Matter Labs and zkSync: Zug's Zero-Knowledge Scaling Engine

Matter Labs and zkSync: Zug’s Zero-Knowledge Scaling Engine

Zero-knowledge cryptography — the branch of mathematics that enables one party to prove knowledge of a secret without revealing the secret itself — is reshaping blockchain’s technical landscape. Applied to blockchain scaling, ZK proofs enable a Layer 2 network to execute thousands of transactions and produce a cryptographic proof of their correctness that the Layer 1 (Ethereum) can verify cheaply and quickly. The result: massive throughput, substantially reduced fees, and Ethereum-grade security without Ethereum-grade cost.

Matter Labs, the company behind the zkSync product line, is the most prominent ZK rollup developer in Crypto Valley. Domiciled in Zug, Matter Labs has raised USD 458 million, shipped two production ZK rollup products (zkSync Lite and zkSync Era), open-sourced the ZK Stack framework for deploying custom ZK-powered chains, and positioned itself at the technological frontier of Ethereum scaling. Its work has attracted both institutional investors and ETH Zurich’s academic engagement — the intersection of applied research and commercial deployment that Crypto Valley’s proximity to Switzerland’s leading technical university enables.

Matter Labs: Company, Not Foundation

An important distinction from the other Zug-domiciled entities covered in this publication: Matter Labs is not a Stiftung (foundation). It is a for-profit company — incorporated in Zug as a Swiss company, with significant operations also in Germany and distributed globally, but operating under a commercial governance model with investors, a board, and profit motives.

This distinction matters for understanding Matter Labs’ strategic behaviour. Unlike the Ethereum Foundation or Web3 Foundation, which are purpose-bound non-profits making grant allocation decisions on ecosystem-alignment grounds, Matter Labs makes commercial decisions: which products to build, how to monetise, when to raise capital, and how to compete with StarkWare, Polygon, and Scroll.

The ZK Stack — the framework enabling third parties to deploy their own ZK chains using zkSync technology — is both an open-source ecosystem contribution and a commercial strategy: by becoming the infrastructure provider for a network of ZK chains, Matter Labs creates network effects and potential fee revenues from the broader ecosystem it enables.

Alex Gluchowski: Founder and CEO

Alex Gluchowski co-founded Matter Labs and serves as its CEO. A software engineer and researcher with a background in formal verification and computer science, Gluchowski’s intellectual interest in zero-knowledge proofs predated the blockchain scaling application — he had worked on ZK-related cryptographic problems before identifying Ethereum scaling as the most commercially significant application of the technology.

Gluchowski’s technical background in formal verification — the use of mathematical methods to prove the correctness of software — directly informed zkSync’s engineering culture. zkSync’s approach to protocol security has consistently emphasised formal proofs of correctness rather than relying solely on audit-based security. This approach is more expensive and slower than pure audit-based development, but produces stronger security guarantees for the cryptographic core of a rollup.

Matter Labs is headquartered at its Zug address, with Gluchowski based in the Crypto Valley region. The company’s proximity to ETH Zurich’s cryptography research community has been a deliberate strategic choice — the talent and research collaboration available through ETH Zurich’s proximity is cited by Matter Labs as a material advantage of the Swiss domicile.

The zkSync Product Line

zkSync Lite (formerly zkSync 1.0)

zkSync Lite was Matter Labs’ first production product — a ZK rollup for simple token transfers and DEX transactions on Ethereum. Launched in June 2020, zkSync Lite demonstrated that ZK rollup technology could operate reliably in production, processing millions of transactions while maintaining Ethereum-level security.

zkSync Lite is not EVM-compatible — it runs a custom virtual machine optimised for simple payment operations rather than general smart contract computation. This limitation restricts zkSync Lite to a specific use case (payments, simple DEX), but enabled Matter Labs to ship production-quality ZK rollup infrastructure before the more complex zkSync Era was ready.

zkSync Lite remains operational and continues to process transactions, though it has been superseded by zkSync Era as the primary zkSync product for new application deployments.

zkSync Era (formerly zkSync 2.0)

zkSync Era is Matter Labs’ flagship product — a ZK rollup for general computation that achieves EVM compatibility while using ZK proofs for settlement. Launched on Ethereum mainnet in March 2023, zkSync Era is the most complex and technically ambitious ZK rollup in production.

EVM Compatibility via zkEVM: zkSync Era achieves EVM compatibility through a zkEVM — a circuit that can generate ZK proofs for EVM-compatible computation. Building a zkEVM is substantially more difficult than building a ZK rollup for simple payments: the full EVM instruction set must be expressed in arithmetic constraints suitable for ZK proving. zkSync Era’s zkEVM uses a compiler approach — Solidity and Vyper code is compiled to the zkEVM’s instruction set (zkEVM bytecode), which is then proven by the zkSync prover.

