Rollup Overview

What is a Rollup?

Ethereum scaling solutions can be broadly categorized into state channels, Plasma, and Rollups. Rollups are becoming the key solution for Layer 2 scaling, with over 90% market share. So, what exactly is a Rollup?

ZK rollups will win out in all use cases in the medium to long term as ZK-SNARK technology improves. —- Vitalik Buterin

A Rollup is an off-chain scaling solution that executes transactions off the main chain and then sends the transaction data back to the main chain at a lower cost. This mechanism allows the protocol to inherit Ethereum’s security while processing more transactions, significantly improving transaction efficiency.

However, this raises a question: how can we prove the published data is valid and correct? This has led to two different solutions, resulting in two types of Rollups: Optimistic Rollups and ZK Rollups.

ZK Rollups and Optimistic Rollups

Both ZK Rollups and Optimistic Rollups aim to scale by reducing the burden on the main chain, but they differ in how they process and verify transactions.

Simply put, ZK Rollups use zero-knowledge proofs (zk-SNARKs) to prove the validity of transactions. All transactions are processed off-chain, and only a single zero-knowledge proof and state update are submitted to the on-chain, allowing validators to verify quickly without checking every transaction. Due to this design, ZK Rollups offer higher security, better data availability, and lower latency without the risk of fraud.

Source: AnT Capital

Optimistic Rollups, as the name suggests, assume that all off-chain transactions are valid (i.e., “optimistic”) and are only verified if a dispute exists. Anyone can challenge the validity of a transaction within a challenge period, typically a week.

Compared to ZK Rollups, Optimistic Rollups simplify the verification process and are more intuitive, but they are subject to fraud risks and rely heavily on third parties. Similarly, due to the complexity of implementing and maintaining zero-knowledge proof technology, ZK Rollups also face significant development and computational challenges.

The different working principles also lead to ZK Rollups and Optimistic Rollups having different focus areas in terms of applications. The former is more suitable for applications that require high security and low latency, such as payments and transactions, while the latter is more suitable for applications that prioritize efficiency and ease of implementation.

Scroll Value Analysis

Project Development

Scroll is an Ethereum scaling solution based on ZK Rollup technology. Its ultimate goal is to achieve full compatibility with the Ethereum Virtual Machine (EVM), becoming a more powerful version of Ethereum.

Public information shows that in early 2021, the three core founding members of Scroll met by chance in the Ethereum community. Driven by their shared technological vision of “using ZK technology to build the future of Ethereum scaling,” the Scroll project was thus established. After more than a year of intensive testing, Scroll officially launched its mainnet on October 17, 2023.

Since its mainnet launch, Scroll has made rapid progress in terms of total value locked, network transactions, and ecosystem development.

As of July 25, 2024, Scroll’s total value locked has reached $1.3 billion. The mainnet has accumulated over 4.55 million wallet addresses, processed approximately 70.33 million user transactions, and generated 7.76 million blocks with an average block time of about 2.9 seconds. In terms of developer ecosystem development, Scroll has officially launched the Level Up one-stop platform to help newcomers learn skills like Solidity and open up grant channels for teams and individuals. In terms of application scenarios, Scroll’s ecosystem covers tracks such as infrastructure, DeFi, NFTs, social, gaming, and privacy, and launched the Scroll Sessions event this year to provide better convenience for users and ecosystem projects.

Source: scrollscan.com

In terms of financing, Scroll’s performance has been impressive. At the beginning of its establishment, Scroll received an angel investment of approximately $3 million. In April 2022 and March 2023, Scroll announced the completion of a $30 million Series A financing round led by Polychain Capital and a $50 million financing round led by Polychain Capital, Sequoia China, and OKX Ventures, respectively. At that time, Scroll’s valuation reached $1.8 billion.

Core Technology

The Scroll team firmly believes that ZK Rollup is the best solution for cheap and secure Layer 2 scaling. It offers the same level of security as Ethereum and, compared to other L2 solutions, has the shortest final confirmation time. However, due to the complexity of smart contract programming languages and the non-composability of ZK Rollup at that time, this solution was initially only suitable for specific applications, making it very difficult to migrate existing applications within the ecosystem.

Therefore, Scroll introduced zkEVM, which can generate zk proofs for general EVM verification, thereby providing the best development experience and supporting the composability of Layer 2. Any existing Ethereum program can be easily migrated to it.

This is the core technology of Scroll and its core value, which is to build an EVM-equivalent ZK Rollup to scale Ethereum.

However, the gap between the ideal and reality is often a chasm. Building zkEVM is very difficult, and for many years, no one has successfully built a native EVM circuit. Even if a feasible framework can be determined theoretically, zkEVM involves many technical challenges at the practical implementation level, and the engineering workload is huge. For example, how to dynamically support different pre-compiles, how to aggregate opcodes more efficiently, and the need to consider the long-term maintainability of the technology stack.

To make zkEVM possible, the Scroll technical team has conducted a series of explorations and has been collaborating with the Ethereum Foundation’s Privacy and Scaling Explorations (PSE) group in an open-source manner from the very beginning. Both parties have contributed about 50% of the PSE zkEVM codebase.

For example, both parties jointly modified the halo2 proof system, replacing the polynomial commitment scheme it used from IPA to KZG, reducing the Proof Size, and thus allowing more efficient verification of ZK Proof on Ethereum.

For example, Scroll provers have created the fastest GPU and ASIC/FPGA accelerators, greatly improving GPU hardware acceleration. Compared to generating ZKP using CPUs, the latter can increase the ZKP generation speed by 5 to 10 times, greatly improving the computational efficiency of the prover.

