L2 Brief: Factors That Will Influence zkEVM Adoption

Top of Mind

Another week, another zkEVM project enters the fray. ConsenSys announced Tuesday that it’s joining the list of projects (Scroll, Polygon zkEVM, ZKSync, among others) using zero-knowledge cryptography to scale Ethereum’s execution engine. The brewing competition in the zkEVM space is becoming reminiscent of the 2021 L1 wars and the ongoing battle for optimistic rollup supremacy between Arbitrum and Optimism. These developments provide context for how we can think about the future adoption of zkEVMs.

Compatibility vs Performance

2021’s “Ethereum Killers” were powered by EVM compatibility and token incentives. Siphoning users out of the Ethereum ecosystem was as simple as deploying an EVM-compatible execution layer on top of a high-performance network (often with centralized validator sets) and launching an incentive fund. This led to the migration of many Ethereum applications and clones on other networks.

Unlike L1s, zkEVMs have a tradeoff between Ethereum compatibility and performance – the more compatible a zkEVM is with today’s version of Ethereum, the less efficient its proving circuits. The same playbook that worked for L1 adoption is not likely to work here.

zkEVMs that optimize for Ethereum compatibility will suffer from higher fees due to computational inefficiencies and longer wait times for L1 finality. However, fees will still be cheaper than L1 Ethereum and likely in the same ballpark as today’s optimistic rollup transaction costs. The benefit here is that the out-of-the-box functionality these zkEVMs provide will allow developers to deploy their existing applications with little to no contract alterations. So long as users are willing to 1. pay slightly higher transaction fees relative to performance-optimized zkEVMs and 2. accept weaker or slower L1 finality guarantees, EVM-equivalent zkEVMs have an upper hand for developer adoption.

On the other end of the spectrum, zkEVMs that optimize for performance will require more backend changes for developers and infrastructure providers. Token grants and ecosystem funds may help to incentivize development and user adoption in these unfamiliar territories, but history shows these incentives are a poor strategy for sustained adoption. However, the slow and steady growth of Arbitrum and Optimism during the last year provides hope that these bootstrapping challenges can be overcome.