PLONK-Based Proofs and the Boojum Upgrade: zkSync Era’s original proof system used PLONK — a universal ZK-SNARK construction that enables efficient proofs without a new trusted setup for each circuit. In 2023, Matter Labs shipped the Boojum upgrade, replacing the original prover with a new recursive proof system (also PLONK-based) designed for GPU-friendly computation.

The Boojum upgrade’s GPU-friendliness is significant: zkSync’s proving operations can be accelerated dramatically using consumer-grade GPUs rather than requiring specialised hardware. This reduces the cost of the proving infrastructure and enables decentralised proving — a future state where anyone with a GPU can participate in the proof generation market.

Transaction Throughput and Fees: zkSync Era’s production throughput is approximately 2,000-3,000 TPS under normal network conditions, with higher theoretical limits as the proving infrastructure scales. Transaction fees on zkSync Era are typically fractions of a cent for simple transfers and a few cents for complex DeFi operations — orders of magnitude lower than Ethereum mainnet during congested periods.

The $458 Million Series C at $2 Billion Valuation

Matter Labs’ fundraising has been among the most substantial in Crypto Valley’s history. Key rounds:

• 2021: USD 50 million Series B led by a16z (Andreessen Horowitz), with participation from Placeholder Capital and Dragonfly Capital.
• 2022: USD 200 million Series C at a USD 2 billion valuation, led by a16z Crypto, with participation from Blockchain Capital, Dragonfly Capital, Variant Fund, and OKX. A further USD 258 million follow-on in the same round brought total capital raised at this stage to USD 458 million.

The USD 458 million Series C — one of the largest VC rounds in blockchain history — reflected the institutional conviction that ZK rollups would become critical Ethereum scaling infrastructure, and that Matter Labs was the category leader. The timing (early 2022, before the bear market’s full force) provided Matter Labs with substantial runway to complete zkSync Era’s development and launch through the challenging 2022-2023 period.

The USD 2 billion valuation in a private round is significant context for understanding zkSync’s eventual token launch and governance transition — the investors hold equity, not tokens, and the path to liquidity involves either a token that appreciates to justify the equity valuation or an acquisition.

The ZK Stack: Hyperchains and the Ecosystem Vision

The ZK Stack, released as open-source software in 2023, is Matter Labs’ framework for deploying custom ZK chains using zkSync Era’s technology. The ZK Stack enables any developer or organisation to launch their own “hyperchain” — a ZK rollup or validium using the same proving infrastructure as zkSync Era, natively interoperable with the broader zkSync ecosystem.

Hyperchains: A hyperchain is a ZK chain built with the ZK Stack that settles to zkSync Era (or directly to Ethereum), using the same proof system and bridge infrastructure. Multiple hyperchains form an interconnected network — assets and messages can move between hyperchains using native bridging without the trust assumptions of third-party bridges.

Validium Mode: In addition to the full ZK rollup mode (where transaction data is posted to Ethereum), the ZK Stack supports Validium mode — a configuration where transaction data is kept off-chain (stored by a Data Availability Committee) and only the ZK proof is posted to Ethereum. Validium offers dramatically lower costs than full ZK rollup mode (since Ethereum’s calldata or blob costs are avoided) at the cost of weaker data availability guarantees. Validium is appropriate for applications where lower cost matters more than Ethereum-grade data availability — gaming, social applications, and some financial products.

Ecosystem Adoption: Several significant projects have announced plans to build hyperchains using the ZK Stack. The ZK Stack represents Matter Labs’ platform strategy: becoming the underlying technology infrastructure for a network of ZK chains, generating network effects and establishing zkSync as the standard ZK rollup framework.

The ZK Token and Governance Transition

In June 2024, Matter Labs launched the ZK token — the governance and economic token for the ZKsync ecosystem. The ZK airdrop distributed approximately 17.5% of total token supply to eligible users and contributors of the zkSync Era and zkSync Lite ecosystems.

The ZK token enables:

• Governance: ZK holders vote on protocol parameters, upgrade proposals, and ecosystem decisions.
• Fee Payment: ZK is accepted as a fee-payment token in the zkSync ecosystem.
• ZK Stack Licensing: Access to the ZK Stack’s features and the hyperchain ecosystem may involve ZK token economics in future configurations.

The governance transition — moving protocol governance from Matter Labs’ sole control to the ZK token holder community — is an ongoing process. Matter Labs retains significant technical authority over zkSync Era’s development while the governance mechanisms mature.

Competitive Landscape: StarkNet, Polygon zkEVM, Scroll

zkSync Era competes in a defined category: EVM-compatible ZK rollups on Ethereum. The competition is intense:

StarkNet: StarkWare’s ZK rollup uses STARK proofs (rather than SNARKs) and the Cairo virtual machine (not EVM-compatible, though EVM equivalence via Kakarot is under development). STARKs are post-quantum secure and avoid the trusted setup required by some SNARK constructions, but require the Cairo VM — a significant migration barrier for Ethereum developers.

