ZkSync (ZK) Faces Sharp Decline in Network Activity, TVL Hits Year-to-Date Lows

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As a seasoned crypto investor with years of experience in the decentralized finance (DeFi) and non-fungible token (NFT) markets, I’ve witnessed the ups and downs of various projects and their respective networks. The recent decline in network activity on zkSync (ZK), a promising Layer 2 (L2) solution for Ethereum, has piqued my concern.

Expert: ZkSync (ZK), a notable Ethereum Layer 2 (L2) solution, is currently experiencing a substantial drop in network usage. Based on The Block’s dashboard statistics, daily active addresses on the zkSync network have decreased by approximately two-thirds since June 23, reaching their lowest point this year.

Simultaneously, the number of daily transactions reached a mere 293,000 by July 23 – the smallest figure recorded so far this year. This significant decline indicates reduced user interaction with the platform, potentially weakening its influence in decentralized finance (DeFi) and non-fungible token (NFT) trading markets.

TVL Declines Despite Market Trends

As an analyst, I’ve noticed a significant correlation between decreasing user activity and shrinking Total Value Locked (TVL) on zkSync. The network’s TVL has contracted to $96 million, which is its lowest point since April 2023, according to DefiLlama. This trend diverges from the overall upward trend of TVL across various DeFi networks, suggesting potential hurdles in maintaining liquidity and user engagement for zkSync.

The value of zkSync’s native token, ZK, has taken a hit during these market downturns. Its lowest point was reached on July 5 at $0.13. Since then, there has been some recovery to $0.15. However, over the last week, it has experienced a drop of almost 10%.

The technical indicators point to a bearish trend, as evidenced by a Relative Strength Index (RSI) of 42.10 and a bearish cross on the Directional Movement Index (DMI). These readings indicate persistent selling pressure and a possible continued decrease in the token’s value.

zkSync Post-Airdrop User Decline

Approximately 17.5% of zkSync’s total ZK token supply – amounting to 3.67 billion tokens – was allocated to 695,232 individual wallets through the platform’s airdrop event. Unlike many other token distributions, this airdrop did not impose any lock-up periods, enabling instant token liquidity for the recipients.

As a researcher studying the blockchain ecosystem, I’ve noticed an unexpected outcome following the large-scale airdrop initiated by zkSync. Contrary to expectations, network activity saw a substantial decrease instead of the anticipated surge. The daily active addresses and total value locked (TVL) have continued to decline significantly rather than increase as intended. Sadly, the airdrop did not manage to generate the sustained user interest and transaction volume we had hoped for.

Elastic Chain: ZkSync’s New Upgrade

In its 3.0 update, zkSync introduced the Elastic Chain to address scalability and user experience concerns. This enhancement transforms zkSync from a standalone Ethereum Layer 2 solution into a network of interconnected Zero-Knowledge (ZK) rollups. The Elastic Chain acts as a unifying system, linking together various ZK Chains, rollups, validiums, and volitions.

This new framework addresses problems like fragmented liquidity and high transaction fees by reducing the need for third-party bridges. These bridges, often costly and vulnerable, are replaced by ZK technology, which allows for smooth and affordable transactions across the network. The Elastic Chain is set to enhance zkSync’s scalability and provide a more seamless experience for users and developers.

The expectation was that this advancement would serve as a significant motivator, drawing in more users and initiatives to the zkSync community. Nevertheless, the full extent of its influence has not yet materialized, as the network remains confronted with various hurdles.

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2024-07-25 15:39