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A&T View: Trend and ecosystem of ZKP track from the perspective of investing in Cysic.

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Insight into A&T Capital's investment logic for Cysic and their perspective on the ZKP track.

Original Title: "A&T View: Trends and Ecology of ZKP Track from Investing in Cysic"

Original Author: A&T Capital

01 Financing News

The zero-knowledge (ZK) hardware startup Cysic has completed a $6 million seed round of financing, led by Polychain Capital, with follow-on investments from A&T Capital, Hashkey, SNZ Holding, ABCDE, and Web3.com Ventures. The funds raised will be used to expand the team and continue to focus on developing hardware solutions.

Cysic aims to provide hardware acceleration solutions for ZK proof protocols. This startup already has 12 ecosystem partners, including Scroll, Nil Foundation, and Hyper Oracle.

02 Why do we invest in Cysic?

1 Investment Logic

1. ZKP technology is gradually playing an important role in the blockchain industry, with huge potential in the hardware market.

ZKP technology becomes mainstream:

Starting with the Ethereum ZK L2 mainly led by Starkware/Scroll, ZKP has gradually expanded its focus to cross-chain, data indexing, and other areas, and has now penetrated into various fields of the blockchain industry.

The hardware market has a large space:

According to the current total market value of $10-20 billion for ZK L1/L2, typically 10% of the value will flow into the computing power market in the future. This means that the current ZK L1/L2 market can support a $1-2 billion ZKP hardware acceleration market, and the next bull market is expected to have a significantly larger market.

2. The team has excellent strength and the cooperation partners are strong.

Excellent team strength: Bowen-led hardware design team has had a lot of outstanding achievements in the industry in the past, and has a good reputation in the blockchain ZKP direction; Professor Xiong Fan's research in the software direction is also impressive; the overall progress of the team is among the forefront in the industry. Strong cooperation partners: Scroll, Manta, Taiko, and Mina are all mainstream projects in the ZK L1/L2 track, and the demand for ZKP computing power is huge; in addition, the lead investor in this round is Polychain, as a top fund in the industry, with abundant resources.

2 Project Description

1. ZKP Acceleration Chip is the underlying core of the ZKP track.

Refer to the three-layer structure shown in the following figure:

ZKP cross-chain bridge, ZK L2 expansion, and ZK privacy L1 are specific ZKP application scenarios.

Groth 16, Plonk, Marlin and other ZK algorithms serve as the software theoretical foundation for the entire structure.

Cysic developed ZKP acceleration chip, which provides the foundation for top-level applications to run.

2. Design of FPGA+ASIC

FPGA mainly plays a role in connecting different ZKP algorithms and circuit designs in the design, providing sufficient adaptability for the entire solution;

ASIC plays a core role in accelerating the design process, specifically in two types of computational tasks: multiple scalar multiplication (MSM) and number-theoretic transform (NTT) algorithms. These two parts determine the time required to generate zero-knowledge proofs (ZKP).

3 Core Team

Xiong Fan, co-founder.

In 2022, he began serving as an associate professor at Rutgers University. From 2021 to 2022, he worked as a cryptography researcher at Algorand for 15 months. From 2015 to 2019, he served as a research assistant at Cornell University.

Bowen Huang, co-founder.

Previously participated in the development of two core chips at Alibaba Pingtouge; worked as a research engineer at the Institute of Computing Technology, Chinese Academy of Sciences for 5 years; currently pursuing a CS master's degree at Yale University from 2019 to 2022.

4 Investment Risk

1. Industry competition risk:

Risk: In addition to Cysic, there are also excellent teams such as Ulvetanna and Accseal in the ZKP hardware acceleration track to respond to the solution / Our understanding: Referring to the Bitcoin mining machine and FIL mining machine market, hardware computing power can usually accommodate at least three top players. The Cysic team is a first-line player in the industry and is likely to occupy a leading position.

2. Risk of wafer failure:

Risk: As an application-specific integrated circuit (ASIC), it must go through the process of chip design and fabrication, which often involves high costs and a high risk of failure. Response/Our understanding: Our team has a strong advisory team to help improve the success rate of chip fabrication.

03 ZKP Track Trends and Ecology

1. ZKP-related tracks are significantly active

The three major Ethereum ZK L2 projects represented by Starkware, Scroll, and ZKSync have a market value of over $10 billion, and the progress of each project is relatively ideal. It is expected that the mainnet will be launched by 2023.

New ZKP-related applications represented by Succinct Labs, Herodotus, Risc0, etc. have gradually gained a lot of funding support and exploration of use cases in the industry, further activating the ZKP-related track.

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2. The value of zero-knowledge proof technology will go far beyond second-layer solutions

As a proof algorithm based on mathematics and cryptography, Zero-knowledge Proof (ZKP) can verify whether the calculation process and results are correct.

More than just scaling: the value of ZKP technology in different parts of the blockchain industry is being increasingly explored.

ZKP + Light Client's design is expected to disrupt the existing cross-chain interoperability track; ZKWASM, Rust version ZKVM and other virtual machines will allow web2 developers to enter web3.0 without changing their inherent development habits as much as possible;

Use ZKP to transmit off-chain execution results to the chain in a verifiable form, which is suitable for various types of content that are not suitable for on-chain execution. This is another way to improve the overall efficiency of the blockchain beyond L2.

For trend prediction and analysis in the ZKP field, please refer to the "Web3 Trend Report" published by A&T Capital: "Web3 Trend Report 2023": the market is adjusting, but innovation never stops - A&T Capital.