ZKsync Ignite Program: Fueling Untapped Liquidity for DeFi Elastic Chains

From zkSync 1.0 to the first zkEVM L2, Era 2.0, and finally Elastic chain in 2024, ZKsync has been iterating fast to unleash innovations, keeping its momentum as a promising Layer2 scaling solution. Now, to further innovate the Elastic chain ecosystem, ZKsync has announced its most recent upgrade – the ‘ZKsync Ignite Program.’ As of now, the program is not live, as it has to go up for on-chain voting, which will happen soon.

The Ignite program is mainly designed for DeFi, and it will turn the ZKsync Era into a full-fledged liquidity hub. DeFi Elastic chain will now leverage a single unified liquidity with no fragmentation. This will empower more users and network effects coming from them. Since the Ignite Program is quite a new addition, a lot of confusion and concerns can be seen among the elastic chain builders. Let’s address all such concerns by taking a deep dive into the ZKsync Ignite Program in this article.

Ignite Program is Zksync’s very first TPP or Token Program Proposal that aims to create a unified liquidity hub for DeFi Elastic chains. This liquidity hub will be positioned on ZKsync Era to benefit from its rich DeFi ecosystem, unmatched security, fully on-chain governance, and other unique offerings. With a liquidity hub, Elastic chain offers a powerful infrastructure for DeFi to enable critical functions like asset storing & exchange, liquidity, and access to a wide range of crypto-native & real-world assets in an entirely unique and efficient manner. 

Ignite program’s unified liquidity will be regulated through a strategic reward program designed for the liquidity providers or users.  ZKsync Ignite program will leverage the 325 million ZK tokens for a period of 9 months. Out of this, 300M tokens will be distributed across the 6 capped minters to utilize for the reward given to users for their meaningful participation. The remaining 25M will be distributed to 4 capped minters to cover the administration and operational costs of the program. This will increase the supply-side DeFi liquidity and strategic assets to reduce slippage and meanwhile, generate organic fees from the demand-side liquidity pools. 

L2/L3s DeFi Elastic chain access the Ignite-enabled liquidity via native interoperability, which is already supported by the ZKSync. Merkl, the popular reward hub, has authored this program, and it will oversee all the operations related to Ignite. 

To ensure fairness in the Ignite Program and make the unified liquidity pool a success, ZKsync includes three main entities- OpenBlock Labs as the “analytics manager,” Merkl as a program operations administrator, and a DeFi Steering Committee consisting of a total 5 members. Here:

• OpenBlock Labs reviews DeFi protocols/apps, recommends ZK token allocation, facilitates bi-weekly reviews, and publishes a detailed report every three months. This two-week iteration cycle enables the program and its coordinators to stay very targeted and focused on the protocol’s performance and users’ activities, understand the areas/applications/mechanisms where the program works well, and dynamically adjust future strategies.

• Merkl owns the technology aspect and program’s operations to design and implement the Ignite Program’s website, support routine operations, calculate & distribute rewards, and advise marketing strategies.

• The DSC has the right to veto: 

• a) approval of any DeFi protocols/dApps’ participation,

• b)Proposed ZK token allocation, 

• c)Proposed marketing & operations strategies, and 

• d) Renewal or modification recommendations in the program. 

Zksync Ignite program is essentially a DeFi reward program regulated by three key entities: Analytics provider, DeFi Steering Committee, and Merkl. These three entities work together to ensure seamless operations, liquidity execution, and fair distribution of rewards for the Ignite Program. Here’s how the whole program will work:

1. Every 2-weeks, the analytics provider, OpenBlock Labs (OBL), will perform in-depth analytics and utilize specific data science models to propose the ZK token allocations to the DSC (DeFi Steering Committee) based on a pool per basis.

2. Next, DSC needs to sign a transaction for the ZK token amount allocated for the ‘Ignite Program capped minter.’ Once signed, the respective amount will be mentioned on the Merkl contract. 

