ZKPs lack a killer app. The technology enables private computation and scalable verification, but adoption is confined to layer 2 rollups like zkSync and Starknet, which compete on cost, not privacy.
crypto-marketing-and-narrative-economics
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Why Zero-Knowledge Proofs Are a Narrative in Search of a Market
An analysis of the disconnect between ZK's technical promise and its lack of a killer consumer application, exploring the gap between developer hype and user adoption.
introduction
THE NARRATIVE GAP
Introduction
Zero-knowledge proofs are a foundational technology searching for a scalable market beyond niche privacy and scaling.
The privacy market is minimal. Applications like Tornado Cash and Aztec demonstrated demand but faced regulatory extinction, proving that pure privacy is a compliance liability, not a mass-market feature.
ZKML is speculative infrastructure. Projects like Modulus Labs and EZKL are building for a future of verifiable AI, but current on-chain AI use cases remain experimental and lack clear economic models.
Evidence: Daily active addresses on major ZK-rollups are a fraction of Optimistic Rollup volumes, and private transaction volumes are negligible outside of sanctioned activity.
key-trends
THE INFRASTRUCTURE PARADOX
Executive Summary: The ZK Reality Check
Zero-Knowledge Proofs are the most elegant cryptographic primitive of our generation, yet their killer application remains elusive outside of scaling.
01
The Problem: Proving is a Commodity, Provers Are Not
ZK tech is a race to the bottom on cost and speed, but the real moat is in hardware and proving distribution. The market is flooded with zkEVM L2s (Scroll, Polygon zkEVM, zkSync) competing on identical value props.
- Proving cost is the dominant operational expense, yet prover decentralization is an afterthought.
- Hardware acceleration (GPUs, FPGAs, ASICs) creates a centralizing force, contradicting decentralization narratives.
- The winning stack will be the one that abstracts proving away entirely, like EigenLayer for AVS or Risc Zero for general compute.
~$0.01-$0.10
Per-Tx Prove Cost
1-3
Dominant Prover Ops
02
The Solution: Privacy is the Only Unique Use Case
Scaling is solved by optimistic rollups today. ZK's defensible market is programmable privacy, not cheaper gas. Protocols like Aztec and Penumbra are building here, while Tornado Cash demonstrated latent demand.
- Private DeFi enables institutional on-ramps and compliance-friendly shielding.
- Identity & Reputation (e.g., Worldcoin, Sismo) use ZK for verification without exposure.
- The narrative must shift from 'ZK-rollups' to 'ZK-applications' where the proof is the product.
<1%
Of TVL is Private
$10B+
Institutional Demand
03
The Reality: Developer UX is Still Abysmal
Building with ZK requires cryptographic expertise, creating a massive talent bottleneck. Noir (Aztec) and SP1 (Risc Zero) aim to abstract this, but the toolchain is fragmented.
- Proof systems (Groth16, Plonk, STARKs) force early, binding architectural choices.
- Circuit writing is a specialized skill; debugging is a nightmare.
- Adoption hinges on a ZK Copilot that generates circuits from high-level code, a gap Giza and EZKL are attempting to fill.
10x
Dev Time Increase
~1000
Globally Proficient Devs
04
The Pivot: ZK as a Verification Layer, Not Execution
The highest-leverage use of ZK is verifying off-chain work, not executing on-chain. This is the Celestia and EigenDA thesis applied to computation.
- Risc Zero and Succinct enable verifiable off-chain compute for oracles, AI, and gaming.
- zkBridges (like Polygon zkEVM Bridge, zkLink) use proofs for trust-minimized cross-chain messaging, competing with LayerZero and Wormhole.
- The market isn't for ZK-chains; it's for ZK-as-a-Service for any state transition.
~500ms
Verification Time
100x
Cheaper than On-Chain
05
The Metric: Proof Throughput is the New TPS
Forget transactions per second. The bottleneck is proofs per second and the cost to generate them. This is a hardware and algorithm war.
- Parallel proving (Nova, SuperNova) and incrementally verifiable computation (IVC) are key breakthroughs.
- Proof aggregation (e.g., Nebra, Geohot's zkVM work) will create a layered proving market.
- The winning infrastructure will offer a proof commodity exchange, decoupling proof generation from specific L2s.
1000+
Proofs/Sec Target
-90%
Cost Curve (Next 24mo)
06
The Endgame: Abstraction Wins
ZK will succeed when developers and users stop knowing they're using it. The UniswapX model for intents shows the way: abstract complexity into a network.
- ZK-rollups will become a default, boring infrastructure choice for L2s, like CDNs for the web.
- The value accrual shifts to application-specific zkChains (driven by Polygon CDK, Arbitrum Orbit) and prover marketplaces.
- The narrative catches up to the market when 'ZK' disappears from the product name.
2026
Peak 'ZK' Hype
$50B+
Infra Market Cap
thesis-statement
THE NARRATIVE TRAP
The Core Argument: Scaling is Not a Product
Zero-knowledge proofs are a powerful cryptographic primitive searching for a market beyond the scaling narrative.