Polygon zkEVM: Polygon’s ZK rollup uses PLONK-based proofs (similar to zkSync) and aims for EVM equivalence — the closest possible match between the Polygon zkEVM’s behaviour and Ethereum mainnet’s. Polygon’s distribution advantage (Polygon’s existing PoS chain had established ecosystem) and technical depth (Polygon acquired several ZK research teams) make it a significant competitor.

Scroll: A newer ZK rollup built by an ETH-connected team, emphasising bytecode-level EVM equivalence. Scroll’s approach prioritises minimal divergence from Ethereum mainnet at the cost of prover complexity. ETH research community connections give Scroll credibility.

The Differentiator: zkSync Era’s primary differentiation in this competitive set is the Boojum upgrade’s GPU-friendliness (enabling decentralised proving), the ZK Stack’s hyperchain ecosystem (building network effects beyond a single rollup), and Matter Labs’ six-year head start in ZK rollup research and production deployment.

The Zug Connection: ETH Zurich Research Collaboration

Matter Labs’ Zug domicile is not incidental to its research programme. ETH Zurich’s cryptography and security group — one of the world’s leading academic centres for ZK proof research — has been a source of research collaboration, graduate talent, and proximity to the academic frontier of the technology that underlies zkSync.

Specific areas of collaboration and talent pipeline:

• ZK Proof Optimisation: ETH Zurich researchers working on PLONK circuit optimisation and recursive proof composition have produced work directly applicable to Matter Labs’ prover performance challenges.
• Formal Verification: ETH Zurich’s programming methodology group’s work on formal verification of distributed protocols is relevant to zkSync Era’s security verification programme.
• Graduate Hiring: ETH Zurich’s master’s and doctoral programmes in computer science produce graduates with specific ZK proof expertise — among the most sought-after technical skills in the Web3 ecosystem.

For a company whose technical differentiation depends on leading-edge cryptography, the ETH Zurich proximity represents a genuine competitive advantage that is difficult to replicate outside Switzerland’s academic research infrastructure.

Regulatory Compliance: zkSync Era and Institutional Use

zkSync Era has developed compliance tooling relevant to institutional DeFi participation:

• Account Abstraction: zkSync Era natively supports account abstraction, enabling smart-contract-based wallets with compliance features — transaction screening, spending limits, and multi-sig approval workflows that institutional users require.
• Paymaster Infrastructure: zkSync’s Paymaster concept enables third parties to sponsor transactions, enabling gas-free user experiences and fee payment in stablecoins — both important for institutional users who cannot or will not hold ETH as a gas token.
• Compliance Modules: Third-party compliance providers have developed zkSync-compatible KYC/AML screening modules, enabling regulated institutions to participate in zkSync’s DeFi ecosystem within their compliance frameworks.

FINMA has not issued specific guidance on ZK rollups as distinct from the underlying Ethereum L1. The regulatory treatment follows from the underlying asset and activity classification. Matter Labs maintains FINMA engagement appropriate to its Swiss domicile and the nature of zkSync’s operations.

Outlook: ZK Rollup Dominance

The long-term outlook for ZK rollups is structurally positive. The academic and engineering consensus holds that ZK rollups — with their validity proofs enabling instant finality and their stronger security guarantees compared to optimistic rollups — represent the superior long-term scaling architecture for Ethereum.

The transition from optimistic rollups (Arbitrum, Optimism) to ZK rollups involves the challenge of EVM compatibility and prover performance — both of which Matter Labs has invested heavily to address. As Boojum and subsequent prover improvements reduce the cost and latency of ZK proving, the economic case for ZK rollups over optimistic rollups strengthens.

For zkSync Era specifically, the path to dominance runs through the ZK Stack’s hyperchain ecosystem adoption. If the ZK Stack becomes the standard framework for deploying application-specific ZK chains — used by DeFi protocols, gaming platforms, institutional DeFi operators, and enterprise applications — Matter Labs achieves the infrastructure position that provides both economic sustainability and ecosystem moat.

From Crypto Valley, Matter Labs represents the most commercially scaled expression of Swiss technical depth in Web3: a ZK cryptography pioneer, an ETH Zurich ecosystem participant, and a USD 2 billion company building infrastructure that will underpin Ethereum’s scaling for years to come.

Related Coverage

• Ethereum: The Web3 Foundation and Zug’s Protocol Anchor
• Ethereum Layer 2 Networks: Arbitrum, Optimism, and zkSync’s Swiss Connections
• Ethereum vs Competing L1 Platforms: The View from Crypto Valley
• Swiss DeFi TVL Tracker: Decentralised Finance Activity 2025
• Crypto Valley vs Berlin: Two European Web3 Hubs Compared

Author: Donovan Vanderbilt | The Vanderbilt Portfolio AG, Zurich Published: 28 February 2026