NFA: zkEVM L2s will be a big, big deal next cycle

Narratives dominate cycles, and in my opinion I believe these are going to be among some of the best performing tokens next cycle. It needs to be mentioned, out of these, only Polygon has a token currently.

These are the tokens which belong to the following Layer 2 networks:

1. Taiko (TYPE 1)
2. StarkNet (TYPE 4)
3. Scroll ZKP (TYPE 2)
4. zkSync (TYPE 4)
5. Polygon (TYPE 2-3)
6. Consensys zkEVM (TYPE 2)

So, why these tokens? Before we answer that question, we should first understand what they are.

Not all of these are the same and have different ways of approaching the problem. There are different "Types" of zkEVMs.

What is a zkEVM?

I guarantee that you will see this term float around a lot next cycle, perhaps as a buzzword of sorts. Only those who are really into the detail will know the implications of zkEVMs already.

zkEVM stands for Zero Knowledge Ethereum Virtual Machine. You may or may not have heard of zkRollups, or Optimistic Rollups. Optimism uses Optimistic Rollups for example. Loopring uses zkRollups.

These differ, and there are pros and cons to each, there are plentiful resources online which explain this in detail if you are interested. But one advantage of a zkRollup is it employs trustless cryptographic setups to ensure security.

A zkEVM in essence is a Layer 2 network which uses zkRollups, whilst maintaining compatibility or equivalence to Ethereum (depending on what type of zkEVM it is). Vitalik has a break down of the different types of zkEVMs that you can find online. This is great for developers as it becomes easy for them to port their code. A true Layer 2 network inherits Ethereum's security. Which is why Polygon in its current state is not a Layer 2 network, but instead a sidechain. However, as a market leader, they are also working on a zkEVM. If you've ever used Ethereum you know how expensive gas fees are. In future, Ethereum will most likely be used as a settlement layer and not much more. While Layer 2 networks will be used for everyday crypto transactions, gaming, dApps and DeFi.

zkEVMs are still fundamentally experimental, and they may not be the holy grail of scalability, but I think they are a good future bet if you want to diversify your crypto portfolio.

So back to the original question.

Why these tokens?

If Polygon Matic was any indication, there is real appetite from the crypto community to scale Ethereum. Simply look at the MATIC chart, and you'll see what could be expected from getting in early on these tokens. Not convinced? Look at Loopring's chart next.

No matter what anyone's personal opinion on Ethereum is, it's still the top Smart Contract Platform.

Bear Market

It goes without saying that purchasing in a bear market is the best way to make money in the bull market. As a wise man once said, millionaires are made in bear markets. One thing you may not know however is, the tokens that tend to do best in a new cycle are NEW tokens. Not only that, but new tokens which get released in bear markets tend to do even better. Please keep this in mind. Tokens that get released during bull markets tend not to do as well. It needs repeating.

1. New tokens tend do the best in a bull market
2. New tokens released in a bear market tend do even better in a bull market

None of this is financial advice.

I don't see these being talked about as much as they probably should be, which means you're early anon.

EDIT: I think I need to provide more background around my comment in the "Why these tokens?" segment. The exam question is, "if you had purchased Loopring in 2019, and sold at the top in 2021, how much would your holdings have multiplied by?"