IOSG Ventures: The Next Battleground – Generating ZK Proof Market

TL,DR;

• ZK technology is mainly used to improve the scalability, privacy, and credibility of various projects such as Starkware, zkSync, Scroll, Mina, Risc0, Giza, and EZKL.
• ZK technology requires a lot of computing power, resulting in a computational overhead of 10^4 to 10^6, posing a challenge to infrastructure teams.
• The main methods for generating ZK proofs are Proof Markets and Proof Networks. Proof Markets operates as an open marketplace for trading ZK proofs, while Proof Networks has in-house servers that provide a cloud-service-like experience for generating evidence.
• The Proof Market method allows for flexibility and cost-effectiveness, as it facilitates an open market where ZK proof trading can be made without the need for high-end server management.
• The Proof Network approach provides a smooth and developer-friendly experience and provides a solution that generates evidence quickly and reliably with less focus on market mechanisms. Theoretically, it can produce evidence quickly, as it also takes time to match orders in the proof market.
• Challenges include testing and debugging difficulties, new security issues emerging, potential vendor lock-in, higher fees in certain usage patterns, and token utility losses.
• The leading players are likely to be those companies with the most in-house ZK proof needs, as they can leverage existing infrastructure and specialized teams to maximize hardware utilization.
• Emerging applications include ZK Coprocessors, ZK Attestation, ZKML, and ZK Bridges, all of which have created a greater demand for generating ZK proofs.
• In the ZK space, decentralized evidence networks are driven by the blockchain industry's preference for security, censorship-resistance, and privacy, although ZK's intrinsic security means that these advantages do not require decentralization as a prerequisite. For Zk, performance is the main concern.

introduction

Growing demand for ZK

After years of research in the field of ZK and great improvements in performance, ZK has finally been applied to real-world applications. Talented engineers apply ZK to:

• Scalability
• privacy
• Data credits

There are many interesting projects that rely on zk, such as Starkware, zkSync, Scroll, Mina, Risc0, =nil; Foundation, EZKL, Giza, Polygon and Manta. These projects generate zk proofs steadily and consistently on a daily basis. The most popular zk use case right now is zkRU for solving Ethereum's scalability problems. Over the past month, ZK verification has spent millions of dollars on Ethereum/Ethereum L2s.

Source: https://dune.com/nebra/zkp-verify-spending A strong increase in ZK verification cost over last year.

This chart produced by the Near team shows the fuel consumption of zkSN(T)ARK on Ethereum and L2s. It includes popular ZK projects like zkSync, Polygon, Aztec, Tornado Cash, Loopring, Worldcoin, Tailgun, Sismo, StarkNet, and ImmutableX, as well as dydx. Compared to zkStark, zkSnark accounts for 80% of the total cost in terms of verification. Out of all these projects, Worldcoin has the highest cost of verification, followed by zkSync. The cost of verification for each WorldCoin is about $2. The verification cost per zkSync is around $30.

Prove the burden on the infrastructure

ZK solves scalability problems, but at some cost. It requires a lot of computing power. ZK comes with a lot of computational overhead, and the Rollup team needs to deal with this. @_weidai estimates that there is a computational overhead of 10^4 to 10^6 using today's ZK technology. Theoretically, we could achieve 10 times the computational overhead with dedicated circuitry. If you add the abstraction layer of virtual machines, you have 100 times the computational overhead. The following diagram depicts a graph of computing power based on year-to-year growth according to Kummei's law. After 2000, chip efficiency increased by a factor of 10 per decade. If we compare computing power against 2000, it will be 784 times in 2025. This also indicates that the current ZK calculations are still not on an order of magnitude compared to 2000.

