Matter Labs, the company behind zkSync, raises $200 million to scale Ethereum
Matter Labs has raised a $200 million Series C funding round led by Blockchain Capital and Dragonfly. Matter Labs is better known for its work on zkSync, an Ethereum scaling solution that drastically reduces the cost of Ethereum transactions.
LightSpeed Venture Partners, Variant and Andreessen Horowitz are also participating in the Series C round. In total, Matter Labs has raised $458 million, including a $200 million ecosystem fund to drive zkSync adoption. That’s a pretty big sum of money, which means the company will be able to iterate on zkSync for a while even if we still don’t know the full aftermath of the collapse of FTX.
Over the past couple of years, the biggest pain point with Ethereum transactions has been gas fees. In Ethereum lingo, gas fees are transaction fees. Every time you want to send some crypto assets on the Ethereum blockchain, you have to pay some gas fees.
And these gas taxes are not variable. If you try to send $10 or $10 billion worth of Ethereum, you will pay the same amount in gas fees. These fees vary depending on network needs. But it can be quite discouraging if you are new to crypto or want to use your cryptocurrencies for small transactions.
Many teams have been working on ways to solve this problem. They believe that some transactions should not happen on the Ethereum blockchain (Layer 1). This is what we call Layer 2 solutions.
ZkSync is one of the L2 solutions that has gained traction in the crypto ecosystem. Essentially, transactions are sent to layer 2 nodes so they can be processed and grouped together.
When there are enough transactions, a batch of transactions is sent to the Ethereum blockchain. Once on the Ethereum blockchain, these transactions cannot be changed.
ZkSync is a zero-knowledge implementation, meaning proof of validity is generated based on hundreds of transactions and then posted to the Ethereum blockchain. It is the most important security feature as Layer 2 transactions cannot be changed because they will not comply with the proof of validity.
In fact, zkSync’s upcoming release will be compatible with the Ethereum Virtual Machine, which should greatly improve its ecosystem support. This way, decentralized app developers can make their apps compatible with zkSync with minimal work.
Matter Labs plans to open source zkSync 2.0 through an MIT Open Source license sometime in Q4 2022. This is going to be important to ensure that there are no bugs in zkSync’s smart contract code. “The one I worry about the most is if we have $10B in a ZK rollup 2y from now and it gets hacked because of a flaw in the circuit limitation code or the EVM wrapper around it,” Ethereum creator Vitalik Buterin tweeted today.
So far, 150 projects have used zkSync in one way or another. For example, Chainlink, SushiSwap, Uniswap, Aave, Argent, 1inch, Gnosis and Curve have implemented zkSync in their products.
Ethereum scaling solutions are going to be incredibly important in making the crypto ecosystem truly decentralized. There are many reasons why centralized exchanges like FTX exist. They allow you to convert fiat currencies into cryptocurrencies. But many also use these exchanges for crypto-to-crypto transactions. Projects like zkSync will make crypto transactions simple, secure and affordable – even without using a centralized exchange.
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