How Optimistic Rollups Enhance Ethereum's Performance and Security

Optimistic Rollups are the solution to the scalability problem that Ethereum has been plagued with over 20,000 transactions or transfers happening every second on the blockchain network and over 4000 or more Dapps deployed and actively used on the network. Ethereum initially never expected so much traffic and scale and this is where rollups enter to solve this problem of scaling. Therefore to solve these high amounts of computational costs and memory requirements required by users and dapp developers alike on the Ethereum blockchain, we introduce Optimistic Rollups - A solution for addressing the scalability problem of Ethereum in the Blockchain Trilemma. Rollups are a layer 2 blockchain construction that sought to improve and offload the amount of load and usage Ethereum, in general, gets off-chain. It is a way to improve the performance and reduce the latency of the Ethereum mainnet by moving both expensive computation and data storage “off-chain”. In this article, we will be covering the “Optimistic Rollups” type of rollup in the Ethereum blockchain how it works, and what it is. Disclaimer: Nothing in this article is financial advice and the author is not liable for any damages that may occur. Users are encouraged and required to do their research before investing in anything. P.S. ZK Rollups have already been covered by me in an alternative article in case you were looking for it. Introduction An Optimistic Rollup is a way to offload computation and transactions “off-chain” from the Ethereum blockchain for the purposes of reducing the amount of load or the compute that happens on the mainnet. Optimistic rollups are a layer 2 (L2) scaling solution designed to enhance Ethereum's throughput and latency by moving computation and data storage off-chain. This innovative approach significantly improves processing speeds by reducing computation on the main Ethereum chain. Unlike other scaling solutions, optimistic rollups ensure security by publishing transaction results on-chain, enhancing transparency, security, and decentralization. Here's a detailed breakdown of how optimistic rollups work and their key features: Transaction Processing: Transactions are executed off-chain and bundled together before being submitted as a single batch to the Ethereum mainnet. Fraud-Proving Mechanism: Optimistic rollups operate under the assumption that all off-chain transactions are valid unless challenged during a "challenge period". Sequencers and Validators: Operators, known as sequencers or validators, collect transactions, compress data, and create blocks on the Ethereum blockchain. Validators are required to deposit a bond to deter malicious actions. Challenge Period: Validators can dispute transactions during a challenge period, initiating fraud proofs if discrepancies are detected. This mechanism ensures transaction accuracy and network integrity. In conclusion, optimistic rollups play a crucial role in enhancing Ethereum's Layer 2 ecosystem by providing faster, cost-effective transactions while maintaining robust security measures. Their unique approach to off-chain transaction processing and fraud detection mechanisms make them a promising solution for improving Ethereum's scalability without compromising on security or trustlessness. The Architecture of Optimistic Rollups Optimistic rollups are a Layer 2 (L2) scaling solution designed to enhance the scalability and efficiency of the Ethereum network by processing transactions off-chain and then posting the results to the Ethereum Mainnet. This architecture significantly reduces the computational load on the Ethereum blockchain, leading to faster transaction times and lower fees. In an Optimistic Rollup (OR) model, proposers suggest new state roots resulting from applying transactions to the current state, while challengers verify and challenge incorrect state roots if necessary. The state transitions are determined by a deterministic function applied to a sequence of transactions starting from an initial state, usually organized into blocks with ordered transactions. Now, we will be exploring the architecture of this - The Optimistic Rollups are comprised of around 4 components which are - Sequencer: The sequencer is responsible for the batching of the transactions from various users into ordered blocks and committing to the order of the blocks. This order can be subject to rollup-specific constraints and the most important thing that makes these rollups “optimistic” is that the order of these blocks that represent bundled-together transactions is public in nature and immutable or resistant to change. Finally, all of the roll-up users at all times should come together to a consensus to agree on the relative ordering of these blocks. Proposer: The job of the proposer is to evolve the state of the virtual machine by applying sequenced transactions on it and committing to a new state by posting the updated state root to the rollup contract that initiated the rollup request. The result of evolving of the state machine is expected to be deterministic in nature and any party evolving through the same state by applying the same ordered list of transactions with the transition function is expected to arrive at the same evolved state. Challenger: The challenger nodes act like a crucial part of the optimistic rollups where they exercise a similar role to the proposer but instead of posting the new / updated state roots to the rollup, they challenge the state root in the rollup contract if it ends up computing to a different VM State than the one on the proposer making these rollup contracts secure and resistant to any form of unauthorized mutation thus making them “tamperproof” in nature. Rollup Contract’s Functions: These rollup contract functions have the responsibility to store the state roots, provide an interface for the purpose of storing sequenced transactions and also providing a challenge mechanism and they are in general split and distributed across multiple smart contracts in general. How do Transactions Take Place in the Optimistic Rollups The interactions between the components of the Optimistic Rollups in the architecture discussion will now be discussed and the flow that takes place for transactions to undergo an “Optimistic Rollup” process will be explored. Submission of a Transaction: The process starts off with the user submitting a transaction that is specific to a rollup service of the user’s choice in general like a JSON-RPC server before it gets forwarded to the sequencer that is responsible for the batching or grouping together of multiple transactions which is responsible for ordering these batches into blocks which will be sent to the chain and this is done mainly to reduce costs and increase efficiency. These blocks are sent on the chain to act like a source of truth and are called “rollup contracts”. Source of Truth: The roll-up contract aka the smart contract on-chain now stores the blocks ensuring data availability on the main net blockchain and serves as a reliable source of truth. New Block Discovery: Upon being notified about the existence of a new block, the proposer is responsible for its execution, updating the virtual machine’s state, and committing to the updated state of the rollup contract. Challengers: Now, after this the challengers step in and for a specific time window, they meticulously verify the state by retrieving data from the rollup contract and stay ready to initiate any challenges in case an inconsistency is found and if it is found, the challenger will obtain a reward and the proposer in question will be punished. This step proves to be crucial for ensuring that the roll-up contract has not been tampered with whatsoever. Users Monitoring: The users are also allowed to monitor the transaction outcomes in a secure manner through the Rollup API guaranteeing transparency and reliability throughout the process. Finally, Optimistic Rollups are considered "optimistic" because they assume off-chain transactions are valid and do not publish proofs of validity for transaction batches posted on-chain. Instead, they rely on a fraud-proving scheme to detect cases where transactions are not calculated correctly. If a fraud-proof succeeds, the roll-up protocol re-executes the transaction(s) and updates the rollup's state accordingly. If the rollup batch remains unchallenged after the challenge period elapses, it is deemed valid and accepted on Ethereum. This process allows Optimistic Rollups to offer significant improvements in scalability, with the ability to process transactions off-chain and then post the results on-chain, thereby reducing congestion on the Ethereum mainnet and improving transaction throughput. Virtual Machines in Optimistic Rollups Now, you may be wondering how a virtual machine is relevant to the process of verifying transactions and making sure they are tampered proof forming the crux of the process of optimistic rollups. We will be covering that now. The role of a virtual machine in optimistic rollups proves to be crucial mainly for the L2 scaling solutions operation and security. Optimistic rollups are designed to improve the scalability of the main network like Ethereum by executing transactions off-chain and then posting the results of the executed transaction on-chain while making sure that it is cryptographically secure [cryptographic guarantee] and has not been tampered with. The VM plays a crucial role in this process, facilitating the execution of transactions and maintaining the state of the rollup. Off-chain Virtual Machine (VM) The VM in the optimistic rollup forms the core infra where transactions are executed and it is separate from the Ethereum Virtual Machine. Execution Environment: The off-chain VM is where transactions are executed. It's separate from the Ethereum Virtual Machine (EVM) but is designed to be compatible with it. This compatibility allows developers to deploy smart contracts on Layer 2 rollups without significant changes to their codebases. State Management: The off-chain VM manages the state of the rollup, including account balances, contract states, and other relevant data. It is responsible for the processing of transactions and updating their states accordingly similar to how the EVM operates on the Ethereum mainnet [let me know if you want an article on this!] Fraud Proofs: Optimistic Rollups rely on a fraud-proving mechanism to ensure the validity of the transactions that take place and if a transaction has been challenged and found to be invalid, the rollup protocol can re-execute the transaction and update the state. This mechanism requires the off-chain VM to be able to recompute the state given a set of transactions. Ethereum Virtual Machine (EVM) Compatability Optimistic rollups are designed to be EVM-Compatible, meaning they support the EVM at the bytecode level and this compatibility allows developers to leverage existing Ethereum tooling, libraries, and