Source:https://visualize.graphy..app/view/04f82b27-3654-47eb-83e8-3981f6e258be

Think about it. We're trying to bring a 10 to 100x increase in trading volume to ZKRU. As the volume increases, we also face a computational overhead of 10^4 to 10^6. These figures put a lot of pressure on the ZKRU infrastructure team. The leading ZKRU team is using high-end machines with at least 200 GB of memory and has talented operations staff to handle these infrastructure complexities. So what does it mean for a small team to launch a ZKRU or build a layer 3 solution with the ZK tech stack? If an indie developer wants to build a ZK Dapps, how do they buy these high-end servers and operate them properly? Now, it's not that hard to launch a ZKRU. You can use the ZK Stack and follow the instructions in the documentation to deploy a new ZKRU. The hardest part is getting the high-end infrastructure to work. Managing a fleet of servers is much more difficult than maintaining our personal laptops on a daily basis. In addition, hardware acceleration is not plug-and-play, and teams need to configure their servers differently depending on the zero-knowledge proof system they use. Ensuring high availability is also a tricky topic. What if a bunch of users start minting Ordinals on your ZKRU and you suddenly face 1000x throughput? Even an experienced team like Arbitrum is down for hours due to the spike in Ordinals transactions. Generating large volumes of zero-knowledge proofs requires high-end server support. For small to medium-sized teams, setting up and maintaining a range of high-end servers will be a heavy burden. In order to better help groups adopt zero-knowledge technologies simply and quickly, the Emerging Project attempts to help these groups deal with all the complexities of computing infrastructure.

Prove the market

Source: IOSG Ventues

Proof marketplace and proof network are the two main methods. Prove that the market is like an open market. To generate a proof, a user needs to find a counterparty who is willing to sell the proof at a certain price. A proof network is like a traditional cloud service, where developers submit their circuits and inputs, and a centralized load balancer allocates internal servers within the proof network to generate proofs for users. The Proof Marketplace is a popular method in the ZK Proof Infrastructure. The Proof Marketplace is an open marketplace where buyers and sellers trade ZK proofs. The ZK Proof Marketplace team doesn't need to care about ZK Proof hardware or own high-end servers, they focus on ZK Proof of transactions and verification mechanisms to onboard third-party hardware vendors. Prove that the market is a more open approach. It welcomes third-party hardware vendors. As long as the seller has such a certificate, the buyer can buy the ZK certificate at the price of USD. When it comes to verifying proofs, everyone in the market does not need to reach a consensus, and only the market operators bear the responsibility for verification. In the Proof Marketplace, the zkDapp developer submits a ZK Proof order, including the price, generation time, timeout, and public input. The third-party hardware vendor will then accept the order and generate a proof. The economic structure of the justification market is simple. Proof generators need to be staked. If they generate the wrong proof or fail to provide it by the deadline, they will be fined. Proof generators with more stakes will be able to generate multiple proofs at the same time. The major players in the proving market industry are =nil and Marlin.

=nil Foundation

Proof that there are sellers and buyers in the marketplace. The buyer is a dApp developer. They pay the seller a fee to generate the proof. There are many factors that affect the price of a proof. The main factors include circuit size, proof system, generation time, and input size. Here's the workflow for the =nil proof market:

1. Attestation that the requester sends a request to the marketplace with an expected price of c_r.
2. Proof of market-locked c_r tokens in buyer accounts.
3. Proof that the producer is c_p at a price
4. The attestation marketplace matches the request with the proposal of the attestation producer.
5. The proof producer generates the proof and sends it to the market.
6. The Proof Marketplace verifies the Proof and pays c_r - fee tokens to the producer.
7. Attestation requesters take their attestation and use it.

The marketplace is designed to provide a transaction-like experience. Proof generates prices that change in real-time. Below is a screenshot of the product from the =NIL Proof Marketplace.

Source:https://nil.foundation/ Currently, Proof Market supports a limited number of claims, with Mina claims proving to be the most active. Specifically, Proof Market accepts circuits based on their zkLLVM compiler and Placeholder proof system.

Gevulot

Gevulot is committed to bringing decentralization to the proof-of-proof market. Gevulot serves as an open and programmable layer-1 blockchain designed for the proof market. The blockchain at the first layer handles the distribution, verification, and reward distribution of proof requests. The prover network leverages lightweight unikernels for high performance. Gevulot uses Verifiable Random Functions (VRFs) to distribute proof work to a small group of provers, ensuring the reliability of the system.

Source: https://www.gevulot.com/ users can deploy programs seamlessly, with predictable costs and users setting a maximum cost based on the number of cycles required for program execution. Provers are rewarded through the Gevulot network and user fees, incentivizing them to generate efficient and competitive evidence. The fastest prover will receive the most network rewards. User fees will be shared equally with all nodes that complete the proof. Gevulot supports a variety of programming languages for program deployment, including C, C++, Go, Java, Node.js, Python, Rust, Ruby, PHP, and more, because Gevulot's underlying VM Nanos supports x86_64 Linux ELF binaries. Gevulot is a general-purpose computing platform that supports different languages and proof systems. Gevulot relies on the Nanos single core to ensure that provers can easily run on different machines. All prover needs to be compiled into a single single-core image.

