (15% of total tokens); 2. Proof-of-Gas (10% of total tokens) by paying gas fees; 3 、Zero-knowledge proof mining Proof-of-ZK-Snarks (15% of total tokens) 4. Transaction is mining (10% of total tokens) Proof-of-TransFee 5. Smart contract Staking lock-up mining Mine (10% of total tokens).
ZKSwap team 15%
A total of 150 million ZKS will be locked for one year since it was launched, and will be distributed from the second year. 5% of the total tokens will be distributed every year until the end of the fourth year.
Potential Series A investors 5.3%
A total of 53 million ZKS, the community governance decides whether to start fundraising one year after the project goes live: if the A round of financing is opened, the corresponding Token will be locked for 3 months and then unlocked in 12 months; if the financing is not opened, it will be The community votes for governance to determine the specific use of Token, or directly destroy it.
Initial liquidity 4%
A total of 40 million ZKS will be used to provide initial liquidity (ZKS-USDT) on Uniswap and Gate.io at 3 pm on January 6, 2021, Beijing time. The initial liquidity ratio is 40,000,000 ZKS / 3,000,000 USDT. Among them, Uniswap and Gate.io each accounted for 50% of initial liquidity.
Developers and ecological incentives 8%
A total of 80 million ZKS will be distributed every year, 2% will be distributed in 4 years.
Angel investor 6.7%
A total of 67 million ZKS, 30% will be released after going online on mainstream centralized exchanges, and the remaining part will be locked for 3 months after going online, and then distributed in 6 months.
A total of 10 million ZKS will be distributed over three years, with an annual distribution of 0.33%.
ZKSwap is a community-based decentralized transaction protocol, so most of the protocol token will be generated by mining and distributed to community participants who maintain the operation of the system. Community mining accounts for 60% of the total supply, of which liquid mining accounts for 15%, gas fee mining accounts for 10%, zero-knowledge proof service mining accounts for 25%, and transaction or mining accounts for 10%. %.
Developers are the most important participants in the ZKSwap ecosystem and are responsible for building various infrastructures. The official ZKSwap team is responsible for maintaining the ZKSwap project and will receive a total of 15% of ZKS Tokens within four years. Community developers and other members provide services and peripheral products for ZKSwap users, so they will receive a total of 8% of ZKS Token within four years, part of which is used for early airdrops and incentives for community members participating in early testing.
4% of the total amount of ZKS Token will be traded on ZKSwap, Uniswap and other decentralized trading platforms within the first year of the mainnet launch, providing initial liquidity of ZKS.
In addition, the ZKSwap project has reserved a total of 13% of ZKS Tokens to attract angel investors, potential Series A investors and legal/exchange/media consultants to participate in ecological construction to help the project achieve further development.
Token unlocking rules
ZKS Token unlocks most of the tokens within 4 years after its launch, and provides long-term incentives to the system after 4 years. The specific time nodes are as follows:
33.03% circulation in the first year
Mining 20% + angel investors 6.7% + initial liquidity 4% + ecological developers and ecological incentives 2% + consultants 0.33%.
59.32% in circulation in the second year
In the first year 33.03% + 15% for mining + 3.95% for round A investors + 5% for the team + 2% for ecological developers and ecological incentives + 0.33% for consultants.
83% circulation in the third year
In the first two years, 59.32% + 15% for mining + 1.35% for round A investors + 5% for team + 2% for ecological developers and ecological incentives + 0.33% for consultants.
90%+ in circulation after the fourth year
83% for the first three years + 5% for the team + 2% for ecological developers and ecological incentives + long-term mining incentives (proportion to be determined).
ZKS community mining
From the above-mentioned ZKSwap Token system, it can be seen that 60% of ZKS Token will be allocated to the “miners” participating in community mining, that is, Gas fee providers, liquidity providers, and zero-knowledge proof service providers, as well as transactions that Participants in mining. They are the main contributors to ensure the correct operation of the system, to achieve zero gas fees, scalability and real-time transactions. The three types of participants will obtain mining revenue through three proofs of PoG, PoL and PoZK. In addition, all users who trade on ZKSwap can get ZKS rewards through the PoT mechanism.
All transactions in ZKSwap Layer2 need to submit proofs to Ethereum Layer1 to ensure security. In the process of interacting with Ethereum Layer1, a certain amount of Gas fee needs to be consumed. In other ZK-Rollups-based systems such as zkSync, this part of the Gas cost is often borne by the user.
ZKSwap proposed Proof-of-Gas (POG), a proof mechanism based on Ethereum Gas consumption, making it possible to pay for Gas on behalf of the company. The gas fee to the provider can deposit any amount of ETH in the ZKSwap payment contract, and the user helps all ZKSwap users to provide the gas fee for submitting the certificate; in return, the gas fee provider will receive the corresponding amount according to the contribution fee ZKS Token.