infrastructure when building Layer 2 rollups. It also facilitates the migration of existing smart contracts to Layer 2 without extensive modifications. In summary, the role of the VM in Optimistic Rollups is to provide an execution environment for transactions, manage the state of the rollup, and facilitate the fraud-proving mechanism. Its compatibility with the EVM and integration with on-chain contracts ensure that Optimistic Rollups can offer scalability, security, and developer-friendly features while leveraging the Ethereum ecosystem. Optimistic Nature of Rollups Now, we will be discussing the optimistic nature of rollups and how it is a fundamental aspect of how Optimistic Rollups execute and operate, offering a unique approach to the scaling of Ethereum. Optimistic Rollups are layer 2 scaling solutions that improve Ethereum’s throughput and latency through the process of processing transactions off-chain and then posting their results on-chain. The term ‘optimistic’ refers to the assumption that all the transactions are valid until proven otherwise by challenger nodes. This is in stark contrast [no pun intended] to ZK Rollups and other rollups which require cryptographic proofs for every transaction to ensure their validity. How It Works Transaction Execution: Transactions are executed off-chain in a virtual machine (VM) that is separate from the Ethereum Virtual Machine (EVM). This off-chain VM is designed to be compatible with the EVM, allowing for the execution of smart contracts and the management of the state. Batching and Posting: After transactions are executed off-chain, they are bundled into batches and posted to the Ethereum mainnet as calldata. This process reduces the amount of data posted on-chain, which in turn lowers gas costs for users. Fraud Proofs: The optimistic nature of rollups comes into play during the challenge period. If someone finds an inconsistency in the posted batch of transactions, they can submit a fraud-proof. If the fraud-proof is successful, the roll-up protocol re-executes the transactions and updates the state accordingly. This mechanism ensures the integrity of the rollup's state. Security and Scalability: Optimistic Rollups derive their security from the Ethereum mainnet. The Ethereum network guarantees the correctness of off-chain computations and the availability of data behind these computations. This makes Optimistic Rollups more secure than pure off-chain scaling protocols and allows them to offer significant improvements in scalability. The optimistic nature of rollups is a key feature that distinguishes them from other scaling solutions. It allows for the efficient processing of transactions off-chain while maintaining the security and integrity of the Ethereum network. This approach enables Optimistic Rollups to offer scalability, cost-effectiveness, and developer-friendly features, making them a significant part of efforts to scale Ethereum using Layer 2 architecture. Fraud Proving Mechanism in Optimistic Rollups The fraud-proving mechanism in Optimistic Rollups (ORs) is a critical component that ensures the integrity and security of the rollup's state. It operates under the assumption that all transactions are valid until proven otherwise, which is why ORs are considered "optimistic." Here's a detailed explanation of how the fraud-proving mechanism works in Optimistic Rollups: Basics of Fraud Proving Assertions: In Optimistic Rollups, blocks are referred to as "assertions" because their validity is not immediately established. They are assumed to be valid until challenged. Challenge Period: After a rollup batch is submitted on Ethereum, there's a specific time window, known as the challenge period, during which anyone can challenge the results of a rollup transaction by computing a fraud proof. This period is typically around 7 days for most OR protocols. How Fraud Proofs Work Interactive Proving Schemes: Fraud proofs are interactive, meaning someone must post an assertion before another person can challenge it. The number of rounds of interaction required to compute the fraud-proof varies depending on the scheme. Single-round vs. Multi-round Proving: Initially, single-round interactive proving schemes were used, where disputed transactions were replayed on Layer 1 (Ethereum) to detect invalid assertions. However, due to the high gas costs and data requirements of re-executing transactions on L1, ORs are transitioning to multi-round interactive proving schemes, which are more efficient. Fraud Proof Computation: If a fraud-proof is successfully computed, the rollup protocol re-executes the transaction(s) and updates the rollup's state accordingly. The sequencer responsible for including the incorrectly executed transaction in a block receives a penalty. Importance of Fraud Proof Trustless Finality: Fraud proofs facilitate trustless finality in ORs, ensuring that a transaction, once valid, will eventually be confirmed. This is crucial for maintaining the integrity and security of the rollup. Security and Censorship Resistance: The validity of the chain relies on the existence of at least one honest node. Honest nodes can advance the chain correctly by either posting valid assertions or disputing invalid assertions. Malicious nodes who enter into disputes with the honest node will lose their stakes during the fraud-proving process. Pros and Cons of Fraud Proofs Pros: Fraud proofs guarantee trustless finality and allow honest minorities to secure the chain. They also benefit from "trustless liveness," meaning anyone can force the chain to advance by executing transactions and posting assertions. Cons: There can be delays in transaction finality due to the potential fraud challenges. Additionally, if there are no honest nodes across the network, a malicious operator could start stealing funds by posting invalid blocks and state commitments due to its “optimistic” nature. Optimism, A double-edged Sword The "optimism" in Optimistic Rollups refers to the assumption that all transactions are valid until they are proven otherwise. This optimistic approach has several implications, some of which are considered demerits or drawbacks in certain contexts: Delay in Transaction Finality Challenge Period: The optimistic nature of Optimistic Rollups introduces a challenge period during which transactions can be disputed. If a fraud-proof is submitted and validated, the transaction is reverted. This process can lead to delays in transaction finality, with waiting periods ranging from several days to weeks. Impact on DeFi and Gaming: While this delay is less of an issue for DeFi applications due to the fungible nature of tokens, it poses significant challenges for use cases like web3 gaming, where unique and non-fungible tokens (NFTs) are involved. The inability to immediately withdraw NFTs or other unique assets during the challenge period can hinder user experience and limit the applicability of Optimistic Rollups in certain domains. Capital Efficiency Withdrawal Constraints: The challenge period also affects capital efficiency. Users cannot withdraw their funds before the expiry of the dispute period which is for a week or so sometimes, which can be inconvenient. This limitation contrasts with Zero-Knowledge Rollups, which do not have a dispute period, allowing users to withdraw funds at any time. Security Concerns Reliance on Honest Validators: The optimistic roll-up system relies on the network's participants to keep each other honest. This creates a balance of trust and vigilance, but it also means that the system is vulnerable to censorship attacks, where a malicious sequencer or validator can delay or prevent valid transactions from being submitted to the main chain. Penalties for Malicious Validators: While penalties exist for malicious validators, the system's security is still dependent on the presence of honest nodes. If there are no honest nodes, a malicious operator can steal funds by posting invalid blocks and state commitments. ZK vs Optimistic Rollups Optimistic Rollups and ZK-Rollups are both Layer 2 scaling solutions designed to increase Ethereum's transaction throughput and reduce costs. They achieve these goals by processing transactions off-chain and then posting the results on-chain. However, they differ significantly in their approach to transaction validation, data posting, and overall efficiency. Here's a detailed comparison between the two: Transaction Validation Optimistic Rollups: Assume all transactions are valid until proven otherwise. This optimistic approach allows for quicker transaction processing but introduces a challenging period during which transactions can be disputed. If a fraud-proof is submitted and validated, the transaction is reverted. ZK-Rollups: Use zero-knowledge proofs to prove the validity of transactions without revealing the specifics of the transactions. This method ensures that transactions are validated before being posted to the Ethereum mainnet, reducing the need for a dispute period. Data Posting Optimistic Rollups: Post the entire transaction data to the Ethereum mainnet. This approach requires more data to be transmitted to Layer 1, which can increase costs and latency. ZK-Rollups: Post only the validity proofs to the Ethereum mainnet. This method reduces the amount of data posted to the mainnet, leading to lower costs and potentially faster transaction finality. Scalability and Costs Optimistic Rollups: They can handle more transactions per second than ZK-Rollups but require more gas to submit their batches to the main chain. They have lower entry barriers for developers and users, supporting any Ethereum smart contract without modification. ZK-Rollups: They tend to save more gas than Optimistic Rollups due to their use of zero-knowledge proofs. However, they have higher computational costs to generate these proofs and require developers to rewrite their smart contracts in a specific language. Security and Privacy Optimistic Rollups: The reliance of optimistic rollups on node validators to check each transaction and potentially dispute it if deemed not valid. This introduces a dispute period that can delay transaction finality, affecting capital efficiency and this delay period can last sometimes for a week or so. ZK-Rollups: ZK rollups provide enhanced privacy and security through the use of zero-knowledge proofs. They are immune to censorship attacks and do not rely on users or validators to challenge fraudulent transactions. However, they have a trusted setup assumption, which could be a vulnerability if the secret parameters used to create the zero-knowledge proofs are compromised. Latency Optimistic Rollups: Having a dispute period can delay transaction finality, ranging from several days to up to two weeks. This is necessary to give verifiers enough time to dispute suspect transactions via fraud proofs. ZK-Rollups: Potentially offer faster withdrawal times and lower transaction costs due to their use of cryptographic proofs, which eliminate the need