Ethereum rollups are Layer-2 scaling solutions that are designed to increase the scalability and throughput (or transaction speed) of the Ethereum blockchain network.

Although the Ethereum blockchain is known to be very secure, it is not naturally scalable. However, as it continued to grow, there was a need to increase its scalability and transaction processing power. To make this happen, Ethereum rollups were developed.

By batching or rolling up multiple transactions later submitted to the Ethereum blockchain as a single transaction, Ethereum rollups ease the Ethereum main chain, increasing the transaction processing speed or throughput of the Ethereum blockchain network.

Types of Ethereum Rollups: Optimistic Rollups and Zero-Knowledge Rollups

Optimistic Ethereum Rollups

Optimistic rollups are rollups that assume the validity of transactions on the L2. Like its name, they do not verify the validity of the rollup transactions. They assume the transactions are valid unless proven otherwise.

To ensure that the wrong transactions are not computed and sent to the Ethereum main chain, Optimistic rollups give users a challenge period of 7 to 14 days, during which they can challenge the validity of the rollup transactions.

The already computed transactions are re-executed if an error occurs, and the correct rollup state is updated on the Ethereum main chain. It doesn’t stop there – the sequencer responsible for computing and including the erroneous transaction receives a slashing penalty.

Arbitrum is an example of an Optimistic Ethereum rollup. It is a layer-two scaling solution that powers fast smart contract transactions for the Ethereum blockchain network.

It handles the processing and batching of Ethereum blockchain transactions, reducing congestion and transaction costs for the Ethereum blockchain.

Due to its unique feature of compressing transactions, which helps reduce gas fees, Arbitrum is now used by DeFi projects like Sushiswap and Aave for efficient and low-cost DeFi swapping.

Zero-Knowledge (ZK) Rollups

Zero-knowledge Ethereum rollups verify the validity of transactions. Unlike Optimistic rollups, which assume that rollup transactions are valid, Zero-knowledge rollups do not assume; instead, they take their time to verify the validity of transactions.

Once the rollup transactions are verified and validated, the Zero-knowledge rollup submits a cryptographic proof to the Ethereum main chain, authenticating their validity. Smart contracts make the verification of the roll-up transactions possible.

ZK sync is an L2 solution primarily built to scale the Ethereum blockchain network and increase its throughput or transaction processing speed. Through its ZK-rollups, ZKSync can process transactions on the Ethereum main chain, batching them and submitting them back to the Ethereum blockchain when completed. Scroll and Starkware are two other famous zero-knowledge rollups.

How Do Ethereum Rollups Work? Off-Chain Transaction and Transaction Batching

Off-Chain Transaction

Since rollups are Layer 2 blockchain solutions, they do not process transactions on the main Ethereum blockchain network. They process transactions off the Ethereum network.

A rollup entity or component known as the sequencer is responsible for confirming the rollup transactions, constructing the L2 blocks, and submitting the cryptographic proofs to the main Ethereum chain.

Transaction Batching

Transaction batching comprises the process of grouping multiple transactions by the sequencer. The sequencer eases the Ethereum main chain by removing some transactions from the Ethereum main chain and then grouping them into one transaction.

Once the transactions are batched, the roll-up posts the transaction data to the L1 chain using smart contracts. Once added to the Ethereum L1 chain, the single rollup transaction cannot be changed or modified.

In addition, some zero-knowledge rollups also post summaries or cryptographic proof to the Ethereum main chain, authenticating the validity of submitted transactions.

Blockchain Proof Mechanisms: Fraud Proof and Validity Proof

Fraud Proof

Fraud proof, also known as fault-proof, is a blockchain-proof mechanism used to validate the authenticity of the data published by Optimistic rollups.

To prevent Optimistic rollups from submitting the wrong data to the Ethereum L1 chain, the fraud-proof mechanisms allow users on the Ethereum blockchain to challenge the batched-together roll-up transactions.

Once an erroneous transaction is spotted among the batched transactions, it is removed and re-executed, after which the re-validated transaction is submitted back to the batch. The sequencer responsible for including the erroneous transaction is also penalized.

However, if no erroneous transaction is spotted during the challenge period, the state change is optimistically assumed to be correct.

