Level 2 defies market anguish as Matter Labs raises $200 million

The zero-knowledge powered rollup is gaining momentum in the race to scale Ethereum
In a sign of momentum for Layer 2, Matter Labs, the team behind nascent zkSync 2.0 network, has raised $200 million in a Series C round led by Blockchain Capital and Dragonfly, the venture announced Nov. 16.

The latest round brings Matter Labs’ total funding to $458 million, including $200 million for a BitDAO ecosystem fund. Andreessen Horowitz and Lightspeed Venture Partners also joined in the final round.

Central engine

ZkSync 2.0 is a zero-knowledge (ZK) based rollup that boasts compatibility with the Ethereum Virtual Machine (EVM), the main engine that powers Ethereum smart contracts.

ZkSync 2.0 is currently rolling out on a three phase mainnet launch process. Last month, the network completed its “baby alpha launch,” during which only Matter Labs will be able to experiment with the chain to verify that it’s working properly and working as intended. Audits will also be completed.

What is zkSync?

A step-by-step guide to the high-capacity blockchain network

The network will then move into its “fair onboarding alpha” phase, which will allow ecosystem apartments to deploy and test their code on zkSync 2.0. Matter Labs also announced today that it will release its code publicly under an MIT Open-Source license during this period.

“Anything other than open sourcing your code is functionally censored,” Matter Labs chief product officer Steve Newcomb told The Defiant. “It’s the censorship of ideas and innovation.”

Real-time monitoring

ZkSync 2.0 will then move to a public launch before 2023. Newcomb told The Defiant that more than 175 ecosystem projects plan to launch on zkSync 2.0, including Uniswap Aave, Curve and Chainlink.

The team also announced that OpenZeppelin, a smart contract security company, will provide continuous auditing services for its zkSync 2.0 code. OpenZeppelin personnel will also be appointed as security and technical advisers to Matter Labs.

Highest priority

“Continuous real-time monitoring goes far beyond one-time audits to provide comprehensive protection and peace of mind,” Newcomb said. “Security is a top priority for us and we want to reduce risk to the entire ecosystem. We are extremely proud to partner with OpenZepplin as a security partner.”

Newcomb said OpenZeppelin has already been analyzing its code for several months and that an audit will be released publicly “in the very near future.”

Newcomb also said that if Matter Labs were to launch a token, it would allocate one-third of its supply to insiders and investors and two-thirds of the tokens to the community. He said rival projects have allocated half of their token supplies to insiders.

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Rollups bundle transactions on layer 2 before batching them to the main Ethereum network, offering cheaper transaction fees and faster execution times than layer 1.

But optimistic rollups, the type of rollup used by the leading Layer 2 networks by market share, Arbitrum and Optimism, sacrifice some scalability in exchange for easier EVM compatibility. Even optimistic rollup withdrawals take seven days to process.

While ZK-based rollups offer greater speed and scalability than their optimistic alternatives, existing ZK rollup solutions, such as Matter Labs’ zkSync 1.0 chain, do not offer EVM compatibility.

Rollups

ZkSync 1.0 has a total locked value of $53 million, according to L2 pace. For comparison, Arbitrum, the largest rollup network, boasts a TVL of $2.3 billion.

But on July 20, Matter Labs, Polygon and Scroll announced that they are working on ZK-based rollups that boast EVM compatibility.

On October 10, Polygon launched a public testnet for its zkEVM rollup, hinting that DeFi heavyweights Aave and Uniswap will be among the first protocols to be implemented on the testnet.

Scroll updated its pre-alpha testnet the same day, enabling smart contracts to be implemented on its chain. Scroll said the launch of a permissionless testnet open to all users would soon follow.

Newcomb said Matter Labs will provide grants to a third-party data provider to begin monitoring Tier 2 scaling vendors’ open source, security and fundraising policies, likening it to nutrition labeling on the side of a cereal box .

“2023 will be the year of the big switch to ZK,” Newcomb said, characterizing zero-knowledge proofs as “mathematically perfect for preventing fraud” while optimistic solutions are based on game theory.

Scalability gains

Newcomb said that while optimistic, ZK-powered rollups offer comparable scalability gains of about 10x at level 2, level 3 will be where zero-knowledge solutions step forward.

“Where Layer 2 is kind of a one size fits all blockchain, Layer 3 is enterprise ready, 10x customization ready [and] 10x scaling,” he said, comparing L3’s customization to Amazon’s AWS service. “Optimistic rollups just don’t offer that. They can’t [provide] that kind of scaling.

“If you want maximum security, roll up ZK to level 3,” Newcomb added. Newcomb also said the need for cross-chain bridges is eliminated at level 3, minimizing safety risks.

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