for a dispute period. Programming Easiness Optimistic Rollups: Have lower entry barriers for developers and users. They support any Ethereum smart contract without modification and do not require special hardware or software. ZK-Rollups: Require developers to rewrite their smart contracts in a specific language and users to install a compatible wallet or browser extension. This makes them more complex and potentially not a fit for all use cases. In summary, while Optimistic Rollups offer quicker transaction processing and lower entry barriers, they introduce delays in transaction finality and rely on the honesty of network participants. ZK-Rollups, on the other hand, provide enhanced privacy and security through zero-knowledge proofs but are more complex and have higher computational costs. The choice between the two depends on the specific requirements of the application and the priorities of the developers and users involved. Popular Chains Using Optimistic Rollups Now, we will be covering the popular blockchains that are using optimistic rollups in them. Optimism: Optimism is an Optimistic Rollup that operates on top of the Ethereum blockchain. It aims to increase the scalability and reduce the cost of transactions by processing them off-chain and then submitting them to the Ethereum mainnet. Optimism uses a sequencer to manage block production and allows for the transfer of ETH or tokens between the Layer 1 (Ethereum) and Layer 2 (Optimism) networks. Arbitrum: Arbitrum is another Optimistic Rollup that also operates on the Ethereum blockchain. It focuses on providing a scalable and cost-effective solution for Ethereum applications by processing transactions off-chain and then submitting them to the Ethereum mainnet. Arbitrum is known for its efficient handling of smart contracts and its support for existing Solidity smart contracts. Metis Andromeda: Metis Andromeda is a Layer 2 scaling solution that aims to provide high throughput and low latency for decentralized applications (dApps) on the Ethereum blockchain. It uses a combination of technologies, including Optimistic Rollups, to achieve its scalability goals. Metis Andromeda is designed to be a flexible and scalable platform for dApp development. Mantle Network: The Mantle Network is a Layer 2 scaling solution that focuses on providing a high-throughput, low-latency environment for dApp development on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. Mantle Network aims to offer a cost-effective and scalable solution for Ethereum applications. Boba Network: Boba Network is an Optimistic Rollup that operates on the Ethereum blockchain. It aims to provide a scalable and cost-effective solution for Ethereum applications by processing transactions off-chain and then submitting them to the Ethereum mainnet. Boba Network is designed to be a flexible and scalable platform for dapp development. Base: Base is a Layer 2 scaling solution that aims to provide a high-throughput, low-latency environment for dApp development on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. The base network is designed to offer a cost-effective and scalable solution for Ethereum applications. Zora: Zora is a decentralized marketplace for digital content on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. Zora aims to provide a scalable and cost-effective solution for digital content creators and consumers. Each of these networks plays a role in the Optimism Rollup ecosystem, contributing to the scalability and efficiency of the Ethereum blockchain by processing transactions off-chain and then submitting them to the mainnet. Top 2 Optimism Rollup using Blockchains We will now be covering the top 2 most popular optimism rollups using blockchains which you should definitely be watching closely. Arbitrum and Optimism are the top two chains in the realm of optimistic rollups, each offering unique features and advantages that cater to different aspects of Ethereum's scalability needs. Here's a comparison between them : Similarities Layer 2 Scaling Solutions: Both Arbitrum and Optimism are Layer 2 scaling solutions designed to enhance Ethereum's scalability by processing transactions off-chain while maintaining security through periodic checkpoints on the Ethereum mainnet. Ethereum Compatibility: They are designed to be compatible with the Ethereum network, allowing developers to port their existing smart contracts onto these Layer 2 solutions seamlessly. Optimistic Rollups: Both employ an optimistic roll-up approach, processing most transactions off-chain and ensuring security through fraud proofs. Decentralization: They prioritize decentralization by relying on a network of validators to ensure the correctness of off-chain transactions. Differences Approach to Scalability: Arbitrum uses Truebit to verify the correctness of off-chain computations, adding an extra layer of security but potentially slower transaction speeds. Optimism, on the other hand, uses optimistic execution, assuming transactions are correct unless proven otherwise, allowing for faster transaction speeds but with a risk of fraudulent transactions. Development and Adoption: Optimism was launched earlier than Arbitrum, giving it a head start in terms of deployment and integration with existing applications. User Experience: The user experience may vary due to differences in how they handle transaction finality and dispute resolution. Performance: The performance comparison depends on various factors, and it's advisable to benchmark specific use cases against each solution to determine which one provides better performance for specific requirements. Account Abstraction: Arbitrum supports a wide range of ERC-20 tokens as collateral, offering users flexibility. Optimism currently only accepts Wrapped Ether (WETH) as collateral. Design Philosophy: Arbitrum focuses on minimizing changes to existing smart contracts, making it easier for developers to migrate their applications. Optimism takes a more opinionated approach, requiring certain code optimizations for better performance. Security Trade-offs: Arbitrum prioritizes speed by allowing immediate withdrawals from Layer 2 to Layer 1, potentially increasing fraud risk. Optimism's approach is more cautious, with longer withdrawal periods to mitigate fraud risk. Developer Experience: Optimism offers a more developer-friendly experience with extensive developer tools and documentation, supporting a wider range of programming languages. Arbitrum, while user-friendly, may require additional effort from developers due to its focus on maintaining compatibility with existing Ethereum contracts. Deployment Status: Optimism has been deployed on the Ethereum mainnet and is available for public use, while Arbitrum is currently in a testnet phase but is expected to launch on the mainnet soon. Both Arbitrum and Optimism are powerful Layer 2 scaling solutions with their own strengths and trade-offs. The choice between them depends on specific requirements, such as the need for speed, security, compatibility with existing Ethereum contracts, and developer experience. As both projects continue to evolve, they are expected to offer even more robust solutions for scaling Ethereum's transaction throughput and enhancing its overall scalability and efficiency. Real-World Use Cases of Optimistic Rollups Optimistic Rollups (ORs) are a Layer 2 scaling solution that significantly enhances the Ethereum blockchain's scalability and efficiency by processing transactions off-chain and then submitting them to the Ethereum mainnet. Here are some real-world use cases : Scaling Decentralized Applications (dApps): Optimistic Rollups are designed to scale dApps and interact with smart contracts in a more cost-effective and efficient manner. By moving computation and data storage off-chain, they reduce congestion on the Ethereum mainnet, thereby improving scalability and reducing transaction costs. Ethereum Scaling: Optimistic rollups are a major part of efforts to scale Ethereum using layer 2 architecture. They build on Ethereum's security and decentralization while offering cheaper fees and faster transactions. Projects like Arbitrum and Optimism are leading examples of optimistic rollup implementations. DeFi and Financial Applications: Optimistic rollups offer high throughput and reduced gas fees, making them suitable for applications like DeFi (Decentralized Finance). This is because they can process transactions off-chain, significantly reducing the cost and time associated with transactions on the Ethereum mainnet. Cross-Chain Bridges: While optimistic rollups are built on top of Ethereum’s base layer, assets on both chains are not natively compatible. However, cross-chain bridges allow for the transfer of funds from an L1 chain, like Ethereum, to an optimistic rollup, enabling more seamless and efficient cross-chain interactions. Testing and Development: Optimistic rollups also provide testnets, like the Optimistic Ethereum Kovan Testnet and Arbitrum Rinkeby Testnet, which simulate the behavior of the main network. These testnets allow developers to deploy and test smart contracts with minimal risk, facilitating the development and testing of dApps and other blockchain applications. Conclusion In conclusion, optimistic rollups represent a significant advancement in the scalability and efficiency of blockchain networks, particularly Ethereum. By leveraging layer 2 solutions, optimistic rollups enable the processing of thousands of transactions off-chain, significantly reducing congestion and improving transaction speeds and costs. This innovative approach not only enhances the user experience but also opens up new possibilities for decentralized applications (dApps) and smart contracts, making them more accessible and cost-effective. The adoption of optimistic rollups is not just a technical solution but a strategic move toward a more scalable and sustainable future for blockchain technology. As projects like Arbitrum and Optimism continue to develop and implement these solutions, we can expect to see a surge in the adoption of dApps and smart contracts, leading to a more vibrant and decentralized ecosystem. Moreover, the security and decentralization of optimistic rollups, combined with their compatibility with Ethereum's existing infrastructure, make them a compelling choice for developers and users alike. The ability to scale without compromising on security or decentralization is a testament to the potential of optimistic rollups to revolutionize the blockchain space. As we look forward, the implementation and optimization of optimistic rollups will undoubtedly play a crucial role in the future of blockchain technology. By addressing the scalability challenges that have long plagued Ethereum and other blockchain networks, optimistic rollups pave the way for a more scalable, efficient, and user-friendly blockchain ecosystem. Optimistic Rollups are the solution to the scalability problem that Ethereum has been plagued with over 