Types of Fraud Proof: Single-Round Interactive and Multi-Round Interactive

Single-Round Interactive Fraud Proof

The single-round interactive proof is a fraud-proof mechanism that allows a challenger to dispute the authenticity or validity of a rollup transaction without constant interaction or communication with the operator, as the transaction can be verified at a go.

OP Stack is an example of a blockchain solution that utilizes the single-round interactive fraud-proof mechanism. OP Stack is a modular, open-source blueprint used to build highly scalable and interoperable blockchains.

Developed by the Optimism foundation, the OP stack allows developers to create blockchains that can interoperate with the Optimism superchain. Using the single-round interactive fraud-proof system, the OP Stack makes it easy to prevent fraud in blockchains.

Multi-Round Interactive Fraud Proof

Multi-round interactive proving is a fraud-proof mechanism that requires a challenger to constantly or repeatedly interact with the operator.

The operator often divides the challenged rollup block into equal halves and subsequently into much smaller bits until the challenger spots the error. During this process, constant communication between the operator and the challenger occurs.

Although single-round interactive proving is a much faster way of verifying the validity of a transaction, it is expensive. Conversely, although much longer, multi-round interactive proving is more cost-effective and efficient for resolving disputes with complex smart contract agreements.

Arbitrum, the L2 scaling solution, utilizes the multi-round interactive fraud-proof system. As discussed earlier, Arbitrum enhances the throughput of the Ethereum blockchain, compressing transactions and reducing the gas fee.

How Does Fraud Proof Work? Merkle Root Verification

Merkle Root Verification

Fraud proof works by verifying Merkle roots. A Merkle root is a data structure used to secure the blockchain. It compresses the data in a blockchain network so users do not have to download the entire blockchain.

To verify the validity of rollup transactions, the fraud-proof mechanism must compare the beginning and end states of the Merkle roots before and after a transaction, either through single-round or multi-round interactive proof.

If both states of the Merkle root match, it means the transaction; otherwise, the transaction is invalid and re-executed.

Thus, if a verifier wants to challenge the validity of a rollup transaction, they only need to submit the current post-state root and specific parts of the Merkle tree, which will be used to calculate the correct post-state root.

Benefits of Fraud Proof: Low Computational Cost, Simplicity, Low Gas Fees

• Low computation cost: Fraud proof used to verify optimistic rollup transactions often requires low computation effort. Its assumption of transaction validity makes it less computationally intensive.
• Simplicity: Since fraudproof systems do not require complex cryptographic systems, they are simple and flexible.
• Low gas fees: The low gas fees are due to the lesser cryptographic requirements of validity proofs in verifying the validity of Optimistic rollups.

Validity Proof

Validity proof, also known as zero-knowledge proof, is a blockchain-proof mechanism used to verify the authenticity or validity of data published by zero-knowledge rollups.

This validity comprises three entities: The prover, verifier, and witness.

• The prover is the entity creating the proof.
• The verifier is the entity that verifies the validity or accuracy of the rollup transaction data being proven by the prover.
• The witness is the data being shared between the prover and the verifier.

While the prover and verifier communicate, it is important to note that the content of the witness (or information being shared) is not disclosed.

How Does Validity Proof Work? Polynomial Commitments

Polynomial Commitment

Validity proofs depend on polynomial commitments to verify the validity of rollup transactions. In polynomial commitments, the transaction information to be verified is encoded into polynomials, which are mathematical expressions.

This process of verifying and validating the authenticity and correctness of rollup transactions is far more secure and difficult to break, hence efficient in preventing fraud in the Ethereum blockchain network.

Benefits of validity Proof: Strong Security, Faster Completion Time, High Scalability

• Strong security: Validity proofs often rely on complex cryptography, making it very difficult to include fraudulent transactions in a batch transaction.
• Faster completion time: Since there are no challenge periods like in fraud-proof systems, transactions can be completed on time.
• High scalability: Removing transactions from the Ethereum main chain and their subsequent batching makes the Ethereum blockchain network highly scalable.

Conclusion

Integrating Fraud Proof and Validity Proof in Ethereum rollups has significantly enhanced the network’s efficiency and security. Developers and users can leverage rollups’ benefits while maintaining the Ethereum ecosystem’s integrity.

As the Ethereum blockchain evolves, the importance of scalable and secure solutions will only grow. Ethereum rollups, powered by Fraud Proof and Validity Proof, could play a pivotal role in shaping the future of blockchain technology.