The PoG mechanism is implemented in the form of smart contracts. When the ZKSwap mainnet is launched, a smart contract for paying gas fees will be released at the same time. Any user can recharge ETH to the smart contract and make a pledge (Gas deduction commitment). The ZKSwap system The ETH in the smart contract will be used to pay ordinary users the gas fee for submitting a certificate to Layer1. In the first three years of ZKSwap’s mainnet launch, a total of 10% of the total ZKS tokens will be used for PoG mining rewards (4% in the first year, 3% each in the second and third years, totaling 100 million ZKS). 109589 ZKS is distributed to PoG miners every day for the first year. The specific rules are as follows: Suppose that all ZKSwap users consumed 50 ETH as gas fees on that day, and the PoG smart contract locked a total of 500 ETH. If a PoG miner recharges 1 ETH, the smart contract will cost the PoG miner 1ETH / 500ETH*50 ETH = 0.1 ETH on the same day, and at the same time get 0.1ETH / total system consumption 50ETH *109589 ZKS = 219.18 ZKS. Note that the daily gas cost is determined by the actual transactions in the system and the degree of congestion in the Ethereum network, and the ETH locked in the PoG contract will change at any time, so the ratio of ETH invested to ZKS is not fixed.
All ETH locked in the PoG contract can only be used to pay for the gas required by the ZKSwap system, and will not be used for any other purposes. The PoG contract address will be released when the mainnet goes live, and the security audit results will be announced.
Adequacy of liquidity is a key factor affecting the ZKSwap trading experience. Therefore, 15% of the ZKS Token in the system will be rewarded to ZKSwap liquidity providers through Proof-of-Liquidity-Mining (POL liquidity-based distribution mechanism) . Among them, 6% was distributed in the first year, 4.5% in the second and third years, and a total of 150 million ZKS in the three years.
ZKSwap liquidity mining is expected to start about 2-3 weeks after its official launch. It is similar to Uniswap’s liquidity mining mechanism. For some specific trading pairs, customers who provide liquidity will be rewarded and ZKS will be distributed. The liquidity provider of the ZKSwap Layer2 fund pool can obtain a corresponding proportion of ZKS Token by virtue of the LP Token of the corresponding fund pool. The fund pool and reward ratio of the initial support will be announced at the same time when the mainnet is launched. The subsequent funding pool rewards will be jointly decided by the community.
All transactions in Layer 2 of the ZKSwap system need to generate zero-knowledge proofs and submit them to Ethereum Layer 1, so a lot of calculations are required. Zero-knowledge proof service is the most important guarantee for the security and scalability of ZKSwap. In the early days of the project, ZKSwap officially deployed a large number of high-frequency AMD CPU servers to generate zero-knowledge proofs. However, in fact, whether it is an official deployment or a user deploys the certificate generation node, as long as the certificate is submitted to Layer 1 on time, the security of the system will not be affected. In theory, the more people participate in the proof generation, the higher the TPS of the system, thus realizing safe and real-time transactions.
ZKSwap will open Proof-of-ZK-Snark (PoZK proof-of-work based on zero-knowledge proof) one month after the mainnet is launched to encourage users to contribute their computing power to generate proof. In the first three years, 15% of the total ZKS tokens will be used for PoZK mining rewards (6% in the first year, 4.5% in the second and third years, totaling 150 million ZKS), every day in the first year Distribute 164383 ZKS as PoZK rewards. The specific distribution rules are as follows: Assuming that a total of 10,000 transaction certificates were submitted in the ZKSwap system on the same day, and a PoZK miner submitted 10 of them, the PoZK miner will get 164383 ZKS* (10 certificates / total 10,000 certificates) = 164.383 ZKS as reward. Note that the number of proof tasks assigned to PoZK miners is proportional to the ZKS pledged by the node itself.
The ZKSwap team is also working hard to develop the GPU version certified by Plonk. When it is officially announced, it is expected that CPU and GPU will be supported to participate in the calculation of zero-knowledge proof. Of course, if community members are interested, they can also study the FPGA version certified by Plonk. Even ASIC chips can accelerate ZKSwap’s Layer 2 proof calculation process and improve ZKSwap’s TPS, so that ZKSwap’s trust-free TPS can exceed 100 or 1000 as soon as possible, so that the efficiency advantage of Layer 2 will be dozens or even hundreds of times higher than that of Ethereum. Improved and have the same security as Layer1, it will inevitably lead to a large number of blockchain applications on Layer2. ZKSwap will also become the entrance to Layer2, driving all DeFi infrastructure based on ZKSwap to achieve silky smoothness on Layer2 Experience.
