In this new cycle, the new triad of Rollup/L1 ecosystems consists of DEX, decentralized lending protocols, and Perp DEX (decentralized perpetual contract trading platforms). DEX serves asset issuance and trading, decentralized lending protocols facilitate asset borrowing and lending, and Perp DEX provides asset risk hedging and leverage amplification.

Given that the competitive landscape of DEX and decentralized lending protocols was established in the last cycle, Perp DEX has become the focal track for Rollup/L1 and VC institutions at the application layer in the new cycle. Each Rollup/L1 supports two or three Perp DEXs through incubation or grants, and most mainstream VCs include one or two Perp DEXs in their portfolios.

ZKX emerged in this context as a dual Rock Star, being a key incubated Perp DEX in the Starknet ecosystem and receiving investments from prominent VCs, including Starknet’s parent company Starkware, Hashkey, Amber, and HTX Ventures.

Although Perp DEX projects often highlight the $100 trillion derivatives market potential during fundraising, an analysis of Defillama’s track data reveals a fundamental fact: the current Perp DEX track is a highly competitive niche market. The market size of Perp DEXs has a visible hard ceiling, while new entrants with strong VC backing and significant funding keep emerging.

In the face of fierce market competition, the ZKX team has set a pragmatic market goal of bringing hundreds of thousands of users into the on-chain perpetual contracts ecosystem, unlike many developers who aim to bring the next billion users into Web3. However, even this realistic goal is an insurmountable challenge for many of the trailing Perp DEXs.

According to the ZKX team, the key to achieving user growth in Perp DEX lies in achieving PMF (Product-Market Fit). ZKX’s product methodology can be condensed into the following formula: Emerging Markets + Seamless User Experience + Account Abstraction = Mass Adoption.

To achieve its market goals, ZKX is experimenting with new primitives and paradigms at both the infrastructure and operational layers of its product stack.

ZKX Infrastructure Layer: Dapp Rollup/App Chain + CLOB Order Book

Currently, the popular paradigms for Perp DEX are divided into two main types: General Rollup + AMM DEX and Dapp Rollup/App Chain + CLOB Order Book.

• General Rollup + AMM DEX: Representative projects include GMX.
• Dapp Rollup/App Chain + CLOB Order Book: Representative projects include ZKX, dYdX, and Aevo.

Each of these Perp DEX paradigms has its applicable scenarios, with distinctive features summarized in the table below:

The path to blockchain scalability has evolved to today, showcasing characteristics such as the reduction in construction and maintenance costs for Rollup/App Chains, the diversification of Rollup/App Chain architecture paradigms, and more tradeoff options between the security and scalability of Rollup/App Chains.

The paradigm shift at the infrastructure layer dictates the development direction at the application layer. Nowadays, it’s becoming a new industry consensus and trend to reimplement all DeFi protocols, originally in the smart contract paradigm, using the Dapp Rollup/App Chain paradigm. ZKX is a pioneer in this new trend.

The infrastructure layer of ZKX is the ZKX AppChain. The ZKX AppChain is an Omni Layer developed using the Substrate SDK. It has a middleware layer responsible for synchronizing asset and state data between Starknet and parallel Rollups built using its SDK and the ZKX AppChain. The cross-domain interoperability between L1 and the ZKX AppChain uses Starknet’s native official cross-chain bridge, Starkway. Therefore, the ZKX AppChain can be regarded as an L3 within the Starknet ecosystem.

The ZKX AppChain has its own independent node network, distributed ledger, and validator node network. The design goal of the ZKX AppChain is to support seamless connection of multiple L1/Rollup users to the ZKX exchange.

In the ZKX infrastructure, the ZKX AppChain and the CLOB order book are responsible for transaction processing and validation, and the records are stored on-chain, available for query via a block explorer at any time.

