Zeta X aims to integrate cutting-edge technology to provide a non-custodial, fully verifiable perpetual contract exchange, with speed and ease of use comparable to centralized platforms.

Authored by: Deep Tide TechFlow

The smoke of the Dex battlefield is filled with high-frequency perpetual DEX, and the optimization of cost and speed has become the key breakthrough for various parties in the perpetual DEX arena.

Two years ago, although Ethereum had a larger and more mature financial ecosystem, many DeFi projects considered switching to Solana due to high fees, transaction speed, and scalability limitations. Zeta Markets is one of them. As a decentralized derivative trading platform, Zeta Markets hopes to bring users a lower cost, more efficient, and more flexible trading experience based on Solana's outstanding performance.

Two years later, Zeta Markets has grown into a leading perpetual contract trading platform in the Solana ecosystem, with 100,000 active traders and over $10 billion in trading volume. However, Zeta Markets' consideration of cost and speed optimization has not stopped. Based on Solana, the construction of a Layer2 called Zeta X is gradually becoming clear: By building rollups on Solana to achieve even faster speeds on top of fast speeds, Zeta X can achieve up to 10,000 TPS and a 5-millisecond delay, aiming to bring a trading experience comparable to CeFi.

At the time of the launch of the $ZEX (Zeta X's native token) airdrop, we interviewed Zeta Market CEO Tristan Frizza, discussing in depth the original intention of Zeta X's design, the token effect of ZEX, and the future development trends of perpetual DEX. During the interview, Tristan stated:

"We ultimately hope to become a universal exchange, somewhat like the Robinhood on the chain, allowing users to experience various products at low cost and high efficiency, and providing a smooth entry experience for users outside the crypto ecosystem."

Below are the highlights of the interview.

Key Points

• Not every application in the Solana ecosystem needs L2 or an application chain. Most applications may not need it because Solana's L1 already has extremely high scalability. However, for applications like Zeta that are very concerned about performance, need to isolate block space, and require a lot of customization, L2 is a natural choice.

• Currently, there is no need to develop Layer 3, as it would lead to more bridge complexity, and the performance of L1 or L2 should already be satisfactory.

• We did not choose to build L2 to attract higher valuations. Our development is based on real products and user needs. We need to create an extremely flexible infrastructure layer to meet trading needs.

• Currently, the block time on Solana is 400 milliseconds. Zeta's goal is to accelerate it by 100 times, achieving a 5-millisecond delay, and matching the TPS of top centralized exchanges like Binance.

• In my opinion, the future improvements in DeFi will come more from faster execution layers, cheaper block space, and more user-friendly wallet interfaces.

• We spent a lot of time ensuring the design of airdrop rules to ensure fairness, including prioritizing real activities and real usage patterns, rewarding according to target ratios, eliminating low-quality and low-value users, and thoroughly screening out false account activities.

• It is difficult for us to predict whether Solana will surpass Ethereum in the future, but I can say with certainty that if this happens, I would not be surprised at all.

Solana's performance can meet the needs of most applications, but we still need to build L2

Deep Tide TechFlow: Thank you, Tristan, for accepting our interview. Could you briefly introduce your background and what Zeta Market is doing?

Tristan:

Hello, I am Zeta Market CEO Tristan Frizza.

Before joining the crypto industry, I was mainly engaged in artificial intelligence research related to computer vision and generative deep learning. I started to get involved in cryptocurrencies in 2017 and fully devoted myself to Crypto in 2021.

In 2021, I and another co-founder founded Zeta, aiming to explore the application of financial markets in the blockchain field. So far, Zeta has grown into a leading perpetual contract trading platform, with 100,000 active traders and over $10 billion in trading volume.

Since its establishment, the Zeta team has been committed to continuously breaking through the boundaries of DeFi in terms of product user experience and performance. Currently, users on the Zeta exchange can complete transactions in less than one second while maintaining complete self-custody and transparency, which is quite an impressive achievement in terms of technology.

Deep Tide TechFlow: Zeta Market has been active in the crypto market since early 2022, which should have been the end of the bull market. After more than two years of development, could you share some progress and important changes that Zeta Market has made during this period?

Tristan:

Contributors at Zeta have been committed to building during the bear market.

Since the launch of the mainnet in early 2022, as part of Zeta V2, we have completely rewritten the exchange. These efforts have greatly improved the availability of the application, including a comprehensive redesign of the user interface, significant optimizations to make our order book fast and real-time, and improvements to our market-making tools to ensure better liquidity. In addition, we have launched a mobile trading experience, a referral and point system.

Currently, our native token $ZEX is about to be launched, which allows users to obtain platform governance rights through staking and benefit from trading incentives.

Deep Tide TechFlow: For Zeta Market, the two hottest topics recently should be $ZEX and Solana Layer2. In fact, there is currently much controversy about whether Solana needs Layer2. What improvements or changes do you think Layer 2 will bring to Solana? Is there a possibility of Layer3 in the future? Why?

