The zkSync token (ZK) is the native utility and governance token within the zkSync ecosystem, designed to maintain and advance the zkSync protocol by facilitating transaction fees and enabling decentralized governance. The introduction of ZK tokens aligns with zkSync’s goal to provide a scalable, cost-effective, and secure solution for Ethereum transactions.

Role and Utility of the Token

The main role of ZK tokens is to be used as currency, meaning, to pay for transaction fees on the zkSync network. By using these tokens for transaction fees, network users benefit from lower transaction costs when compared to the Ethereum mainnet, mostly due to zkSync’s efficient Layer-2 scaling solutions. This incentivizes users to adopt zkSync for their transactions, consequently increasing network activity and liquidity.

The tokens are also important for the network’s governance framework. Token holders can participate in the decision-making process by voting on key proposals that affect the protocol’s future direction, as it happens in many decentralized governance models. This approach makes sure that the system evolves in a manner that reflects the collective interests of its community.

Decisions on protocol upgrades, parameter adjustments, and the introduction of new features are made more transparent and democratic through the active involvement of ZK token holders.

The ZK token also incentivizes network security and participation, through ZK token staking, to support the network’s security infrastructure. Stakers are rewarded with ZK tokens, providing a financial incentive to contribute to the network’s resilience and stability.

There is also the ability for token holders to act as liquidity providers, in exchange to be rewarded with ZK tokens for adding liquidity to different pools, which is essential for the functioning of decentralized exchanges (DEXs) and other DeFi applications running on zkSync.

Tokenomics

Distribution and Allocation

The total supply of ZK tokens is capped at 21 billion. The distribution strategy includes an airdrop to users and contributors. Specifically, 17.5% of the total supply was airdropped, with 89% allocated to active users and 11% to contributors who have supported the zkSync ecosystem through development, advocacy, or education. This distribution strategy is designed to fairly reward participants based on their contributions and activity within the network.

Airdrop allocations were determined based on a snapshot of activity on zkSync Era and zkSync Lite, taken on March 24th, 2024. Eligibility for the airdrop was based on the level of activity and contributions to the zkSync ecosystem. For instance, users who frequently transacted on zkSync and contributed to the network’s growth through development or advocacy received higher allocations. This approach aims to distribute tokens fairly and encourage continued engagement and contribution to the zkSync ecosystem.

Incentive Mechanisms and Economic Model

The economic model of zkSync includes incentive mechanisms to create network participation and liquidity provision.

Users who stake ZK tokens contribute to the network’s security and are rewarded with additional ZK tokens. Liquidity providers in the zkSync ecosystem are incentivized through ZK token rewards to add liquidity to different pools, ensuring the functioning of decentralized exchanges (DEXs) and other DeFi applications on zkSync, helping to maintain sufficient liquidity for high-volume trading and other financial activities.

Governance

zkSync operates a decentralized governance model where ZK token holders have the power to propose and vote on changes to the protocol. This includes decisions on protocol upgrades, parameter adjustments, and the introduction of new features. The goal is to ensure that the development of zkSync is guided by its community, promoting transparency and collective decision-making.

Governance proposals are submitted through a structured process that ensures all voices within the community are heard. Token holders can participate in discussions and vote on proposals using their ZK tokens. This democratic approach to governance ensures that decisions reflect the collective interests of the community and that all stakeholders have an opportunity to contribute to the protocol’s development.

Future Plans for Decentralization

zkSync aims to progressively decentralize its governance and operational structures further. Future plans include enhancing the governance framework to allow for more granular decision-making and broader community participation. This might involve more detailed governance protocols and mechanisms to ensure that all stakeholders have an opportunity to contribute to the decision-making process.

One key area of focus is the introduction of additional features like zkPorter, which will further enhance scalability and data availability. The integration and governance of zkPorter are expected to be managed through community votes, ensuring that zkSync remains a user-driven platform.

Highlights

• zkSync Token (ZK): The ZK token is a native utility and governance token used within the zkSync ecosystem to pay for transaction fees and participate in decentralized governance.
• Tokenomics: The total supply of ZK tokens is capped at 21 billion, with 17.5% allocated through an airdrop to active users and contributors, incentivizing network participation and liquidity provision.
• Incentive Mechanisms: ZK tokens are used for staking to support network security, and liquidity providers are rewarded with ZK tokens for adding liquidity to pools, enhancing the ecosystem’s functionality.
• Governance Structure: zkSync operates a decentralized governance model where ZK token holders vote on protocol changes, ensuring community-driven development and decision-making.
• Future Decentralization Plans: zkSync aims to enhance its governance framework, involve the community in security initiatives, and progressively decentralize its operational structures to maintain a user-driven and secure ecosystem.