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What are Optimistic Rollups?

What are Optimistic Rollups?
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Congestion on Ethereum prompted the development of diverse scaling solutions to address user frustrations with slow transactions and high fees. Different solutions were proposed to reduce congestion including sharding, which is expected to be integrated. 

In the meanwhile, Layer-2 or L2 blockchains and roll-ups, including ZK-Rollups and Optimistic Rollups, emerged as innovative strategies to alleviate congestion.

What are Optimistic Rollups?

As previously mentioned, Optimistic Rollups present a strategic response to the escalating transaction fees and congestion challenges on the Ethereum blockchain. As L2 scaling solutions, they alleviate the burden on the primary Ethereum chain (L1) by conducting transactions off-chain. 

Unlike side chains, which operate independently with their consensus mechanisms and native tokens, Optimistic Rollups maintain a close relationship with L1. They serve as an extension, inheriting the security and consensus mechanisms of the main chain. This integration ensures that L2 transactions leverage the same validators and mining power as L1, enhancing security while providing a scalable and customizable solution. 

Optimistic Rollups represent a pivotal advancement in addressing Ethereum's scalability issues, offering users a more efficient and cost-effective alternative within the broader Ethereum ecosystem.

How do Optimistic Rollups work?

Optimistic rollups begin with an optimistic assumption, treating all transactions as valid by default and processing them off-chain in batches. This optimistic outlook results in faster transaction speeds and lower fees as the burden on the Ethereum mainnet is significantly reduced.

Optimistic Rollups employ a fraud-proof mechanism to address the possibility of invalid transactions. Validators, chosen from the network, continuously monitor for suspicious activity. If they detect an invalid transaction, they submit a fraud-proof to the Ethereum mainnet.

Following the off-chain processing, each batch undergoes a “challenge period” during which anyone can submit a fraud-proof. If no challenges are raised within the set period, the batch is deemed valid and finalized on the mainnet.

Crucially, Optimistic Rollups maintain a robust security infrastructure by inheriting security from the Ethereum mainnet. Even in the event of L2 compromise, the mainnet can step in to revert fraudulent transactions, ensuring the integrity and reliability of the entire system.

What are Fraud Proofs? 

Fraud proofs play a crucial role in maintaining the integrity of L2 solutions like Optimistic Rollups within the Ethereum ecosystem. The process begins with transactions being bundled into batches on the L2 chain, operating under an optimistic assumption of validity until challenged.

During a “challenge period”, typically lasting a week, participants such as validators, users, or miners can submit a fraud-proof if they suspect a transaction within the batch is invalid. Fraud proofs take the form of structured demonstrations showcasing how a specific transaction or state transition leads to an invalid state. This is done by utilizing cryptographic proofs and Merkle trees to verify L2 state data integrity.

Upon submission of a valid fraud-proof, the challenged transaction or the entire batch is reverted on the main Ethereum chain. The submitter of the proof is rewarded, while the submitter of the incorrect transaction faces penalties. 

Two main types of fraud proofs exist, non-interactive and interactive.  Non-interactive can be computationally expensive. Interactive, on the other hand, involves a back-and-forth dialogue for efficient identification of faulty transactions within the batch.

Optimistic Rollups vs. ZK Rollups

Optimistic Rollups and ZK Rollups, both aiming to alleviate Ethereum's scalability challenges, diverge in their approaches with distinct advantages and trade-offs. Optimistic Rollups operate under an optimistic assumption, treating all transactions as valid by default. Only when someone submits a valid fraud proof during the challenge period is a transaction deemed potentially invalid. In contrast, ZK Rollups employ cryptographic zero-knowledge proofs to verify transaction validity without revealing sensitive details, ensuring enhanced privacy.

Regarding privacy, Optimistic Rollups expose all transaction data on the L2 chain, while ZK Rollups keep actual transaction details hidden, significantly bolstering privacy. Security mechanisms differ, with Optimistic Rollups relying on L1 chain security and ZK Rollups providing inherent security through mathematically guaranteed proofs. Transaction finality also varies, as Optimistic Rollups require the challenge period to expire, potentially delaying withdrawals, while ZK Rollups offer almost instant finality.

In terms of cost, Optimistic Rollups are generally cheaper due to less computationally expensive proof generation. However, potential fraud proofs and reversions may incur additional fees. ZK Rollups, while offering stronger privacy guarantees, involve more expensive proof generation, leading to higher transaction fees. Decentralization dynamics differ, with Optimistic Rollups allowing broad participation in the fraud proof mechanism, while ZK Rollups may necessitate specialized hardware, raising centralization concerns.

Use case suitability aligns with their characteristics – Optimistic Rollups find ideal applications in general-purpose scenarios, such as DeFi, NFTs, and payments. Meanwhile, ZK Rollups shine in privacy-centric applications like gaming and confidential transactions, where fast finality and high-frequency transactions are crucial. Each solution presents a unique set of benefits and considerations, catering to diverse needs within the Ethereum ecosystem

Chains Using Optimistic Rollups

Optimistic rollups have grown immensely in popularity since they were conceived. As of the time of writing this, over half a dozen chains have implemented Optimistic Rollups in some form or another. The list includes:

  • Optimism
  • Arbitrum
  • Metis
  • OMG Network
  • Boba Network
  • Aztec Protocol
  • Doen

Final Thoughts

As Ethereum's price and gas fees are anticipated to surge in the next bull run, Optimistic Rollups are poised for heightened popularity. Their efficient scalability, reduced transaction fees, and faster processing make them a compelling solution, attracting increased adoption.

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