Tristan:

Frankly, I think not every application in the Solana ecosystem needs L2 or an application chain. Most applications may not need it because Solana's L1 already has extremely high scalability. However, for applications like Zeta that are very concerned about performance, need to isolate block space, and require a lot of customization, L2 is a natural choice. Building our own specific Rollup on Solana will provide us with great flexibility in designing the exchange, as there may be some limitations in design space for Solana runtime at present.

Finally, I believe that there is currently no need to develop Layer 3 because it would lead to more bridge complexity, and the performance of L1 or L2 should already be satisfactory.

Deep Tide TechFlow: Building a Layer2 is more attractive than just a standalone perpetual Dex narrative, and the valuation will be higher. Have you considered this? Assuming you want to evaluate Zeta Market, you and your team probably don't want to simply benchmark it from the perspective of a perpetual Dex. So, in your opinion, from what perspective should Zeta Market's potential be evaluated?

Tristan:

Although the market situation may be as such, we did not choose to build L2 in order to attract a higher valuation. Our development is based on real products and user needs. We need to create an extremely flexible infrastructure layer to meet trading needs. Based on this demand, we need to have this technology stack rather than relying entirely on a general blockchain.

We have seen other leading perpetual contract exchanges also pursuing similar application chain routes, especially dYdX (now based on Cosmos) and Hyperliquid (building their own L1). Given the Zeta team's rich background in high-frequency trading (HFT), we are confident in maintaining strong competitiveness in this vertical field.

Furthermore, we believe that value will flow more easily to chains like Zeta because it is built on Solana, rather than being an isolated application chain. This means that bridging should be seamless, and we inherit Solana's security guarantees.

Deep Tide TechFlow: Why did Zeta Market choose to do Layer2? Could you please introduce the core features of Zeta X?

Tristan:

The main purpose of Zeta Markets developing a Layer 2 solution is to move the execution layer off-chain, significantly improving transaction speed and throughput. Currently, the block time on Solana is 400 milliseconds. Zeta's goal is to accelerate it by 100 times, achieving a 5-millisecond delay, and matching the TPS of top centralized exchanges like Binance. This upgrade will make the liquidity of perpetual contracts more efficient and provide users with the best liquidity in the market.

Zeta X will use an order book completely written in Rust and executed in zkVM. This allows for encrypted verification of each transaction through zero-knowledge proofs, providing users with ultra-fast, pre-confirmed transactions, achieving response speeds comparable to centralized exchanges, while maintaining the security and transparency of DeFi.

In addition, Zeta X will significantly reduce transaction costs and greatly enhance the user experience by eliminating the need for individual transaction signatures and reducing gas fees. Overall, Zeta X aims to integrate cutting-edge technology, such as Rust zkVM and Solana's high-performance base layer, to provide a non-custodial, fully verifiable perpetual contract exchange, with speed and ease of use comparable to centralized platforms.

Deep Tide TechFlow: When Solana launched Layer2, did you and your team encounter any resistance or controversy? How did you deal with it?

Tristan:

Initially, there were indeed some skeptics or critics who thought this was a denial of Solana. But I think these criticisms are not mature. In fact, Solana is very fast and has a lot of block space, making it an excellent choice for DA and consensus layers.

Fortunately, in the past few months, the controversy surrounding the construction of L2 on Solana has greatly diminished, as on the one hand, people realize that Solana as an ecosystem will exist in the long term, and on the other hand, many new teams are launching their own L2 or application chains built on Solana. Given Solana developers' relentless focus on improving product user experience, this point is widely accepted by developers and the community.

Designing ZEX: A lot of effort put into fairness and utility of the token

Deep Tide TechFlow: Next, I would like to ask about the token, which is a concern for many users. You posted your views on Token airdrops on Twitter: If not designed properly, airdrops may do more harm than good. So, for the design of the $ZEX airdrop, what are the core metrics or principles that Zeta follows?

Tristan:

We put a lot of effort into the design of the $ZEX airdrop. The distribution of the $ZEX airdrop follows the following principles:

Prioritize real activities and real usage patterns: We spent a lot of time identifying the core behaviors of real users, continuously adjusting and optimizing the rules, trying to allocate rewards to those users who truly create value for the exchange. Therefore, users who engage in long-term trading, have large trading volumes, and are generally active in the Solana ecosystem receive large allocations.

Reward according to point ratio: We chose linear distribution as our airdrop method, which means that the airdrop allocation is roughly converted according to the user's point ratio. This is fair because it means that the more a person trades, the more rewards they receive, and effectively avoids strange behavior where people create thousands of wallets to receive more rewards. The challenge of linear distribution is that sometimes some large holders on the platform may receive a large amount of airdrops, so we set a reasonable limit to make the distribution relatively fair in all aspects.

