Analysis: the Future of L2 and ALEO Zero Knowledge Proof Mining

Dec 06, 2022

Author: Wublockchain

In the public blockchain field, the route of zero-knowledge proof (ZKP) is already very clear. In the future, it is likely to form a situation where ETH L1 is the core to ensure security, and ZKP is deployed on L2 to achieve privacy function. In addition to L2, public blockchains using ZKP include Aleo, Mina and Filecoin.

As ETH ends POW and ZKP requires a lot of computing power to maintain, ZKP will take on a lot of GPU computing power in the foreseeable future. In Messari’s June article “What Will Ethereum Miners do After The Merge?”, they analyzed the feasibility of ZKP taking on ETH computing power.

“The complexity of using ZKP will increase as users seek more expressive, high-performance, and private computations. This will lead to slower proof generation, requiring the use of specialized hardware to generate proofs in a timely manner. When Bitcoin was first introduced, anyone with a standard CPU/GPU could get Bitcoin. Eventually, specialized miners developed more efficient hardware (ASICs), which made CPU/GPU mining no longer profitable. ZK mining is likely to follow a similar path, starting with standard GPU miners and then developing more efficient miners (ASICs or FPGAs). ZKP is still in its infancy, but Paradigm predicts that the ZK miner/prover market could grow to the size of the PoW mining market in the future.”

Comparing FPGAs to GPUs, the top FPGAs have 1/3 the hardware cost (leading process nodes, clock frequency, energy consumption ratio, and memory bandwidth) of the top GPUs and a energy consumption ratio that exceeds GPUs by a factor of 10. Comparing FPGA and ASIC, ASIC is one-time in programming, while ZKP code is not as stable as Bitcoin, and the logic of different ZKPS is also different. Obviously, ASIC is not suitable for this kind of changeable business. The FPGA can modify the program with a simple refresh, which means that multiple sets of ZKP logic are compatible.

So in the longer term, FPGAs are likely to rule the ZKP mining industry, however FPGAs are more difficult to program and the technology is not yet mature. In the short term, GPUs will be the primary device for ZKP mining. For those former ETH miners, they naturally have a greater commercial incentive to support the ZKP public blockchains than to invest their computing power in abandoned public blockchains such as ETC or ETHW.

L2 ZKP

ZK-Rollup’s Proof and Batch submission process is currently centralized, with a single Sequencer determining the order of submissions. To scale up the miners, the process would need to be decentralized, i.e. any miner could submit Proof to L1. Vitalik has made some suggestions on how to achieve decentralization, such as setting up a DAO to conduct periodic auctions of Sequencer decisions, or randomly assigning a node to one of the nodes whose probability of being selected is proportional to the amount of ETH it deposits in Rollup. However, either way is essentially a PoS mechanism, where the amount of stakes determines the level of revenue, which is different from the traditional mining method (where the level of revenue is determined by the amount of computing power).

Currently, the main L2s that use ZK-Rollup include zkSync and StarkNet.

The day-to-day operations of zkSync depend on a computing service provider that generates zero-knowledge proofs for blocks, namely “Stichting ZK Sync”, a non-profit Dutch foundation registered in Amsterdam. According to the development team Matter Labs, zkSync plans to decentralize in the future by introducing an independent consensus mechanism with two distinct roles: Validators and Guardians. Validators are responsible for packaging transactions into blocks and generating zero-knowledge proofs for them, and their nodes must operate in a secure environment with good Internet bandwidth, which is what we commonly understand by big mining pool. Guardians are the Token holders of zkSync and nominate validators based on their Token shares. Guardians’ nodes can run on regular computers or cloud servers and do not require a dedicated service provider, so they are not easily censored. Conversely, guardians can monitor transaction data to select non-censored verifier nodes.

StarkNet also needs to issue Token on the way to decentralization. Currently, StarkNet processing fees are paid using ETH, and may later use StarkNet native Token, or may support both native Token and ETH payments. Token can be used to pay fees in addition to staking to make voting decisions including transaction sequencing, STARK proofs, etc., improving network completeness and censorship resistance. Refer to a proposal by Ohad to add a BFT-based sequencer, where sequencers are selected based on their shares, choosing a specific sequencer for each slot. During this process, the network adds a slashing rule (similar to Cosmos SDK) that couples incentives between sequencers and provers in the best possible way.

ALEO ZKP

One of ZKP’s hottest projects this year is ALEO. ALEO is a privacy public blockchain. ALEO is a privacy public blockchain, there is no public blockchain in the privacy field that can stand out yet, neither Oasis, secret network nor Platon have any dapp that really implements the privacy function. However, unlike other privacy public blockchains, ALEO’s consensus mechanism is similar to traditional PoW, and both require computing power to maintain. The difference is that the underlying computation of ALEO mining is not an arbitrary hash function, but a proof of knowledge, so it can not only act as a PoW to ensure network consensus, but also provide verification of the transactions contained in a given block.

ALEO has a major advantage over L2’s ZKP in that the mining algorithm is simpler. When verifying a block, the algorithm generates a random number, and if the final result is less than the target value after the ZKP, the calculation is correct, and the first node to complete the calculation has the power to mine the block. The mining machine simply generates a random number each time it verifies a block and starts calculating it, which is formally not very different from Bitcoin.

This is not the case with L2’s ZKP computation, which involves parallel computation, because even a single CPU cannot verify thousands of transactions one by one, and must use a device with multiple computing units like a GPU for parallel computation. However, although GPUs are currently the most suitable device for ZKP mining, further algorithm optimization is needed to achieve parallel computing for L2 mining, and ALEO has a great advantage in this regard, as it does not require parallel computing, so GPU miners can be almost seamlessly interfaced. With the immaturity of both the privacy public blockchain and ZK L2, those idle ETH miners may have more incentive to connect their computing power to the ALEO pool.

However, this is all based on the premise that ZK L2 is not yet mature, and since the ETH ecosystem is booming, dapps on L1 can be directly migrated over once L2 is online. This is not the case with ALEO. Even if the privacy public blockchain technology is mature, the team still needs to invest a lot of money to build the whole ecology, which is obviously a major disadvantage of ALEO. We can call it an ecological moat of ETH system: no matter what type of L2, as long as it can add ZK to the original underlying public blockchain technology, then it naturally has the ability to capture ETH value. This is something that L1s such as ALEO do not have.

Summing up

As the demand for censorship resistance gradually expands, the privacy field is sure to become a revolutionary application in the future. Currently, the most viable of the privacy proofs is ZKP, which requires a lot of computing power to maintain, so ZKP mining is likely to become an industry of comparable scale to previous ETH mining.

The most important thing that needs to be solved for ZKP mining is decentralization, and zkSync and StarkNet have already released their roadmaps for this. Logically, in order to achieve decentralization, it is essential to issue Token, which is not only used to maintain consensus, but also to regulate mining nodes and improve censorship resistance to a certain extent.

The most cost-effective mining equipment is FPGA, but considering the difficulty of FPGA programming and the fact that there are more idle GPU miners, it is more likely that GPU will rule the industry in the short term.

Among public blockchains, ZKP mining can be adopted by any L2 of the ZK series, but L1 is currently only allowed by ALEO. In contrast, ALEO does not require parallel computing, so idle GPU miners can be docked seamlessly. L2, on the other hand, has more ecological advantages, with a larger user base and less risk.

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