David Angliss, an analyst with Australia’s leading cryptocurrency investment firm, Apollo Crypto, shares the fund’s regular take on what’s happening in the fast-changing and volatile cryptocurrency space.

The last time we chatted with Apollo Crypto’s David Angliss, we concentrated on one of the major bullish sector narratives to take hold of the industry so far this year – Layer 2 scaling of Ethereum, specifically the Arbitrum project and its recently airdropped ARB token.

Continuing in that vein, this article looks a bit closer at probably the most hyped protocol of all “L2s” yet to release a token. And that’s zkSync.

Angliss was first, however, keen to chat about the Ethereum blockchain’s most recent upgrades, Shanghai and Capella, collectively known as “Shapella”.


‘Shapella’s Show’

The main thing to know about this upgrade, as we’ve mentioned elsewhere on Coinhead recently, is that Shapella enables those who’ve been staking ETH (since the protocol merged from proof-of-work to proof-of-stake last year) to withdraw their staked ETH for the first time.

This, notes Angliss, will affect approximately 18+ million ETH (about 15% of all ETH in circulation), worth tens of billions of dollars.

So, why is this not completely bearish? Why, if all this ETH can now potentially flood back into the market, have we instead seen a rise in Ethereum’s price since this upgrade?

To answer that, Angliss explained that the release of ETH is staggered in such a way to completely avoid a flood of ETH onto the open market. The staked ETH is being made available to withdraw at a rate of just 0.4% of the total staked ETH per day.

Angliss also pointed us to an article entitled Shapella’s Show by the well-known crypto analyst Arthur Hayes. Hayes is a candid and often insightful market observer and billionaire investor, who is also something of a controversial figure after being sentenced in May last year to two years’ probation with six months’ home detention after pleading guilty to a lack of anti-money laundering compliance at his former exchange, BitMEX.

Hayes noted that the “Shapella upgrade is a significant turning point for the Ethereum staking landscape, and is expected to drive the adoption of more decentralized and non-custodial solutions in the ecosystem.” 

One of the byproducts, however, notes Hayes and reiterates the Apollo analyst is that the new upgrade presents a challenge “to existing custodial staking business models, such as Lido Finance and centralised services like Coinbase, Kraken, and Binance, as users now have more options and may seek non-custodial alternatives”.

That’s not to say, notes Angliss, that the liquid-staking protocols we’ve discussed in this column before no longer have a use case or strong thesis. “The landscape’s definitely changed for them, but the Shapella upgrade is still a net positive for liquid-staking protocols,” he says.


What is zkSync?

Moving on, let’s talk about a particular protocol, and one Angliss and Apollo are extremely bullish on – zkSync.

We’ve discussed this one briefly before but to just to recap, zkSync is one of several new “layer 2” scaling solutions to emerge for the Ethereum blockchain, and it’s a developing DeFi ecosystem in its own right.

Angliss and Apollo’s interest in it centres around respect for its technology and potential network effect. Angliss says that zkSync is the key protocol utilising the most effective scaling technology – ZK rollups. (Arbitrum and Optimism use different cryptographic tech called optimistic rollups).

“ZK rollups rely on mathematics to validate the rollup,” Angliss has explained to us in a previous article, “while Optimistic rollups rely on the observers of the layer 1 contracts to invalidate incorrect transactions.”

The upshot is that Optimistic rollups are “slightly slower and more expensive” than zkSync.

The protocol does not have a token… yet. More on that in a sec, but what’s exciting right now, says the analyst, is that it’s going from strength to strength in terms of usage and TVL (total value locked from participants on the network).

In fact, as Angliss points out, the zkSync TVL has grown impressively in a short space of time – from US$27 million to more than US$119 million – about 4x in just a few weeks.

Source: defillama.com


Potential paths to airdrops, rewards and DeFi optimisation

The zkSync protocol recently launched its completely EVM-compatible (Ethereum-chain compatible) update, which is known as zkSync Era.

And within that protocol, there still lies an opportunity to engage and potentially obtain an airdrop bounty of future tokens, bearing in mind that most who managed to get the ARB drop ended up with at least 625 tokens, which is worth about US$1,000 at the time of writing.

Also, the leading DEX (decentralised exchange) in the zkSync ecosytem, SyncSwap, has announced it will have a token, too, and will reward users of its exchange through a loyalty program.

And finally, Angliss pointed us to what he describes as a “degen strategy” for maximising funds and rewards within the zkSync ecosystem.

“Obviously this comes with the caveat of extreme caution needed when engaging in degen DeFi strategies,” he explains. “But essentially what you can do is deposit ETH or USDC  on a zkSync app called Nexon Finance and borrow against that. You can then essentially keep looping to leverage your position.”

Bearing in mind, of course, there needs to be a good deal of liquidity flowing through this borrowing and lending system for it to work as intended.

So, broadly speaking, does Angliss believe engaging and participating in the zkSync network, using strategies such as this and attempting to get the ecosystem’s rewards and airdrops will be well worth spending time on?

“Put it this way. Look at how well protocols like GMX (GMX) and Gains Network (GNS) have done. You have a chance right now to interact with a protocol in its infancy that could well achieve that level of success or greater, which is looking to reward early users and adopters.”

Final note: Twitter is currently innundated with airdrop hunters offering advice on how to “farm” upcoming airdrops, including the likes of zkSync, LayerZero and others. For some solid tips, we recommend checking out these two accounts: @milesdeutscher and @OlimpioCrypto.

Also, CoinGecko wrote a good, simple-to-follow piece on “How to enhance your eligibility” for the potential zkSync airdrop.