[Education] - What are Proof of Reserves Audits?

A Zk-rollup or a Zero-Knowledge rollup is a process that completes transactions on another, faster blockchain known as a layer 2. The data from these transactions are then ported back to the layer 1 or mainnet for a much more cost-effective cost than completing the transaction solely on the initial blockchain.

Zk-rollup protocols use complex cryptography known as Zero-Knowledge proof, which determines a transaction’s validity with minimal information about the transaction. The addition of minimal information requirements accompanying Zk-rollups lends to preserving privacy while still being a fast and cheap way to complete transactions.

The additional privacy stands out even more when compared to the other rollup process, Optimistic rollup. When using Optimistic rollups, users’ funds remain on the network until the dispute resolution period has closed. Comparatively, Zk-rollups users can withdraw funds much more quickly.

That isn’t the only advantage Zk-rollups have over Optimistic rollups.

Zk-rollups are much faster and more secure when compared to Optimistic rollups due to their added complexity.

The downside is that use cases for Zk-rollups are typically very particular, so they will only support a specific service or use case. These use cases include swapping NFTs or transferring crypto between addresses. However, due to the rapid advances in cryptography, thanks to the recent boom in popularity over the last few years, that is no longer the case.

Polygon, Matter Labs and Scroll have all said they are preparing to launch the first zkEVMs. A zkEVMs is a Zk-rollups with the same functionality as Ethereum’s mainnet.

Similar to modem Optimistic rollups, these updated and improved Zk-rollups should have to capacity to support virtually any application developers would care to build on Ethereum.

Zk-rollups are the ideal choice regarding privacy, and with modern updates and tweaks, they can become the default. The potential of Zk-rollups becoming the new standard will significantly improve privacy in Web3 while also making things vastly quicker and cheaper for end users.