Proof Network

Proof Network provides a more user-friendly approach to the developer experience. It operates similarly to a Web2 cloud service provider. The developer sends the payload data via the REST API, and the attestation network then returns the attestation to the developer. Developers don't need to care about price fluctuations and which side will generate proofs.

Risk0

Risc Zero launched Bonsai with their zkVM. With the power of zkVM, users can have Bonsai generate a variety of claims. For example, based on Bonsai and Risc0 VMs, Zeth generates proofs for Ethereum blocks.

Source：https://www.risczero.com/

Succinct

Recently, Succinct has also launched their new product. Rather than providing a REST API circuit, Succinct provides a more cloud-like approach. Here's how the user workflows:

1. Connect to your GitHub account and deploy the circuit
2. API calls via REST or smart contracts and passes in circuit inputs
3. Query results via REST API or smart contract

Source: https://succinct.xyz/ Compared with BONSAI, Succinct has the following advantages in terms of developer experience:

• It's easier to manage circuit code bases
• There is no need for secondary transmission circuits
• One-click deployment of smart contracts for on-chain proof generation and verification
• Explore the popular ZK proofs
• Dashboard to view the status of proof generation
• 支持 rustx、gnark、circom、plonky2

Source: https://succinct.xyz/

Proof network or proof market

The attestation marketplace provides greater pricing flexibility for buyers and sellers of attestation. It invites all hardware providers to participate, which helps to reduce costs for buyers. But it's worth noting that the amount of savings can vary from individual to individual and business to business. Often, a centralized service such as a proof network may offer a free service to individuals while charging businesses a hefty fee but providing access to VIP customer support. For example, if an enterprise plans to roll out a new event or feature, it can reserve some computing power in advance on the attestation network. A decentralized marketplace may present more balanced and competitive pricing. In today's market, proof-based products seem to provide a smoother experience for developers. It handles all the proof generation work and supports the major proof systems without introducing any new complex concepts. It provides a consistent user experience. Theoretically, it provides fast proof generation since it also takes time to prove that the market's orders are matched. If you're familiar with cloud computing, proving that the network is more like a stateless cloud function. We have =nil Foundation and Gevulot working on the proof market. Succinct and Risc0 are on the proof network. Hardware companies like Ulvetanna and Cystic have also contributed greatly to improving ZK proof performance on GPUs and developing the next generation of dedicated ZK chips. Proving that the market is relatively easy to start. For ZK infrastructure projects, proving that the market design can bring more hardware providers online. With its decentralized design, they can easily scale the network to meet future computing needs. In the future, we foresee the combination of proof-of-network and proof-of-market design. The goal is to provide a seamless experience for developers, while integrating the Proof of Marketplace as a backend to facilitate the addition of additional computing resources. This is the direction that Succinct plans to pursue in the near future. We're seeing similar shifts in other markets, such as Infura. Infura has its own servers, but it also plans to direct licensed parties to provide the infrastructure.

Source: IOSG Ventures

Who really needs cloud ZK infrastructure

We believe that developers who want to reduce time to market and build lightweight, flexible applications that can scale or update quickly will greatly benefit from these cloud-based ZK infrastructures. For applications with large differences between peak and trough usage, cloud ZK infrastructure will reduce costs.

For this type of application, it can be expensive to purchase a set of servers that are always running and available at peak times. When the usage is at the bottom, it will cause a large amount of waste. Cloud infrastructure can be scaled at any time to improve performance. This excess computing power can be automatically released outside of peak times.

Who will be the leaders?

From what we know about the Web2 cloud industry, we find that the companies with the greatest computing needs tend to have a leading cloud infrastructure business. They can take advantage of scalability, cost, teamwork, and innovative products. The same applies to cloud ZK infrastructure. We believe that those projects with the greatest need for generation validation have the potential to have one of the most successful ZK cloud infrastructure businesses. For projects that generate a lot of ZK proofs internally, they already have a lot of infrastructure, optimizers, and a team of professionals. They can also maximize hardware utilization by sharing attestation resources across applications, allowing prover to be repurposed for other purposes when an application doesn't need to generate proof right away. These large-scale projects have, to some extent, their own proof systems. Third-party attestation infrastructures often struggle to optimize the various attestation systems used by different large-scale projects. By providing fast and easy-to-use cloud provers, large projects can effectively scale their ecosystem of proof systems. For ZKRU, cloud ZK infrastructure can increase the use of its forks. It is not difficult to launch a new Layer 2 or Layer 3 on these ZKRUs, but it will be costly to maintain the ZK infrastructure. Offering out-of-the-box and flexible cloud attesters can help attract more developers. Currently, most developers typically use the OPRU SDK to build new Layer 2 or Layer 3 due to the ease of management of the corresponding infrastructure. Without building their own ZK infrastructure, these massive ZK projects would have to pay exorbitant fees to third-party computing providers. They will also be limited in their development velocity because they can't always customize their infrastructure to further improve performance and reduce the cost of proof.

