The Transformation of Encryption Economy from a Technical Perspective

The encryption economy is not just a simple technological transformation; it also involves investment and financial cycles. Many practitioners and enthusiasts find it difficult to adapt to this field, mainly because the cyclical nature is too obvious and the fluctuations are too severe. In a bull market, ordinary people have the opportunity to achieve tenfold or even hundredfold returns, but in a bear market, they may also suffer severe losses. Regardless of who it is, as long as they enter this field, learning investment knowledge is essential.

The main reason for the current bear market is the capital tightening caused by the Federal Reserve's interest rate hikes. The yields of mainstream lending protocols have generally fallen below 2%, far lower than those in traditional financial markets. This has prompted institutional investors and stablecoin projects to continuously shift funds from the cryptocurrency market to traditional markets to purchase assets like government bonds.

Based on historical data, the Federal Reserve has experienced multiple rate hike cycles over the past few decades, each lasting 1-3 years, with an average of about 10 rate hikes. The slower the pace of rate hikes, the worse the effect, and the harder it is to control inflation. Currently, it seems that in 2023, global stock markets and the encryption market will still face pressure from capital outflows, and the bottom of the bear market may not have arrived yet.

The Prospects of Ethereum Scaling Solutions

Despite the poor short-term market environment, from the perspective of long-term technological transformation, Ethereum and its zkRollup scaling solutions are still worth looking forward to, especially the new generation of zkEVM-based solutions.

Vitalik Buterin has made it clear that scalability is the next important goal for Ethereum. zkRollup achieves scalability by bundling a large number of transactions and validating them all at once. Compared to Optimistic Rollup, zkRollup uses zero-knowledge proof technology, which has more technical advantages.

However, traditional EVM was not designed to support zero-knowledge proofs, which creates difficulties for compatibility in development. To address this issue, some projects are developing virtual machines that support zero-knowledge proof computations and are compatible with Solidity, namely zkEVM.

Design Optimization of zkEVM

Currently, there are multiple zkEVM solutions, but actual tests indicate that there is still room for performance improvement. By optimizing the structure of zkEVM, efficiency can be significantly enhanced. The main optimization directions include: adopting a layered structure, compressing redundant space, and shortening proof generation time, among others.

Faster zero-knowledge proof algorithms are also very important. New algorithms like FOAKS have significant advantages in proof time and verification time, and are expected to further enhance the performance of zkEVM.

The Necessity of Independent Data Availability Layer

Currently, zkRollup mainly focuses on reducing the computational burden of transaction validation, but the original transaction data still needs to be stored on Ethereum. This may become a new bottleneck.

Therefore, Ethereum needs an independent data availability layer to store this raw data. This can not only prevent smart contract freezes caused by server failures but also further reduce transaction costs, decoupling the costs of Layer 2 from Layer 1.

Overall, although the short-term market environment is challenging, the development prospects of the Ethereum ecosystem remain promising from a technical perspective. The continuous optimization of scalability solutions such as zkRollup will lay the foundation for the large-scale implementation of future Web3 applications.