20,000 transactions or transfers happening every second on the blockchain network and over 4000 or more Dapps deployed and actively used on the network. Ethereum initially never expected so much traffic and scale and this is where rollups enter to solve this problem of scaling. Therefore to solve these high amounts of computational costs and memory requirements required by users and dapp developers alike on the Ethereum blockchain, we introduce Optimistic Rollups - A solution for addressing the scalability problem of Ethereum in the Blockchain Trilemma . Blockchain Trilemma Rollups are a layer 2 blockchain construction that sought to improve and offload the amount of load and usage Ethereum, in general, gets off-chain. It is a way to improve the performance and reduce the latency of the Ethereum mainnet by moving both expensive computation and data storage “off-chain”. In this article, we will be covering the “Optimistic Rollups” type of rollup in the Ethereum blockchain how it works, and what it is. Disclaimer: Nothing in this article is financial advice and the author is not liable for any damages that may occur. Users are encouraged and required to do their research before investing in anything. Disclaimer: Nothing in this article is financial advice and the author is not liable for any damages that may occur. Users are encouraged and required to do their research before investing in anything. P.S. ZK Rollups have already been covered by me in an alternative article in case you were looking for it. P.S. ZK Rollups have already been covered by me in an alternative article in case you were looking for it. Introduction An Optimistic Rollup is a way to offload computation and transactions “off-chain” from the Ethereum blockchain for the purposes of reducing the amount of load or the compute that happens on the mainnet. Optimistic rollups are a layer 2 (L2) scaling solution designed to enhance Ethereum's throughput and latency by moving computation and data storage off-chain. This innovative approach significantly improves processing speeds by reducing computation on the main Ethereum chain. Unlike other scaling solutions, optimistic rollups ensure security by publishing transaction results on-chain, enhancing transparency, security, and decentralization. Here's a detailed breakdown of how optimistic rollups work and their key features: Transaction Processing: Transactions are executed off-chain and bundled together before being submitted as a single batch to the Ethereum mainnet. Transaction Processing : Transactions are executed off-chain and bundled together before being submitted as a single batch to the Ethereum mainnet. Transaction Processing Fraud-Proving Mechanism: Optimistic rollups operate under the assumption that all off-chain transactions are valid unless challenged during a "challenge period". Fraud-Proving Mechanism : Optimistic rollups operate under the assumption that all off-chain transactions are valid unless challenged during a "challenge period". Fraud-Proving Mechanism Sequencers and Validators: Operators, known as sequencers or validators, collect transactions, compress data, and create blocks on the Ethereum blockchain. Validators are required to deposit a bond to deter malicious actions. Sequencers and Validators : Operators, known as sequencers or validators, collect transactions, compress data, and create blocks on the Ethereum blockchain. Validators are required to deposit a bond to deter malicious actions. Sequencers and Validators Challenge Period: Validators can dispute transactions during a challenge period, initiating fraud proofs if discrepancies are detected. This mechanism ensures transaction accuracy and network integrity. Challenge Period : Validators can dispute transactions during a challenge period, initiating fraud proofs if discrepancies are detected. This mechanism ensures transaction accuracy and network integrity. Challenge Period In conclusion, optimistic rollups play a crucial role in enhancing Ethereum's Layer 2 ecosystem by providing faster, cost-effective transactions while maintaining robust security measures. Their unique approach to off-chain transaction processing and fraud detection mechanisms make them a promising solution for improving Ethereum's scalability without compromising on security or trustlessness. The Architecture of Optimistic Rollups Optimistic rollups are a Layer 2 (L2) scaling solution designed to enhance the scalability and efficiency of the Ethereum network by processing transactions off-chain and then posting the results to the Ethereum Mainnet. This architecture significantly reduces the computational load on the Ethereum blockchain, leading to faster transaction times and lower fees. In an Optimistic Rollup (OR) model, proposers suggest new state roots resulting from applying transactions to the current state, while challengers verify and challenge incorrect state roots if necessary. The state transitions are determined by a deterministic function applied to a sequence of transactions starting from an initial state, usually organized into blocks with ordered transactions. Now, we will be exploring the architecture of this - architecture The Optimistic Rollups are comprised of around 4 components which are - Sequencer: The sequencer is responsible for the batching of the transactions from various users into ordered blocks and committing to the order of the blocks. This order can be subject to rollup-specific constraints and the most important thing that makes these rollups “optimistic” is that the order of these blocks that represent bundled-together transactions is public in nature and immutable or resistant to change. Finally, all of the roll-up users at all times should come together to a consensus to agree on the relative ordering of these blocks. Sequencer: The sequencer is responsible for the batching of the transactions from various users into ordered blocks and committing to the order of the blocks. This order can be subject to rollup-specific constraints and the most important thing that makes these rollups “optimistic” is that the order of these blocks that represent bundled-together transactions is public in nature and immutable or resistant to change. Finally, all of the roll-up users at all times should come together to a consensus to agree on the relative ordering of these blocks. Sequencer: Proposer: The job of the proposer is to evolve the state of the virtual machine by applying sequenced transactions on it and committing to a new state by posting the updated state root to the rollup contract that initiated the rollup request. The result of evolving of the state machine is expected to be deterministic in nature and any party evolving through the same state by applying the same ordered list of transactions with the transition function is expected to arrive at the same evolved state. Proposer: The job of the proposer is to evolve the state of the virtual machine by applying sequenced transactions on it and committing to a new state by posting the updated state root to the rollup contract that initiated the rollup request. The result of evolving of the state machine is expected to be deterministic in nature and any party evolving through the same state by applying the same ordered list of transactions with the transition function is expected to arrive at the same evolved state. Proposer: Challenger: The challenger nodes act like a crucial part of the optimistic rollups where they exercise a similar role to the proposer but instead of posting the new / updated state roots to the rollup, they challenge the state root in the rollup contract if it ends up computing to a different VM State than the one on the proposer making these rollup contracts secure and resistant to any form of unauthorized mutation thus making them “tamperproof” in nature. Challenger: The challenger nodes act like a crucial part of the optimistic rollups where they exercise a similar role to the proposer but instead of posting the new / updated state roots to the rollup, they challenge the state root in the rollup contract if it ends up computing to a different VM State than the one on the proposer making these rollup contracts secure and resistant to any form of unauthorized mutation thus making them “tamperproof” in nature. Challenger: Rollup Contract’s Functions: These rollup contract functions have the responsibility to store the state roots, provide an interface for the purpose of storing sequenced transactions and also providing a challenge mechanism and they are in general split and distributed across multiple smart contracts in general. Rollup Contract’s Functions: These rollup contract functions have the responsibility to store the state roots, provide an interface for the purpose of storing sequenced transactions and also providing a challenge mechanism and they are in general split and distributed across multiple smart contracts in general. Rollup Contract’s Functions: How do Transactions Take Place in the Optimistic Rollups The interactions between the components of the Optimistic Rollups in the architecture discussion will now be discussed and the flow that takes place for transactions to undergo an “Optimistic Rollup” process will be explored. Submission of a Transaction: The process starts off with the user submitting a transaction that is specific to a rollup service of the user’s choice in general like a JSON-RPC server before it gets forwarded to the sequencer that is responsible for the batching or grouping together of multiple transactions which is responsible for ordering these batches into blocks which will be sent to the chain and this is done mainly to reduce costs and increase efficiency. These blocks are sent on the chain to act like a source of truth and are called “rollup contracts”. Submission of a Transaction: The process starts off with the user submitting a transaction that is specific to a rollup service of the user’s choice in general like a JSON-RPC server before it gets forwarded to the sequencer that is responsible for the batching or grouping together of multiple transactions which is responsible for ordering these batches into blocks which will be sent to the chain and this is done mainly to reduce costs and increase efficiency. These blocks are sent on the chain to act like a source of truth and are called “rollup contracts”. Submission of a Transaction: user Source of Truth: The roll-up contract aka the smart contract on-chain now stores the blocks ensuring data availability on the main net blockchain and serves as a reliable source of truth. Source of Truth: The roll-up contract aka the smart contract on-chain now stores the blocks ensuring data availability on the main net blockchain and serves as a reliable source of truth. Source of Truth: New Block Discovery: Upon being notified about the existence of a new block, the proposer is responsible for its execution, updating the virtual machine’s state, and committing to the updated state of the rollup contract. New