Security has always been a top priority for Scroll. In addition to adhering to open-source code, Scroll has a dedicated internal security team that works with numerous auditing companies to conduct comprehensive audits of the project’s codebase.

Ecosystem Development

Scroll’s mission is to build an open-source, scalable ecosystem using the native capabilities of zkEVM. By continuously improving the user and developer experience, the team is committed to helping global developers quickly build blockchain applications and anchor real-world applications in web3, attracting many new users, and ultimately promoting social development.

The Scroll website shows that the number of ecosystem projects joining has exceeded 300, covering DeFi, gaming, infrastructure, NFTs, privacy, social and other scenarios.

Scroll’s developer community building is also noteworthy. According to the latest developer report by venture capital firm Electric Capital, as of July 2024, there were 649 full-time developers on the Scroll chain, ranking 8th among all ecosystems, and the monthly active developers reached 2429.

Source: @ElectricCapital

In addition, Scroll is committed to providing developers with a variety of development tools, from oracles to auditing tools and RPC nodes, to ensure developers have comprehensive support when building applications. The team also regularly holds various hackathons to encourage developers to explore and develop innovative applications that are easy to use and have broad applications in various directions.

At the same time, the Scroll team is actively expanding its international market and building a diversified community. Currently, Scroll has established user communities in countries such as Turkey and is continuously transitioning to countries and regions such as Africa, Southeast Asia, and Argentina.

Scroll Market Competitiveness

Horizontal Comparison

In May of this year, Ethereum co-founder Vitalik Buterin expressed on social media that “IMO (In my opinion) in 10 years, all rollups will be ZK and will commit blocks with finalized state roots to L1 every slot. Getting there will take a lot of infrastructure and prover optimization, but that’s the clear endgame.”

At the same time, ZK Rollup, this scaling solution, has gained increasing favor from developers. l2BEAT data shows that the total value locked on ZK Rollup chains has exceeded $5 billion and shows a steady upward trend.

Source: l2BEAT

Among these ZK Rollup solutions, Scroll, Linea, Zksync Era, and Starknet have seen the most significant development, accounting for nearly 90% of the total TVL.

Next, we will comprehensively compare these projects from multiple dimensions, including technical features, contract languages, TVL, and on-chain ecosystems.

Partial data source: l2BEAT

Overall, ZK Rollup technology is increasingly segmented, with each innovation direction having its own focus.

In terms of developer experience, Scroll and ZKsync Era are more suitable for developers who want to seamlessly migrate existing Ethereum applications to a more efficient platform due to their EVM compatibility and the use of Solidity programming, low transaction fees, and efficient transaction processing. Linea also has similar advantages but focuses on optimizing zero-knowledge proofs and data availability. Starknet is more innovative in technology, adopting STARK proofs and the dedicated programming language Cairo, which provides higher scalability and flexibility despite having a certain learning curve.

In terms of application scenarios, the aforementioned leading projects have shown great potential for development, and the number of ecosystem projects joining has continued to grow. Based on the advantages of high throughput and low transaction fees, these protocols have focused on both DeFi and NFT fields and are also pursuing balanced development in areas such as gaming, infrastructure, and developer tools. However, no single protocol has yet dominated the market, and they are still in a benign competitive state.

Future Outlook

Before looking ahead to Scroll’s future, let’s first examine the challenges the project currently faces.

The biggest challenge and difficulty undoubtedly come from the technical side. As mentioned earlier, the Scroll team is trying to turn the impossible into reality. Even though it has been theoretically recognized, there are still many uncertainties in the process of smooth landing.

Ye Zhang, the co-founder of Scroll, also revealed in an interview that the entire tool stack requires strong technical support. For example, implementing Pairing circuits involves many complex mathematical problems, highly demanding developers’ cryptography/mathematics skills and engineering capabilities. In addition, in the later development, the team also needs to consider the long-term maintainability of the technology stack, such as the specific implementation of ZK-proof system iterations, and how to transition the codebase and new features of the optimized version.

The unknown means exploration and innovation but involves risk and failure.

Of course, in addition to technical difficulties, how to truly implement technology is also an issue that Scroll, and the entire blockchain industry, need to take seriously. If Layer 2 projects are only immersed in the superficial prosperity brought by TVL growth and try to capture user traffic data only through airdrop expectations and marketing activities, the industry development will inevitably stagnate.

We understand that the Scroll team will focus on expanding into global lagging economic markets and communities in the next phase, focusing on places like Africa where blockchain is needed due to severe fiat inflation, providing local citizens with truly practical infrastructure to ultimately achieve large-scale application landing.

There is no doubt that Scroll is one of the pioneers of ZK Rollup solutions. In addition to the advantages brought by technological innovation, it has also fully bloomed in terms of developer community building and on-chain ecosystems. However, technology ultimately serves user’s actual needs. We hope that technology innovators and development teams can focus not only on the advanced nature of the technology itself, but also on its practical application value, ensuring that technology can truly bring benefits and improvements.

Conclusion

The debate over Ethereum scaling has been ongoing, and the long window period has led to a hundred schools of thought. With its strong technical strength, the Scroll team has won a first-mover advantage. However, technology is not the only criterion for project success. The market still has no answer to the best path, which will take time to judge.

Fortunately, before the final landing of Rollup technology, project teams from both the ZK and OP systems are actively exploring technology optimization and innovation, trying to create value for the entire ecosystem. These controversies and mergers are the fuel that drives the industry towards maturity. We look forward to them guiding the blockchain into a better era, a truly decentralized, scalable, and secure future.