Who has the greatest demand for zero-knowledge proofs?

In addition to ZKRU and Layer 1 networks, we've recently seen more emerging zero-knowledge proof applications. They all have a huge demand for proof generation. Zero-knowledge coprocessors enable smart contract developers to trustlessly obtain past blockchain state. Zero-knowledge coprocessors generate zero-knowledge proofs for these past blockchain states. This may be a more secure and trustless alternative than a diagram. Zero-knowledge authentication helps users bring off-chain data or identity information to the blockchain. After the certifier verifies this data off-chain, it generates a zero-knowledge proof for it and places it on the blockchain. Zero-knowledge machine learning Xi makes on-chain reasoning possible. The computing provider performs ML computation off-chain, generates a zero-knowledge proof for it, and then publishes that proof to the blockchain. A ZK-bridge is a more secure version of a cross-chain bridge. It generates a proof of storage or even a consensus proof for the source chain and places it on the target chain. This may replace the current cross-chain bridge.

What's so special about a decentralized proof network?

Within the blockchain industry, decentralization is the most popular narrative. Decentralization brings a number of benefits:

• safety
• Censorship resistance
• Privacy

Zero-knowledge proofs are different from other general computations. ZK is inherently secure. Anyone can easily and quickly verify the proof to ensure the authenticity of the prer. In the ZK space, decentralization is not a prerequisite for security. Zero-knowledge proofs focus on the complex underlying details that are built into circuits. While the content within these circuits is extremely difficult to review, it can still be effectively implemented by generating a requestor for ZK proofs. Privacy can become an issue for attestation networks as users send private input to the attestation network. The ideal solution is to generate attestations locally to prevent any data breaches. This will present a challenge to local performance. Other solutions could be a new zero-knowledge multi-party computation protocol or generating proofs in a trusted execution environment. A decentralized proof network does not bring more privacy. Narrative aside, censorship resistance may be the main reason for building a decentralized proof network. Zero-knowledge proof technology is still in its infancy, and so far we haven't observed any form of censorship in this space. However, the main challenge holding back the development of zero-knowledge proofs is performance. The introduction of a decentralized proof network may lead to an increase in the computational demand for generating proofs.

conclusion

Zero-knowledge proofs are rapidly developing and have a wide range of applications. We expect to see zero-knowledge proofs being integrated into different technology stacks. We have seen ZK layer1, ZK layer 2, ZKML, ZKVM, ZK-Email. Developers are also building ZK oracles, ZK data sources, and ZK databases. We are on the road of "ZK everything". The computational overhead that ZKs introduce forces developers to deploy their circuits on high-end servers. As a result, we expect to see an increase in demand for cloud ZK attestation infrastructure to help developers get rid of the complexities of operating these infrastructures.

In this area, our insights include:

• Proof Marketplace and Proof Network are two of the main ways to help ZK dApp developers stay away from the complexities of infrastructure.
• We anticipate a hybrid approach that combines proof-of-network and proof-of-market mechanisms.
• Not all ZK dApp developers are suitable for cloud ZK infrastructure. Medium-sized projects with stable traffic can self-host servers to reduce costs.
• Leaders in cloud ZK infrastructure will be those projects that have a need to generate a large number of ZK proofs, such as leading ZKRUs. They have financial incentives to do the business.
• Decentralization is the dominant narrative in the crypto space, as decentralization brings features such as privacy, censorship resistance, and security. ZK proves that some of these features are already present. Currently, the selling point of the decentralized proof marketplace is censorship resistance.
• The popularity of cloud ZK proof infrastructure is closely related to the number of ZK dApps currently on the market. While some projects initially highlighted their cloud ZK-proof infrastructure as a key feature, many will eventually turn to other new narratives.