ZKPs are infrastructure, not a product. The technology is a general-purpose compute verifier, but the market fixates on its application to L2 rollups like zkSync and Starknet. This creates a narrative trap where the tool defines the problem.
The scaling problem is largely solved. Optimistic rollups like Arbitrum and Optimism already provide sufficient throughput and cost reduction for 99% of applications. The marginal utility of ZK-rollup finality is negligible for most users interacting with Uniswap or Aave.
The real market is state compression. ZKPs enable trustless data availability and privacy-preserving compliance, which are unsolved problems. Projects like Aztec and Mina target this, but adoption requires new application paradigms, not just faster transactions.
Evidence: Ethereum L2s collectively process ~50 TPS. Even a single ZK-rollup like Polygon zkEVM can theoretically handle 2,000 TPS. The bottleneck is demand, not proof generation speed.
MARKET REALITY CHECK
ZK Landscape: Hype vs. Usage
Comparing the technical capabilities of leading ZK platforms against their actual on-chain adoption and economic activity.
| Metric / Feature | zkSync Era | Starknet | Polygon zkEVM | Scroll |
|---|---|---|---|---|
Cumulative TPS (30d Avg) | 15.2 | 8.7 | 4.1 | 3.8 |
TVL (USD, Mainnet) | $1.2B | $1.3B | $140M | $120M |
Avg. Daily Active Addresses | 210k | 95k | 45k | 32k |
Proof System | SNARKs (Boojum) | STARKs | SNARKs (Plonky2) | SNARKs (Halo2) |
Native Account Abstraction | ||||
EVM Bytecode Compatibility | ||||
Avg. Proof Gen Time (Mainnet Block) | < 5 min | < 15 min | < 10 min | < 20 min |
Cumulative Bridge Inflow (USD) | $3.8B | $2.1B | $890M | $750M |
deep-dive
THE NARRATIVE GAP
The Product-Market Fit Chasm
Zero-knowledge proofs are a solution in search of a widespread problem, creating a disconnect between technical hype and user adoption.
ZK tech is over-engineered. The current focus is on building faster provers and custom VMs like zkEVMs and zkVMs, but this ignores the core issue: most applications do not require the privacy or succinctness guarantees that ZKPs provide at their current cost.
The killer app is missing. Privacy-preserving DeFi on Aztec or identity proofs with Sismo are compelling niches, but they lack the network effects of a Uniswap or OpenSea. The market for pure privacy is smaller than the market for cheap, fast transactions, which L2s like Arbitrum already solve.
Evidence: The total value locked (TVL) in privacy-focused ZK rollups is a fraction of a percent of general-purpose optimistic rollups. The most successful ZK applications today are scaling solutions like zkSync and Starknet, which use the technology for throughput, not its canonical privacy features.
counter-argument
THE NARRATIVE GAP
Steelman: "The Apps Are Coming"
Zero-knowledge proofs are a powerful cryptographic primitive in search of a mass-market application beyond scaling.
ZK tech is overbuilt. The current ecosystem of zkEVMs like zkSync Era, Starknet, and Polygon zkEVM is solving a problem—L2 scaling—that optimistic rollups like Arbitrum and Optimism already solve sufficiently for most applications.
The killer app isn't scaling. The narrative that 'the apps are coming' masks a deeper truth: we lack a native ZK application that is impossible without the technology. Scaling is a feature, not a product.
Privacy is the logical market. Real demand exists for private transactions and identity, not just cheap blockspace. Applications like Aztec or zk-proofs for compliance (e.g., Polygon ID) target this, but face regulatory and UX friction.
Evidence: Daily active addresses on major zk-rollups remain a fraction of their optimistic counterparts, indicating that superior technology alone does not drive adoption.
protocol-spotlight
ZK APPLICATIONS BEYOND SCALING
Case Studies: The Search for a Market
ZK tech is production-ready, but killer apps beyond L2s remain elusive. Here's where the search is happening.
01
The Problem: Private On-Chain Compliance
Institutions need to prove regulatory compliance (e.g., sanctions screening) without exposing their entire transaction graph. Current solutions are either fully transparent or fully off-chain, creating trust gaps.
- Key Benefit: Enables institutional DeFi adoption by meeting AML/KYC requirements.
- Key Benefit: Preserves commercial privacy for entities like hedge funds and market makers.
0
Viable Products
100%
Necessary for TradFi
02
The Solution: ZK-Coprocessors (RISC Zero, Axiom)
Offload complex, stateful computation off-chain and submit a verifiable proof of the result. This unlocks on-chain apps that are currently impossible due to gas costs or EVM limitations.
- Key Benefit: Enables trustless historical data access for derivatives, on-chain gaming, and DAO governance.
- Key Benefit: ~1000x cheaper than performing the same computation in an L1 smart contract.
~$0.01
Proving Cost
Any Logic
Compute Type
03
The Problem: Centralized Sequencer Censorship
Dominant L2s like Arbitrum and Optimism rely on a single sequencer. This creates a centralized point for transaction ordering and censorship, violating crypto's core ethos.