3. Merkl will now use OpenBlock Labs’s analytics and allocation methodologies to create campaigns ( per pool basis) while dynamically computing rewards according to user activity and actions.

4. Finally, Merkl will provide the distributor with the exact reward to reflect for that given week. Once public, users can claim their rewards on the Ignite Program Dashboard. The corresponding rewards will be sent to their wallets directly.

Further, users can check the updated ZK token rewards every 4-8 hours on the Ignite Program dashboard. However, note that DSC has the right to cancel the program at anytime.

1. Increased, shared DeFi TVL: By investing 325 Million ZK tokens to pool massive liquidity from various sources, the Ignite program will boost liquidity on various Elastic chains. Further through unification, it will make the shared TVL of all the interconnected chains accessible to DeFi builders out there. This means DeFi builders no longer need to worry about low TVL or they do not need to bootstrap liquidity for their network. Instead, they can access an active ecosystem showing strong TVL and robust liquidity. DeFi projets can now focus on defining their product-market fit to achieve accelerated time-to-market and greater impact.

2. Significantly Reduced slippape : Unified liquidity allows for lowering down the slippage considerably. FYI, slippage is the difference between the expected price and actual execution price in DeFi trading. With enough liquidity in the system, DeFi Elastic chains ensure price stability to create a smooth and reliable user experience, expanding their user base and eventually the traction on their network.

3. Near-instant cross-chain interactions: A unified liquidity hub works by allowing independent DeFi Elastic chains to interact seamlessly. That’s because Ignite Program will make zkSync Era feel like interacting with a single chain with very low latency.  Users on these networks can freely move their assets across the preferred protocols and access their broader range of assets, state, and users.

 Let’s say Alice is a ZKsync Era-1 user and she wants to buy an asset from  ZKsync Era-2. With a unified liquidity hub, Alice no longer need to interact with different chain, their unique standards or a bridge to purchase the asset. Now, she can bridge to zkSync Era mainnet, do swap, and purchase the asset– all in a single transaction just like moving a native asset. Such near-instant cross-chain ability promotes a more user-friendly and integrated experience for Elastic chains. 

4. Lower fees & fast transactions: Unified liquidity offers Elastic chain users with a more streamlined, easy, and cost-effiicient dApp environment. With lower fees and significantly faster transactions, DeFi chains can build a huge userbase and retain them in long run. 

5. Rapid innovations: A robust liquidity hub allows for the creation of foundational infrastructure that dApp developers need to experiment and innovate endlessly. ZKsync Era’s unified liquidity hub serves as an attractive destination for new DeFi projects as they will have access to resources and features to experiment with novel applications and drive better innovations in the DeFi space. 

Now, let’s talk about the benefits Ignite Program offers to participants or LPs:

• Passive income through yield farming: Ignite is created to encourage participants for passive income earning through yield farming. Simply through participation, one can generate a good amount of revenue.

• Chance to grab substantial rewards: Participants in Ignite Program have the opportunity to earn rewards out of 300M ZK tokens allocated for a duration of 9-months for the active participants.

• Benefits of Meritocratic system: As discussed earlier, ZKsync Ignite analyzes latest performance of protocols in a two-weeks cycle. This means, if your protocol or you are a top-performer, your potential for reward will optimize by a huge margin.

All the Existing Elastic chains, including Lens Protocol, Nodle, Space and Time, Cronos, Sophon, and QuarkID will benefit fron the unified liquidity hub that ZKsync Ignite Program is building. If you want your DeFi project to tap into unified liquidity, start build your DeFi Elastic chain on ZKsync Era. Choose Zeeve RaaS as your rollups service provider. Zeeve will handle heavy liftings related to launch, such as deployment, configuration, scaling, and 24/7 maintenance.

Zeeve has integrated support for 40+ third-party integration services to enable modularity in your Elastic chain. Also, you can setup a mainnet-ready testnet with all the configurations using Zeeve’s ZKsync Sandbox tool, optimized for low-code deployments. For more information about Zeeve Raas and our comprehensive blockchain offerings, connect with our experts.