Block Discovery: Upon being notified about the existence of a new block, the proposer is responsible for its execution, updating the virtual machine’s state, and committing to the updated state of the rollup contract. New Block Discovery: Challengers: Now, after this the challengers step in and for a specific time window, they meticulously verify the state by retrieving data from the rollup contract and stay ready to initiate any challenges in case an inconsistency is found and if it is found, the challenger will obtain a reward and the proposer in question will be punished. This step proves to be crucial for ensuring that the roll-up contract has not been tampered with whatsoever. Challengers: Now, after this the challengers step in and for a specific time window, they meticulously verify the state by retrieving data from the rollup contract and stay ready to initiate any challenges in case an inconsistency is found and if it is found, the challenger will obtain a reward and the proposer in question will be punished. This step proves to be crucial for ensuring that the roll-up contract has not been tampered with whatsoever. Challengers: Users Monitoring: The users are also allowed to monitor the transaction outcomes in a secure manner through the Rollup API guaranteeing transparency and reliability throughout the process. Users Monitoring: The users are also allowed to monitor the transaction outcomes in a secure manner through the Rollup API guaranteeing transparency and reliability throughout the process. Users Monitoring: Finally, Optimistic Rollups are considered "optimistic" because they assume off-chain transactions are valid and do not publish proofs of validity for transaction batches posted on-chain. Instead, they rely on a fraud-proving scheme to detect cases where transactions are not calculated correctly. If a fraud-proof succeeds, the roll-up protocol re-executes the transaction(s) and updates the rollup's state accordingly. If the rollup batch remains unchallenged after the challenge period elapses, it is deemed valid and accepted on Ethereum. This process allows Optimistic Rollups to offer significant improvements in scalability, with the ability to process transactions off-chain and then post the results on-chain, thereby reducing congestion on the Ethereum mainnet and improving transaction throughput. Virtual Machines in Optimistic Rollups Now, you may be wondering how a virtual machine is relevant to the process of verifying transactions and making sure they are tampered proof forming the crux of the process of optimistic rollups. We will be covering that now. The role of a virtual machine in optimistic rollups proves to be crucial mainly for the L2 scaling solutions operation and security. Optimistic rollups are designed to improve the scalability of the main network like Ethereum by executing transactions off-chain and then posting the results of the executed transaction on-chain while making sure that it is cryptographically secure [cryptographic guarantee] and has not been tampered with. The VM plays a crucial role in this process, facilitating the execution of transactions and maintaining the state of the rollup. Off-chain Virtual Machine (VM) The VM in the optimistic rollup forms the core infra where transactions are executed and it is separate from the Ethereum Virtual Machine . Ethereum Virtual Machine Execution Environment: The off-chain VM is where transactions are executed. It's separate from the Ethereum Virtual Machine (EVM) but is designed to be compatible with it. This compatibility allows developers to deploy smart contracts on Layer 2 rollups without significant changes to their codebases. Execution Environment : The off-chain VM is where transactions are executed. It's separate from the Ethereum Virtual Machine (EVM) but is designed to be compatible with it. This compatibility allows developers to deploy smart contracts on Layer 2 rollups without significant changes to their codebases. Execution Environment State Management: The off-chain VM manages the state of the rollup, including account balances, contract states, and other relevant data. It is responsible for the processing of transactions and updating their states accordingly similar to how the EVM operates on the Ethereum mainnet [let me know if you want an article on this!] State Management: The off-chain VM manages the state of the rollup, including account balances, contract states, and other relevant data. It is responsible for the processing of transactions and updating their states accordingly similar to how the EVM operates on the Ethereum mainnet [let me know if you want an article on this!] State Management: Fraud Proofs: Optimistic Rollups rely on a fraud-proving mechanism to ensure the validity of the transactions that take place and if a transaction has been challenged and found to be invalid, the rollup protocol can re-execute the transaction and update the state. This mechanism requires the off-chain VM to be able to recompute the state given a set of transactions. Fraud Proofs: Optimistic Rollups rely on a fraud-proving mechanism to ensure the validity of the transactions that take place and if a transaction has been challenged and found to be invalid, the rollup protocol can re-execute the transaction and update the state. This mechanism requires the off-chain VM to be able to recompute the state given a set of transactions. Fraud Proofs: Ethereum Virtual Machine (EVM) Compatability Optimistic rollups are designed to be EVM-Compatible, meaning they support the EVM at the bytecode level and this compatibility allows developers to leverage existing Ethereum tooling, libraries, and infrastructure when building Layer 2 rollups. It also facilitates the migration of existing smart contracts to Layer 2 without extensive modifications. In summary, the role of the VM in Optimistic Rollups is to provide an execution environment for transactions, manage the state of the rollup, and facilitate the fraud-proving mechanism. Its compatibility with the EVM and integration with on-chain contracts ensure that Optimistic Rollups can offer scalability, security, and developer-friendly features while leveraging the Ethereum ecosystem. Optimistic Nature of Rollups Now, we will be discussing the optimistic nature of rollups and how it is a fundamental aspect of how Optimistic Rollups execute and operate, offering a unique approach to the scaling of Ethereum. Optimistic Rollups are layer 2 scaling solutions that improve Ethereum’s throughput and latency through the process of processing transactions off-chain and then posting their results on-chain. The term ‘optimistic’ refers to the assumption that all the transactions are valid until proven otherwise by challenger nodes. This is in stark contrast [no pun intended] to ZK Rollups and other rollups which require cryptographic proofs for every transaction to ensure their validity. How It Works Transaction Execution: Transactions are executed off-chain in a virtual machine (VM) that is separate from the Ethereum Virtual Machine (EVM). This off-chain VM is designed to be compatible with the EVM, allowing for the execution of smart contracts and the management of the state. Transaction Execution : Transactions are executed off-chain in a virtual machine (VM) that is separate from the Ethereum Virtual Machine (EVM). This off-chain VM is designed to be compatible with the EVM, allowing for the execution of smart contracts and the management of the state. Transaction Execution Batching and Posting: After transactions are executed off-chain, they are bundled into batches and posted to the Ethereum mainnet as calldata. This process reduces the amount of data posted on-chain, which in turn lowers gas costs for users. Batching and Posting : After transactions are executed off-chain, they are bundled into batches and posted to the Ethereum mainnet as calldata. This process reduces the amount of data posted on-chain, which in turn lowers gas costs for users. Batching and Posting Fraud Proofs: The optimistic nature of rollups comes into play during the challenge period. If someone finds an inconsistency in the posted batch of transactions, they can submit a fraud-proof. If the fraud-proof is successful, the roll-up protocol re-executes the transactions and updates the state accordingly. This mechanism ensures the integrity of the rollup's state. Fraud Proofs : The optimistic nature of rollups comes into play during the challenge period. If someone finds an inconsistency in the posted batch of transactions, they can submit a fraud-proof. If the fraud-proof is successful, the roll-up protocol re-executes the transactions and updates the state accordingly. This mechanism ensures the integrity of the rollup's state. Fraud Proofs Security and Scalability: Optimistic Rollups derive their security from the Ethereum mainnet. The Ethereum network guarantees the correctness of off-chain computations and the availability of data behind these computations. This makes Optimistic Rollups more secure than pure off-chain scaling protocols and allows them to offer significant improvements in scalability. Security and Scalability : Optimistic Rollups derive their security from the Ethereum mainnet. The Ethereum network guarantees the correctness of off-chain computations and the availability of data behind these computations. This makes Optimistic Rollups more secure than pure off-chain scaling protocols and allows them to offer significant improvements in scalability. Security and Scalability The optimistic nature of rollups is a key feature that distinguishes them from other scaling solutions. It allows for the efficient processing of transactions off-chain while maintaining the security and integrity of the Ethereum network. This approach enables Optimistic Rollups to offer scalability, cost-effectiveness, and developer-friendly features, making them a significant part of efforts to scale Ethereum using Layer 2 architecture. Fraud Proving Mechanism in Optimistic Rollups The fraud-proving mechanism in Optimistic Rollups (ORs) is a critical component that ensures the integrity and security of the rollup's state. It operates under the assumption that all transactions are valid until proven otherwise, which is why ORs are considered "optimistic." Here's a detailed explanation of how the fraud-proving mechanism works in Optimistic Rollups: Basics of Fraud Proving Assertions: In Optimistic Rollups, blocks are referred to as "assertions" because their validity is not immediately established. They are assumed to be valid until challenged. Assertions : In Optimistic Rollups, blocks are referred to as "assertions" because their validity is not immediately established. They are assumed to be valid until challenged. Assertions Challenge Period: After a rollup batch is submitted on Ethereum, there's a specific time window, known as the challenge period, during which anyone can challenge the results of a rollup transaction by computing a fraud proof. This period is typically around 7 days for most OR protocols. Challenge Period : After a rollup batch is submitted on Ethereum, there's a specific time window, known as the challenge period, during which anyone can challenge the results of a rollup transaction by computing a fraud proof. This period is typically around 7 days for most OR protocols. Challenge Period How Fraud Proofs Work Interactive Proving Schemes: Fraud proofs are interactive, meaning someone must post an assertion before another person can challenge it. The number of rounds of interaction required to compute the fraud-proof varies depending on the scheme. Interactive Proving Schemes : Fraud proofs are interactive, meaning someone must post an assertion before another person can challenge it. The number of rounds of interaction required to compute the fraud-proof varies depending on the scheme. Interactive Proving Schemes Single-round vs. Multi-round Proving: Initially, single-round interactive proving schemes were used, where disputed transactions were replayed on Layer 1 (Ethereum) to detect invalid assertions. However, due to the high gas costs and data requirements of re-executing transactions on L1, ORs are transitioning to multi-round interactive proving schemes, which are more efficient. Single-round vs. Multi-round Proving : Initially, single-round interactive proving schemes were used, where disputed transactions were replayed on Layer 1 (Ethereum) to detect invalid assertions. However, due to the high gas costs and data requirements of re-executing transactions on L1, ORs are transitioning to multi-round interactive proving schemes, which are more efficient. Single-round vs. Multi-round Proving Fraud Proof Computation: If a fraud-proof is successfully computed, the rollup protocol re-executes the transaction(s) and updates the rollup's state accordingly. The sequencer responsible for including the incorrectly executed transaction in a block receives a penalty. Fraud Proof Computation : If a fraud-proof is successfully computed, the rollup protocol re-executes the transaction(s) and updates the rollup's state accordingly. The sequencer responsible for including the incorrectly executed transaction in a block receives a penalty. Fraud Proof Computation Importance of Fraud Proof Trustless Finality: Fraud proofs facilitate trustless finality in ORs, ensuring that a transaction, once valid, will eventually be confirmed. This is crucial for maintaining the integrity and security of the rollup. Trustless Finality : Fraud proofs facilitate trustless finality in ORs, ensuring that a transaction, once valid, will eventually be confirmed. This is crucial for maintaining the integrity and security of the rollup. Trustless Finality Security and Censorship Resistance: The validity of the chain relies on the existence of at least one honest node. Honest nodes can advance the chain correctly by either posting valid assertions or disputing invalid assertions. Malicious nodes who enter into disputes with the honest node will lose their stakes during the fraud-proving process. Security and Censorship Resistance : The validity of the chain relies on the existence of at least one honest node. Honest nodes can advance the chain correctly by either posting valid assertions or disputing invalid assertions. Malicious nodes who enter into disputes with the honest node will lose their stakes during the fraud-proving process. Security and Censorship Resistance Pros and Cons of Fraud Proofs Pros: Fraud proofs guarantee trustless finality and allow honest minorities to secure the chain. They also benefit from "trustless liveness," meaning anyone can force the chain to advance by executing transactions and posting assertions. Pros : Fraud proofs guarantee trustless finality and allow honest minorities to secure the chain. They also benefit from "trustless liveness," meaning anyone can force the chain to advance by executing transactions and posting assertions. Pros Cons: There can be delays in transaction finality due to the potential fraud challenges. Additionally, if there are no honest nodes across the network, a malicious operator could start stealing funds by posting invalid blocks and state commitments due to its “optimistic” nature. Cons: There can be delays in transaction finality due to the potential fraud challenges. Additionally, if there are no honest nodes across the network, a malicious operator could start stealing funds by posting invalid blocks and state commitments due to its “optimistic” nature. Cons: Optimism, A double-edged Sword The "optimism" in Optimistic Rollups refers to the assumption that all transactions are valid until they are proven otherwise. This optimistic approach has several implications, some of which are considered demerits or drawbacks in certain contexts: Delay in Transaction Finality Challenge Period: The optimistic nature of Optimistic Rollups introduces a challenge period during which transactions can be disputed. If a fraud-proof is submitted and validated, the transaction is reverted. This process can lead to delays in transaction finality, with waiting periods ranging from several days to weeks. Challenge Period : The optimistic nature of Optimistic Rollups introduces a challenge period during which transactions can be disputed. If a fraud-proof is submitted and validated, the transaction is reverted. This process can lead to delays in transaction finality, with waiting periods ranging from several days to weeks. Challenge Period Impact on DeFi and Gaming: While this delay is less of an issue for DeFi applications due to the fungible nature of tokens, it poses significant challenges for use cases like web3 gaming, where unique and non-fungible tokens (NFTs) are involved. The inability to immediately withdraw NFTs or other unique assets during the challenge period can hinder user experience and limit the applicability of Optimistic Rollups in certain domains. Impact on DeFi and Gaming : While this delay is less of an issue for DeFi applications due to the fungible nature of tokens, it poses significant challenges for use cases like web3 gaming, where unique and non-fungible tokens (NFTs) are involved. The inability to immediately withdraw NFTs or other unique assets during the challenge period can hinder user experience and limit the applicability of Optimistic Rollups in certain domains. Impact on DeFi and Gaming Capital Efficiency Withdrawal Constraints: The challenge period also affects capital efficiency. Users cannot withdraw their funds before the expiry of the dispute period which is for a week or so sometimes, which can be inconvenient. This limitation contrasts with Zero-Knowledge Rollups, which do not have a dispute period, allowing users to withdraw funds at any time. Withdrawal Constraints : The challenge period also affects capital efficiency. Users cannot withdraw their funds before the expiry of the dispute period which is for a week or so sometimes, which can be inconvenient. This limitation contrasts with Zero-Knowledge Rollups, which do not have a dispute period, allowing users to withdraw funds at any time. Withdrawal Constraints Security Concerns Reliance on Honest Validators: The optimistic roll-up system relies on the network's participants to keep each other honest. This creates a balance of trust and vigilance, but it also means that the system is vulnerable to censorship attacks, where a malicious sequencer or validator can delay or prevent valid transactions from being submitted to the main chain. Reliance on Honest Validators : The optimistic roll-up system relies on the network's participants to keep each other honest. This creates a balance of trust and vigilance, but it also means that the system is vulnerable to censorship attacks, where a malicious sequencer or validator can delay or prevent valid transactions from being submitted to the main chain. Reliance on Honest Validators Penalties for Malicious Validators: While penalties exist for malicious validators, the system's security is still dependent on the presence of honest nodes. If there are no honest nodes, a malicious operator can steal funds by posting invalid blocks and state commitments. Penalties for Malicious Validators : While penalties exist for malicious validators, the system's security is still dependent on the presence of honest nodes. If there are no honest nodes, a malicious operator can steal funds by posting invalid blocks and state commitments. Penalties for Malicious Validators ZK vs Optimistic Rollups Optimistic Rollups and ZK-Rollups are both Layer 2 scaling solutions designed to increase Ethereum's transaction throughput and reduce costs. They achieve these goals by processing transactions off-chain and then posting the results on-chain. However, they differ significantly in their approach to transaction validation, data posting, and overall efficiency. Here's a detailed comparison between the two: Transaction Validation Optimistic Rollups: Assume all transactions are valid until proven otherwise. This optimistic approach allows for quicker transaction processing but introduces a challenging period during which transactions can be disputed. If a fraud-proof is submitted and validated, the transaction is reverted. Optimistic Rollups : Assume all transactions are valid until proven otherwise. This optimistic approach allows for quicker transaction processing but introduces a challenging period during which transactions can be disputed. If a fraud-proof is submitted and validated, the transaction is reverted. Optimistic Rollups ZK-Rollups: Use zero-knowledge proofs to prove the validity of transactions without revealing the specifics of the transactions. This method ensures that transactions are validated before being posted to the Ethereum mainnet, reducing the need for a dispute period. ZK-Rollups : Use zero-knowledge proofs to prove the validity of transactions without revealing the specifics of the transactions. This method ensures that transactions are validated before being posted to the Ethereum mainnet, reducing the need for a dispute period. ZK-Rollups Data Posting Optimistic Rollups: Post the entire transaction data to the Ethereum mainnet. This approach requires more data to be transmitted to Layer 1, which can increase costs and latency. Optimistic Rollups : Post the entire transaction data to the Ethereum mainnet. This approach requires more data to be transmitted to Layer 1, which can increase costs and latency. Optimistic Rollups ZK-Rollups: Post only the validity proofs to the Ethereum mainnet. This method reduces the amount of data posted to the mainnet, leading to lower costs and potentially faster transaction finality. ZK-Rollups : Post only the validity proofs to the Ethereum mainnet. This method reduces the amount of data posted to the mainnet, leading to lower costs and potentially faster transaction finality. ZK-Rollups Scalability and Costs Optimistic Rollups: They can handle more transactions per second than ZK-Rollups but require more gas to submit their batches to the main chain. They have lower entry barriers for developers and users, supporting any Ethereum smart contract without modification. Optimistic Rollups : They can handle more transactions per second than ZK-Rollups but require more gas to submit their batches to the main chain. They have lower entry barriers for developers and users, supporting any Ethereum smart contract without modification. Optimistic Rollups ZK-Rollups: They tend to save more gas than Optimistic Rollups due to their use of zero-knowledge proofs. However, they have higher computational costs to generate these proofs and require developers to rewrite their smart contracts in a specific language. ZK-Rollups : They tend to save more gas than Optimistic Rollups due to their use of zero-knowledge proofs. However, they have higher computational costs to generate these proofs and require developers to rewrite their smart contracts in a specific language. ZK-Rollups Security and Privacy Optimistic Rollups: The reliance of optimistic rollups on node validators to check each transaction and potentially dispute it if deemed not valid. This introduces a dispute period that can delay transaction finality, affecting capital efficiency and this delay period can last sometimes for a week or so. Optimistic Rollups : The reliance of optimistic rollups on node validators to check each transaction and potentially dispute it if deemed not valid. This introduces a dispute period that can delay transaction finality, affecting capital efficiency and this delay period can last sometimes for a week or so. Optimistic Rollups ZK-Rollups: ZK rollups provide enhanced privacy and security through the use of zero-knowledge proofs. They are immune to censorship attacks and do not rely on users or validators to challenge fraudulent transactions. However, they have a trusted setup assumption, which could be a vulnerability if the secret parameters used to create the zero-knowledge proofs are compromised. ZK-Rollups : ZK rollups provide enhanced privacy and security through the use of zero-knowledge proofs. They are immune to censorship attacks and do not rely on users or validators to challenge fraudulent transactions. However, they have a trusted setup assumption, which could be a vulnerability if the secret parameters used to create the zero-knowledge proofs are compromised. ZK-Rollups Latency Optimistic Rollups: Having a dispute period can delay transaction finality, ranging from several days to up to two weeks. This is necessary to give verifiers enough time to dispute suspect transactions via fraud proofs. Optimistic Rollups : Having a dispute period can delay transaction finality, ranging from several days to up to two weeks. This is necessary to give verifiers enough time to dispute suspect transactions via fraud proofs. Optimistic Rollups ZK-Rollups: Potentially offer faster withdrawal times and lower transaction costs due to their use of cryptographic proofs, which eliminate the need for a dispute period. ZK-Rollups : Potentially offer faster withdrawal times and lower transaction costs due to their use of cryptographic proofs, which eliminate the need for a dispute period. ZK-Rollups Programming Easiness Programming Easiness Optimistic Rollups: Have lower entry barriers for developers and users. They support any Ethereum smart contract without modification and do not require special hardware or software. Optimistic Rollups : Have lower entry barriers for developers and users. They support any Ethereum smart contract without modification and do not require special hardware or software. Optimistic Rollups ZK-Rollups: Require developers to rewrite their smart contracts in a specific language and users to install a compatible wallet or browser extension. This makes them more complex and potentially not a fit for all use cases. ZK-Rollups : Require developers to rewrite their smart contracts in a specific language and users to install a compatible wallet or browser extension. This makes them more complex and potentially not a fit for all use cases. ZK-Rollups In summary, while Optimistic Rollups offer quicker transaction processing and lower entry barriers, they introduce delays in transaction finality and rely on the honesty of network participants. ZK-Rollups, on the other hand, provide enhanced privacy and security through zero-knowledge proofs but are more complex and have higher computational costs. The choice between the two depends on the specific requirements of the application and the priorities of the developers and users involved. Popular Chains Using Optimistic Rollups Now, we will be covering the popular blockchains that are using optimistic rollups in them. Optimism: Optimism is an Optimistic Rollup that operates on top of the Ethereum blockchain. It aims to increase the scalability and reduce the cost of transactions by processing them off-chain and then submitting them to the Ethereum mainnet. Optimism uses a sequencer to manage block production and allows for the transfer of ETH or tokens between the Layer 1 (Ethereum) and Layer 2 (Optimism) networks. Optimism : Optimism is an Optimistic Rollup that operates on top of the Ethereum blockchain. It aims to increase the scalability and reduce the cost of transactions by processing them off-chain and then submitting them to the Ethereum mainnet. Optimism uses a sequencer to manage block production and allows for the transfer of ETH or tokens between the Layer 1 (Ethereum) and Layer 2 (Optimism) networks. Optimism Arbitrum: Arbitrum is another Optimistic Rollup that also operates on the Ethereum blockchain. It focuses on providing a scalable and cost-effective solution for Ethereum applications by processing transactions off-chain and then submitting them to the Ethereum mainnet. Arbitrum is known for its efficient handling of smart contracts and its support for existing Solidity smart contracts. Arbitrum : Arbitrum is another Optimistic Rollup that also operates on the Ethereum blockchain. It focuses on providing a scalable and cost-effective solution for Ethereum applications by processing transactions off-chain and then submitting them to the Ethereum mainnet. Arbitrum is known for its efficient handling of smart contracts and its support for existing Solidity smart contracts. Arbitrum Metis Andromeda: Metis Andromeda is a Layer 2 scaling solution that aims to provide high throughput and low latency for decentralized applications (dApps) on the Ethereum blockchain. It uses a combination of technologies, including Optimistic Rollups, to achieve its scalability goals. Metis Andromeda is designed to be a flexible and scalable platform for dApp development. Metis Andromeda : Metis Andromeda is a Layer 2 scaling solution that aims to provide high throughput and low latency for decentralized applications (dApps) on the Ethereum blockchain. It uses a combination of technologies, including Optimistic Rollups, to achieve its scalability goals. Metis Andromeda is designed to be a flexible and scalable platform for dApp development. Metis Andromeda Mantle Network: The Mantle Network is a Layer 2 scaling solution that focuses on providing a high-throughput, low-latency environment for dApp development on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. Mantle Network aims to offer a cost-effective and scalable solution for Ethereum applications. Mantle Network : The Mantle Network is a Layer 2 scaling solution that focuses on providing a high-throughput, low-latency environment for dApp development on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. Mantle Network aims to offer a cost-effective and scalable solution for Ethereum applications. Mantle Network Boba Network: Boba Network is an Optimistic Rollup that operates on the Ethereum blockchain. It aims to provide a scalable and cost-effective solution for Ethereum applications by processing transactions off-chain and then submitting them to the Ethereum mainnet. Boba Network is designed to be a flexible and scalable platform for dapp development. Boba Network : Boba Network is an Optimistic Rollup that operates on the Ethereum blockchain. It aims to provide a scalable and cost-effective solution for Ethereum applications by processing transactions off-chain and then submitting them to the Ethereum mainnet. Boba Network is designed to be a flexible and scalable platform for dapp development. Boba Network Base: Base is a Layer 2 scaling solution that aims to provide a high-throughput, low-latency environment for dApp development on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. The base network is designed to offer a cost-effective and scalable solution for Ethereum applications. Base : Base is a Layer 2 scaling solution that aims to provide a high-throughput, low-latency environment for dApp development on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. The base network is designed to offer a cost-effective and scalable solution for Ethereum applications. Base Zora: Zora is a decentralized marketplace for digital content on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. Zora aims to provide a scalable and cost-effective solution for digital content creators and consumers. Zora : Zora is a decentralized marketplace for digital content on the Ethereum blockchain. It uses Optimistic Rollups to process transactions off-chain and then submits them to the Ethereum mainnet. Zora aims to provide a scalable and cost-effective solution for digital content creators and consumers. Zora Each of these networks plays a role in the Optimism Rollup ecosystem, contributing to the scalability and efficiency of the Ethereum blockchain by processing transactions off-chain and then submitting them to the mainnet. Top 2 Optimism Rollup using Blockchains We will now be covering the top 2 most popular optimism rollups using blockchains which you should definitely be watching closely. Arbitrum and Optimism are the top two chains in the realm of optimistic rollups, each offering unique features and advantages that cater to different aspects of Ethereum's scalability needs. Here's a comparison between them : Arbitrum Optimism Similarities Layer 2 Scaling Solutions: Both Arbitrum and Optimism are Layer 2 scaling solutions designed to enhance Ethereum's scalability by processing transactions off-chain while maintaining security through periodic checkpoints on the Ethereum mainnet. Layer 2 Scaling Solutions : Both Arbitrum and Optimism are Layer 2 scaling solutions designed to enhance Ethereum's scalability by processing transactions off-chain while maintaining security through periodic checkpoints on the Ethereum mainnet. Layer 2 Scaling Solutions Ethereum Compatibility: They are designed to be compatible with the Ethereum network, allowing developers to port their existing smart contracts onto these Layer 2 solutions seamlessly. Ethereum Compatibility : They are designed to be compatible with the Ethereum network, allowing developers to port their existing smart contracts onto