- Key Benefit: Decentralized sequencing via ZK proofs of fair ordering (e.g., Espresso Systems).
- Key Benefit: Enables cross-rollup atomic composability, a missing primitive for a multi-chain world.
1
Active Sequencer
~3s
Finality Time
04
The Solution: Private Identity & Reputation (Sismo, Semaphore)
ZK proofs allow users to anonymously prove membership in a group (e.g., "I own a Nouns DAO NFT") or a personal trait (e.g., "My credit score is >750") without revealing their identity.
- Key Benefit: Enables soulbound tokens and sybil-resistant governance without doxxing.
- Key Benefit: Creates a portable, private reputation layer for DeFi credit and social apps.
Zero-Knowledge
Proof Type
Selective Disclosure
Core Feature
05
The Problem: Opaque Off-Chain Oracle Data
Oracles like Chainlink deliver data on-chain, but the sourcing and aggregation logic is a black box. Users must trust the oracle operator's integrity.
- Key Benefit: Verifiable data feeds where the entire pipeline from API call to on-chain delivery is proven correct.
- Key Benefit: Mitigates Oracle manipulation risks for multi-billion dollar DeFi protocols.
$10B+
Secured by Oracles
Trust Assumption
Current Model
06
The Solution: ZK-Bridges (Polygon zkBridge, Succinct)
Move assets and arbitrary data between chains with light-client-level security, proven on-chain. This is a fundamental upgrade over the multisig models used by LayerZero and Wormhole.
- Key Benefit: No new trust assumptions beyond the security of the two connected chains.
- Key Benefit: Enables universal state proofs, allowing one chain to verifiably read another's state.
~5 min
Proof Time
1-of-N Security
vs. Multisig
future-outlook
THE NARRATIVE GAP
The Path to Product-Market Fit
Zero-knowledge proofs have achieved technical maturity but lack a dominant, user-facing application beyond scaling.
ZK tech is production-ready. zkEVMs like zkSync Era and Polygon zkEVM process millions of transactions, proving the underlying cryptography is stable and performant for general computation.
The market is scaling, not privacy. The killer app is L2 scaling, not the promised privacy. Users flock to Arbitrum and Optimism for cheap fees, not because their transactions are private. The privacy narrative remains a feature, not a product.
Real adoption requires abstraction. For mass use, ZK must become an invisible backend. StarkWare's Cairo and RISC Zero's zkVMs enable this by letting developers write normal code, while the proving stack handles the cryptographic complexity.
Evidence: Daily ZK-Rollup transaction volume is 3-5x higher than all privacy-focused ZK applications combined, demonstrating where the real economic demand currently lies.
takeaways
ZKPS: THE REALITY CHECK
Key Takeaways for Builders and Investors
Zero-knowledge proofs are a foundational technology searching for a killer application beyond scaling. Here's where the real value lies.
01
The Privacy-Utility Mismatch
The dominant narrative conflates privacy with scaling. ZKPs for privacy (e.g., zk-SNARKs in Zcash) have seen limited adoption due to poor UX and regulatory friction. The real traction is in scaling, where privacy is a byproduct, not the primary feature.\n- Key Insight: Markets pay for speed and cost, not secrecy.\n- Market Signal: ~$20B+ TVL in ZK-rollups like zkSync Era and Starknet, vs. ~$500M in privacy chains.
40x
TVL Gap
<1%
Private Tx Share
02
The Modular Prover Market
Proof generation is becoming a commoditized service. Dedicated proving networks like RiscZero and Succinct abstract complexity, allowing any chain to become a ZK L2. This creates a B2B market for proof throughput.\n- Key Insight: The value accrues to the prover infrastructure, not necessarily the app chain.\n- Builder Action: Integrate a general-purpose ZKVM; don't build your own prover. Focus on application logic.
~500ms
Proof Time Target
$0.01-$0.10
Target Cost/Tx
03
ZK-Enabled Intents & Interop
The next frontier is using ZKPs for trust-minimized cross-chain communication and intent settlement. Projects like Succinct's Telepathy and Polyhedra Network use ZK proofs to verify state from another chain, enabling light-client bridges without new trust assumptions.\n- Key Insight: ZKPs solve the oracle problem for cross-chain state.\n- Investor Lens: This is the infrastructure for the Omnichain thesis, competing with LayerZero and Axelar.
10-100x
Security Boost
~2s
Finality Speed
04
The App-Specific Proof Dilemma
General-purpose ZK-rollups face stiff competition from optimized OP Stack chains. The defensible moat is in application-specific circuits where ZK's unique properties are essential (e.g., private DEX order matching, on-chain gaming).\n- Key Insight: A ZK L2 for a generic EVM is a features race. A ZK circuit for a specific problem is a moat.\n- Example: zkBob for private stablecoin transfers, Dark Forest for fog-of-war gaming.
1000x
Circuit Efficiency
Niche
Market Size
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NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall