Ethereum has solidified its own status as a leading network in the blockchain industry. With Ethereum’s rise of popularity and market dominance (which translates to an increase of user activity) comes the cost of scaling. Scalability has been a big issue that drags Ethereum’s momentum, with gas fees being an ongoing issue for several consecutive years. Optimistic rollups are a layer 2 solution native to Ethereum that solve this issue in a unique way.
What they do and how they work
Optimistic Rollups are built on the Ethereum network, tasked with the role of aggregating transactions off the Ethereum mainnet in order to declutter the network and make it run efficiently. Optimistic rollups leverage the function of smart contracts to divert transactions from the layer 1 mainnet to the layer 2 chain.
To fulfill peer-to-peer transactions on the rollup, users must deposit
a set minimum amount to the smart contract, which is then verified by a third-party called a sequencer. The sequencer’s role is to order and then activate the rollup once they can see both parties have participated. After verification, an entire batch of transactions and data are compressed into a block and relayed through Ethereum as a single transaction, thus saving space and mainnet processing time. Data such as chain condition, connected wallets, balances, live smart contracts, and other unique details are added to the rollup’s state everytime new data enters the rollup.
Fraud Proofs
Fraud Proofs are a crucial mechanism in optimistic rollups that prevent any inaccurate or fraudulent transactions. If a transaction from the verifier (the sequencer) doesn’t perfectly reflect the data already established on chain by the two parties committing the transactions, a challenger has the responsibility of realigning the information. They dispute the transaction by presenting their version of the branched data inside the smart contract, as well as sourcing the data from each party’s side during the transaction. A dummy reinvention of the transaction is then simulated on the network, and if it comes to the conclusion that the information does not fully translate with all available information, the batch of transactions is reverted back to its previous state on the rollup for correction.
The difference between ZK Rollups and Optimistic Rollups
ZK Rollups:
- Computed off-chain.
- Uses validity proof.
- Incontrovertible proof offline allows funds to be withdrawn immediately.
- Compress data by not displaying all transactions and history on the mainnet.
- Doesn’t support EVM* computation.
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- Is more costly to run than Optimistic rollups.
- Requires a trusted network to function currently, however this may change with further development as it is currently being explored by leading ZK rollups.
- No human or verification input is required for functionality.
- Cryptographic based.
Optimistic Rollups:
- Computed on-chain.
- Fraud proof mechanism.
- Requires a one week delay in withdrawing funds to verify and correct any dispute matters.
- Full open information on all transactions, however it does take up more data space on the mainnet than a ZK rollup.
- Can support and utilize EVM*.
- Cost efficient.
- Is trustless.
- Requires verifiers to function.
- Crypto-economic based.
*EVM – Ethereum Virtual Machine that allows the computation of arbitrary logic to support smart contracts.