Eliminate low-quality, low-value users: We are very clear that many users at the end are either outright witches or will never use the platform in the long term. We decided to add a $500 trading volume limit to all wallets as a criterion, filtering out about 25% of wallets, which means that these low-value users receive fewer airdrops, while those who are truly trading receive more.

Thoroughly screen out false account activities: We spent a lot of time studying behavior patterns with the Allium team and identified thousands of wallets that clearly came from the same person, or were executing automatic, robot-like repetitive operations. We also excluded these wallets.

Deep Tide TechFlow: We conducted a simple survey among users around us, and some users feel that the utility of tokens for perpetual Dex is very limited, simply staking, fee deduction, etc. We know that $ZEX will also serve as the Gas token for Layer2. How do you think the utility of the token should be designed for a Perp DEX? Additionally, could you please share your complete design ideas for the utility of $ZEX?

Tristan:

In perpetual projects and the broader token economics, there is indeed a huge and as yet unexplored design space. I am particularly impressed by protocols like GMX and their GMX/GLP 2 token model, which allows users to earn LP rewards in their point pool model. This model is very unique and brings a lot of practical value.

Zeta's token design has some significant features. First, users can stake their tokens to obtain gZEX, which is the governance voting token of the Zeta platform. This is based on a voting custody model (we are one of the earliest projects on Solana to adopt this model), where the longer the staking period, the exponentially greater the gZEX obtained, thus encouraging long-term holding. gZEX gives users governance power and can also share up to 30% of the trading incentives from our token pool, further enhancing user returns.

Once L2 is launched, we also envision being able to use the ZEX token in our Rollup infrastructure. For example, the cost of running a validator network for zk Rollups is quite expensive, so local Rollup tokens can be used to reward participants running validators. We are still in the conceptual stage regarding this design, and we are committed to better integrating tokens into our new Rollup, so stay tuned!

I would not be surprised if Solana surpasses Ethereum in the future

Deep Tide TechFlow: Returning to the product itself, we have seen many DEX exploring new directions this year, such as Uniswap improving the AMM mechanism, Jupiter focusing on user experience, dYdX launching its own Chain, Bluefin aiming to build financial infrastructure, and so on. From a competitive perspective, what do you think are the innovation spaces for future DEX or Perp DEX?

Tristan:

I am delighted to see the vibrant innovation in the DeFi space. I believe that DeFi still has a long way to go, especially considering that the current scale of DeFi is far below that of the CeFi market, and the CeFi market is far below the traditional financial market. In my opinion, the future improvements in DeFi will come more from faster execution layers, cheaper block space, and more user-friendly wallet interfaces.

I believe we have already seen rapid progress in DeFi. Of course, Zeta is building an ultra-fast execution layer for perpetual contract trading, and Solana has also made great strides in reducing costs and improving efficiency. Additionally, we have seen interesting innovations around decentralized gateways, which allow users to directly access DeFi, and the recent integration of fast bridges like DeBridge allows us to attract users from more blockchains to deposit and trade on Zeta.

Deep Tide TechFlow: What position do you hope Zeta Market will have in the Solana ecosystem in the future? And expanding to the entire blockchain world, what do you expect Zeta Market to be like?

Tristan:

In the short term, we have already proven Zeta's leading position as a perpetual contract exchange on Solana in terms of speed, liquidity, and trading volume. As we move towards the vision of Rollup, our ambition is growing, and our goal in the future is to compete with all on-chain perpetual contract markets, become a leader in this space, and ultimately compete with centralized exchanges.

Ultimately, we hope to become a universal exchange, somewhat like a decentralized Robinhood. We hope to provide users with various products (such as spot and lending), all traded across collateral on the same risk system, accessible from any underlying chain, and providing a smooth onboarding experience for non-crypto native users.

Deep Tide TechFlow: One last question: Do you think Solana will surpass Ethereum?

Tristan:

It's difficult to predict the future, as the cryptocurrency space seems to undergo a round of evolution every few months, but I can say with certainty that if this were to happen, I would not be surprised.

As an early developer, I have been building projects on Solana for over 3 years, and I chose Solana because I believe the Solana team has done an excellent job in terms of technology and has successfully developed a very focused ecosystem. I think Ethereum was a great attempt at a general-purpose smart contract blockchain, but it has some obvious scalability bottlenecks, which is also why emerging public chains like Solana have been able to develop rapidly. With exciting developments like Firedancer, I believe Solana will be far ahead in blockchain scalability.

Furthermore, the Solana ecosystem has a large number of excellent developers, which is difficult for other public chains or competitors to replicate, so I believe these emerging competitors will need at least a few years to catch up to Solana. Nevertheless, Solana still lags far behind Ethereum in metrics such as TVL, but Solana is attracting more institutional adoption (such as Visa, Stripe, Shopify Pay, and PayPal), and all of this could change rapidly in the future.

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