ZKSwap is a new generation of Layer 2 decentralized exchange, and the transaction itself is the core of the entire system. In order to incentivize all users participating in the transaction, ZKSwap introduced Proof-of-TransFee-Mining (PoT, transaction fee certification mechanism), and the transaction is mining. All users who conduct transactions on ZKSwap Layer2 will receive a ZKS Token subsidy based on the amount of daily fee paid. In the first three years, 10% of the total ZKS tokens will be used for PoT mining rewards (4% in the first year, 3% in the second and third years, totaling 100 million ZKS), and 109,589 ZKS will be distributed every day in the first year As a PoT reward. The specific reward rules are as follows: Assuming that all ZKSwap funds pool income is equivalent to $50,000 in handling fees on that day, and a user pays a total of $50 in handling fees, the user can get ($50/$50,000)*109589 ZKS = 109.589 ZKS as a PoT mining reward.
Smart contract staking lock-up mining (PoS)
In order to incentivize long-term holders of ZKS, ZKSwap will also support staking lock-up mining after the mainnet is launched. Staking participation and reward distribution are completed through smart contracts to avoid centralization risks. It is expected that 10% of the total ZKS tokens will be issued through staking lock-up mining (4% in the first year, 3% in the second and third years).
Users participating in staking mining need to lock ZKS to the designated staking smart contract. The contract will automatically calculate the staking reward according to the locked ratio, and the user can retrieve it at any time. In the first year, it is estimated that 109589 ZKS rewards will be issued to Staking locked-up users every day, according to the locked-up ratio. For example, if a user’s effective lock-up amount is 50,000 ZKS on the day, and the total lock-up amount in the staking contract is 50,000,000 ZKS, the user is expected to receive (50,000 ZKS / 50,000,000 ZKS)*109589 ZKS = 109.589 ZKS on the same day. The specific rules and smart contracts for lock-up will be released after the mainnet goes live and will be fully open source.
ZKS usage scenarios
As the native protocol Token of ZKSwap, ZKS not only represents the rights of the holder, but also has practical use value. ZKS can be used in the following scenarios.
ZKSwap is a decentralized project led by the community. ZKS is the certificate of community participation in governance:
Users who hold a certain number of ZKS can initiate upgrade proposals, such as modifying the handling fee, the distribution of liquid mining capital pools, and the ZKS long-term incentive plan;
All ZKS token holders can vote on the proposal, and the proposal will be approved by the majority vote, and the development team is responsible for implementation.
Voting / mortgage
The trading pairs supported by ZKSwap are limited. Except for the transactions initially added by the official team, users who hold ZKS can vote or pledge to list the currency:
Coin holders can initiate a coin listing proposal through the above governance process, and they can list if they get a majority of votes;
For users with a large amount of currency, they can compete for the currency by staking ZKS.
The official ZKSwap team will implement currency listing operations based on the results of voting and pledge. After the listing is complete, all users can create trading pairs or provide liquidity.
ZKS repurchase and destruction
The ZKSwap agreement will charge 0.3% of all Layer2 Swap transactions as a transaction fee. Among them, 0.25% will be automatically allocated to the liquidity provider, and the other 0.05% will be used as an agreement fee. All protocol fees (100%) will be used to repurchase ZKS on a regular basis, and the ZKS obtained will be directly destroyed, and ZKSwap officials will not receive any transaction fees.
Layer2 node plan
As mentioned in the previous chapter, the nodes of ZKSwap Layer2 are responsible for submitting zero-knowledge proofs of transactions on the chain, and obtain ZKS rewards by providing PoZK services. These Prover nodes responsible for submitting proofs need to pledge ZKS tokens to obtain the right to generate proofs. The amount of pledge deposit is proportional to the proof task assigned. After ZKSwap goes live on the mainnet, the Layer 2 node plan will be released, and ZKS will be pledged to participate in PoZK mining, to jointly maintain system security and scalability, and to obtain ZKS revenue.
to sum up
ZKS is the ZKSwap protocol token, which is a key link to encourage participants to jointly build the ZKSwap ecosystem. ZKS will complete 90% of the total token distribution within four years. Among them, more than 60% of ZKS Token will be distributed to ZKSwap infrastructure providers through community mining, including Gas fee providers, liquidity providers, zero-knowledge proof service providers and all users participating in the transaction. Users who hold ZKS can participate in ZKSwap ecological governance, vote or pledge to be listed, and pledge to become a Layer 2 PoZK node.
Thanks again to the global community for their support and help to ZKSwap. The ZKSwap team also hopes to work with users to create a zero-delay, zero-fee, and secure Layer 2 swap protocol, and on this basis, it will become an important part of the future Layer 2 infrastructure .