these Layer 2 solutions seamlessly. Ethereum Compatibility Optimistic Rollups: Both employ an optimistic roll-up approach, processing most transactions off-chain and ensuring security through fraud proofs. Optimistic Rollups : Both employ an optimistic roll-up approach, processing most transactions off-chain and ensuring security through fraud proofs. Optimistic Rollups Decentralization: They prioritize decentralization by relying on a network of validators to ensure the correctness of off-chain transactions. Decentralization: They prioritize decentralization by relying on a network of validators to ensure the correctness of off-chain transactions. Decentralization : They prioritize decentralization by relying on a network of validators to ensure the correctness of off-chain transactions. Decentralization Differences Approach to Scalability: Arbitrum uses Truebit to verify the correctness of off-chain computations, adding an extra layer of security but potentially slower transaction speeds. Optimism, on the other hand, uses optimistic execution, assuming transactions are correct unless proven otherwise, allowing for faster transaction speeds but with a risk of fraudulent transactions. Approach to Scalability : Arbitrum uses Truebit to verify the correctness of off-chain computations, adding an extra layer of security but potentially slower transaction speeds. Optimism, on the other hand, uses optimistic execution, assuming transactions are correct unless proven otherwise, allowing for faster transaction speeds but with a risk of fraudulent transactions. Approach to Scalability Development and Adoption: Optimism was launched earlier than Arbitrum, giving it a head start in terms of deployment and integration with existing applications. Development and Adoption : Optimism was launched earlier than Arbitrum, giving it a head start in terms of deployment and integration with existing applications. Development and Adoption User Experience: The user experience may vary due to differences in how they handle transaction finality and dispute resolution. User Experience : The user experience may vary due to differences in how they handle transaction finality and dispute resolution. User Experience Performance: The performance comparison depends on various factors, and it's advisable to benchmark specific use cases against each solution to determine which one provides better performance for specific requirements. Performance : The performance comparison depends on various factors, and it's advisable to benchmark specific use cases against each solution to determine which one provides better performance for specific requirements. Performance Account Abstraction: Arbitrum supports a wide range of ERC-20 tokens as collateral, offering users flexibility. Optimism currently only accepts Wrapped Ether (WETH) as collateral. Account Abstraction : Arbitrum supports a wide range of ERC-20 tokens as collateral, offering users flexibility. Optimism currently only accepts Wrapped Ether (WETH) as collateral. Account Abstraction Design Philosophy: Arbitrum focuses on minimizing changes to existing smart contracts, making it easier for developers to migrate their applications. Optimism takes a more opinionated approach, requiring certain code optimizations for better performance. Design Philosophy : Arbitrum focuses on minimizing changes to existing smart contracts, making it easier for developers to migrate their applications. Optimism takes a more opinionated approach, requiring certain code optimizations for better performance. Design Philosophy Security Trade-offs: Arbitrum prioritizes speed by allowing immediate withdrawals from Layer 2 to Layer 1, potentially increasing fraud risk. Optimism's approach is more cautious, with longer withdrawal periods to mitigate fraud risk. Security Trade-offs : Arbitrum prioritizes speed by allowing immediate withdrawals from Layer 2 to Layer 1, potentially increasing fraud risk. Optimism's approach is more cautious, with longer withdrawal periods to mitigate fraud risk. Security Trade-offs Developer Experience: Optimism offers a more developer-friendly experience with extensive developer tools and documentation, supporting a wider range of programming languages. Arbitrum, while user-friendly, may require additional effort from developers due to its focus on maintaining compatibility with existing Ethereum contracts. Developer Experience : Optimism offers a more developer-friendly experience with extensive developer tools and documentation, supporting a wider range of programming languages. Arbitrum, while user-friendly, may require additional effort from developers due to its focus on maintaining compatibility with existing Ethereum contracts. Developer Experience Deployment Status: Optimism has been deployed on the Ethereum mainnet and is available for public use, while Arbitrum is currently in a testnet phase but is expected to launch on the mainnet soon. Deployment Status : Optimism has been deployed on the Ethereum mainnet and is available for public use, while Arbitrum is currently in a testnet phase but is expected to launch on the mainnet soon. Deployment Status Both Arbitrum and Optimism are powerful Layer 2 scaling solutions with their own strengths and trade-offs. The choice between them depends on specific requirements, such as the need for speed, security, compatibility with existing Ethereum contracts, and developer experience. As both projects continue to evolve, they are expected to offer even more robust solutions for scaling Ethereum's transaction throughput and enhancing its overall scalability and efficiency. Real-World Use Cases of Optimistic Rollups Optimistic Rollups (ORs) are a Layer 2 scaling solution that significantly enhances the Ethereum blockchain's scalability and efficiency by processing transactions off-chain and then submitting them to the Ethereum mainnet. Here are some real-world use cases : Scaling Decentralized Applications (dApps): Optimistic Rollups are designed to scale dApps and interact with smart contracts in a more cost-effective and efficient manner. By moving computation and data storage off-chain, they reduce congestion on the Ethereum mainnet, thereby improving scalability and reducing transaction costs. Scaling Decentralized Applications (dApps) : Optimistic Rollups are designed to scale dApps and interact with smart contracts in a more cost-effective and efficient manner. By moving computation and data storage off-chain, they reduce congestion on the Ethereum mainnet, thereby improving scalability and reducing transaction costs. Scaling Decentralized Applications (dApps) Ethereum Scaling: Optimistic rollups are a major part of efforts to scale Ethereum using layer 2 architecture. They build on Ethereum's security and decentralization while offering cheaper fees and faster transactions. Projects like Arbitrum and Optimism are leading examples of optimistic rollup implementations. Ethereum Scaling : Optimistic rollups are a major part of efforts to scale Ethereum using layer 2 architecture. They build on Ethereum's security and decentralization while offering cheaper fees and faster transactions. Projects like Arbitrum and Optimism are leading examples of optimistic rollup implementations. Ethereum Scaling DeFi and Financial Applications: Optimistic rollups offer high throughput and reduced gas fees, making them suitable for applications like DeFi (Decentralized Finance). This is because they can process transactions off-chain, significantly reducing the cost and time associated with transactions on the Ethereum mainnet. DeFi and Financial Applications : Optimistic rollups offer high throughput and reduced gas fees, making them suitable for applications like DeFi (Decentralized Finance). This is because they can process transactions off-chain, significantly reducing the cost and time associated with transactions on the Ethereum mainnet. DeFi and Financial Applications Cross-Chain Bridges: While optimistic rollups are built on top of Ethereum’s base layer, assets on both chains are not natively compatible. However, cross-chain bridges allow for the transfer of funds from an L1 chain, like Ethereum, to an optimistic rollup, enabling more seamless and efficient cross-chain interactions. Cross-Chain Bridges : While optimistic rollups are built on top of Ethereum’s base layer, assets on both chains are not natively compatible. However, cross-chain bridges allow for the transfer of funds from an L1 chain, like Ethereum, to an optimistic rollup, enabling more seamless and efficient cross-chain interactions. Cross-Chain Bridges Testing and Development: Optimistic rollups also provide testnets, like the Optimistic Ethereum Kovan Testnet and Arbitrum Rinkeby Testnet, which simulate the behavior of the main network. These testnets allow developers to deploy and test smart contracts with minimal risk, facilitating the development and testing of dApps and other blockchain applications. Testing and Development : Optimistic rollups also provide testnets, like the Optimistic Ethereum Kovan Testnet and Arbitrum Rinkeby Testnet, which simulate the behavior of the main network. These testnets allow developers to deploy and test smart contracts with minimal risk, facilitating the development and testing of dApps and other blockchain applications. Testing and Development Conclusion In conclusion, optimistic rollups represent a significant advancement in the scalability and efficiency of blockchain networks, particularly Ethereum. By leveraging layer 2 solutions, optimistic rollups enable the processing of thousands of transactions off-chain, significantly reducing congestion and improving transaction speeds and costs. This innovative approach not only enhances the user experience but also opens up new possibilities for decentralized applications (dApps) and smart contracts, making them more accessible and cost-effective. The adoption of optimistic rollups is not just a technical solution but a strategic move toward a more scalable and sustainable future for blockchain technology. As projects like Arbitrum and Optimism continue to develop and implement these solutions, we can expect to see a surge in the adoption of dApps and smart contracts, leading to a more vibrant and decentralized ecosystem. Moreover, the security and decentralization of optimistic rollups, combined with their compatibility with Ethereum's existing infrastructure, make them a compelling choice for developers and users alike. The ability to scale without compromising on security or decentralization is a testament to the potential of optimistic rollups to revolutionize the blockchain space. As we look forward, the implementation and optimization of optimistic rollups will undoubtedly play a crucial role in the future of blockchain technology. By addressing the scalability challenges that have long plagued Ethereum and other blockchain networks, optimistic rollups pave the way for a more scalable, efficient, and user-friendly blockchain ecosystem.