Based on the ZKX AppChain, ZKX provides users with an easy-to-use and unified ZKX account. Each L1/L2 has a corresponding ZKX sub-account, where users self-custody their assets on the respective L1/L2 sub-accounts. The lifecycle of a ZKX account can be divided into three processes: account funding, trading & settlement, and account withdrawal:

Account Funding: Synchronizing asset balance and state data between the ZKX AppChain and the L1/L2 where the deposit assets are located.

Trading & Settlement: Functions such as P&L, clearing, and funding rate calculations are executed on the ZKX AppChain, then batch rolled up from the ZKX AppChain to Starknet for attestation. The validator nodes of the ZKX AppChain participate in the consensus process while also supporting price feeds through an internal oracle module.

Account Withdrawal: Synchronizing asset balance and state data between the ZKX AppChain and the L1/L2 where the withdrawal assets are located.

The architecture of the ZKX AppChain and the CLOB order book endows ZKX with the following key features: high performance and scalability (2 blocks per second), robust risk management, powerful API integration (2000 requests per 10 seconds, sub-second internal oracle), unified liquidity, and self-custody & provable transactions.

ZKX operation layer: multiple airdrop incentives + social gamification experience

In the traditional Perp DEX benefit structure, traders need to pay gas fees for using the base protocol (L1/L2) block space. The unpredictability of gas fees makes it challenging for traders to manage transaction costs. Additionally, traders must pay extra priority gas fees during transaction peaks caused by other applications on the same L1/L2. Frankly, in the traditional Perp DEX benefit structure, traders are at the end of the benefit chain, with their interests not fully respected or protected.

The architecture of ZKX’s ZKX AppChain and CLOB order book not only brings advanced product features such as high performance, zero gas fees, and a unified user experience but also successfully reconstructs the benefit distribution relationship among the base protocol (L1/L2), application developers, and traders. This achieves incentive alignment by significantly reducing or even eliminating the rent-like block space fees collected by L1/L2, prioritizing the needs of traders, who are the core driving force behind product adoption.

To further attract traders to adopt Perp DEX, ZKX has prepared double airdrop rewards for traders: ZKX platform token $ZKX airdrop and Starknet protocol native token $STRK airdrop.

In addition to adjusting the benefit structure, the architecture of ZKX AppChain and CLOB order book ensures that the frontend trading experience of ZKX aligns with that of CEX perpetual contract products. Traders can seamlessly transition to Perp DEX users with almost zero learning cost.

By observing the trading volume distribution of perpetual contract users (see figure below), we find a significant stratification: a small number of whale users contribute a large proportion of the trading volume versus a large number of shrimp users contributing a small proportion of the trading volume.

To address this stratification, ZKX offers two trading modes on the frontend user interface: OG trading and professional trading. The OG trading mode allows traders to simply place leveraged bets on the rise or fall of the underlying asset of perpetual contracts at a specific future time, with rounds every 30 minutes.

Additionally, ZKX issues four types of CLAN NFTs: PACHINKO Adventurer, DeFi Tycoon, YAKUZA Tycoon, and Ethereum Titan. These NFTs are distributed to real crypto traders, seasoned DeFi traders, early ZKX contributors, and Ethereum ecosystem traders and contributors, respectively. Traders holding CLAN NFTs can represent their clan in OG trading competitions to earn exclusive clan NFT badges and additional ZKX rewards.

The OG trading mode is very suitable for shrimp users to use as a social game similar to Texas Hold’em or poker. The professional trading mode aligns with standard perpetual contract products. This dual trading mode enhances the inclusiveness of ZKX’s perpetual contract products, allowing both professional and ordinary traders to find their niches.

Summary

In summary, the infrastructure of ZKX Dapp Rollup/App Chain combined with the CLOB order book grants ZKX greater flexibility in operational design. This allows ZKX to innovate with mechanisms such as respecting and protecting traders’ interests, ensuring consistent trading experiences, offering multiple airdrop rewards, and providing an inclusive, gamified social trading experience. These innovations position ZKX to effectively challenge CEX perpetual contracts and traditional Perp DEXs, steadily moving towards its market goals.

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