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| By Jurica Dujmovic |
Recently we published a tweet about Polygon’s (MATIC, Tech/Adoption Grade “B”) new rollup, zkEVM, aka the holy grail of scaling.
But that Tweet couldn’t quite cover the full story. That’s why I sat down with Weiss Crypto Portfolio and Weiss Crypto Investor Editor Juan Villaverde to ask him why this is such a big deal and how it compares to previous scaling solutions, such as the Bitcoin Lightning Network payment protocol.
According to Juan, while the LN is great, it more closely resembles early Layer-2 technologies previously deployed on the Ethereum (ETH, Tech/Adoption Grade “A”) network. In short, it’s fairly limited in what it can do.
However, this comprehensive, EVM-compatible ZK-rollup solution is super-exciting, because it’s the best scaling technology we know of.
But let’s hear the breakdown straight from the horse’s mouth ...
Jurica Dujmović: Both LN and ZK-rollups both provide capacity to handle payments. What gives ZK-rollups the upper hand in this competition?
Juan Villaverde: Although LN handles payments competently using BTC, which is still more secure than Ethereum, the fact still is that it’s very limited — especially when compared to the flexibility and versatility offered by ZK-rollups.
Now we’re adding Ethereum Virtual Machine compatibility to ZK rollups, which allows any smart contract to be deployed on a ZK rollup chain and have full compatibility, inheriting all the security properties of the mainchain.
This is done so quickly and cheaply that we could see end-user fees become a thing of the past. That would be a huge development as fees and special login procedures were (and still are) a big factor preventing the mass adoption of crypto apps. You don’t need to wait or use tokens when using ZK-rollups. All that could be done in the background by the app itself. This is Layer-2 scaling done right.
Meanwhile, the smart-contract environment is ripe for innovation and exploration of different solutions to different problems in the space. So, networks that use zkEVMs is where we’ll likely see killer apps, rather than on LN.
Jurica: You mentioned “killer apps.” We’ve seen the concern — on some podcasts, as well within our own Twitter community — from traders and influencers that it’s all speculative at this point, and that there is really no real-world usage for those apps.
Juan: That’s absolutely not true. Just look at Aave (AAVE, Tech/Adoption Grade “B”).Being able to borrow at very low rates against one’s investments is something many crypto traders covet, and Aave is able to deliver that opportunity. Aave allows you to manage your money like billionaires do. This alone makes it a killer app in our eyes.
Although it’s not perfect and for now it takes only crypto — with non-fungible tokens likely to be accepted at a future date —, we feel there still is a significant subset of population that can benefit greatly from Aave and other apps like it.
Furthermore, in times we live in, apps like Aave prove indispensable for investors seeking to protect their assets from crises and uncertainty. In an environment where governments run large deficits and inflation runs rampant, one shouldn’t be a holder of a currency, but rather a borrower.
It’s much better to have hard assets like Bitcoin (BTC, Tech/Adoption Grade “A-”) and Ethereum and borrow against them if there’s a need for cash. If hyperinflation kicks in or inflation gets worse, then the hard assets go up in the value and the value of the loan goes down.
By doing this, one keeps their net worth and pays back the loan using the devalued currency … just like governments do. This keeps you protected from government confiscation through inflation, and it’s all thanks to crypto and this one killer app.
Jurica: We’ve recently published an article by Nilus Mattive, in which he spoke about visiting El Salvador and witnessing poor adoption of BTC in spite of its being a legal tender in the country. Why do you think that is?
Juan: As you can see from my previous responses, ETH offers much more flexibility and space for innovation than BTC does.
Even the people of El Salvador agree. They’re not using BTC because it’s simply not practical.
BTC is a great hard asset and a great investment, but it’s simply not practical for being used as a medium of exchange. It’s too volatile and it’s too slow.
To make one thing clear, we’re not against Bitcoin. It has its uses. And I believe investors should own BTC in their portfolios — but as an investment, not as a currency.
That job belongs to a smart-contract platform that requires no intermediaries to function. Isn’t that a promise of crypto, after all?
Well, I can’t argue that last point. But what do you think about the new zkEVM rollups, mass adoption and use of BTC vs. ETH as legal tender?
Do you agree with Juan? Or do you have a perspective we haven’t shared yet? Let us know by commenting on Twitter using the hashtag #LNvsZK and tagging @WeissCrypto.
We look forward to reading your comments and insights. And who knows, maybe your comment will make it into a future Weiss Crypto Daily issue!
Best,
Jurica Dujmović
