Rollups are one of the most promising categories of Layer 2 solutions. These solutions move transaction computations off-chain, but store transaction data to the Ethereum chain, which means that rollups are secured by Layer 1.

All this is accomplished via smart contracts whose primary function is to bundle, or ‘roll up’, transaction data and move it off chain for processing. This data is handled by network participants typically referred to as sequencers or validators, who then submit batches of highly compressed transaction data back to the main chain. Those batches contain the minimum information needed to verify whether the transactions are valid.

Because rollups move computation off-chain but still submit (highly compressed) data to the Ethereum mainnet, they can produce gains in scalability without creating data availability issues which is sometimes the case with other Layer 2 solutions. Some rollups also come with the option of off-chain data availability (where no data is actually posted on Ethereum), which can lead to significant gains in throughput, but at the cost of reduced security.

The method of verification is the key distinction between the two types of rollups – zero knowledge (ZK) rollups and optimistic rollups. ZK rollups generate cryptographic proofs that can be used to prove the validity of transactions. Each batch of transactions has its own ‘validity proof’ which is submitted to the main chain.

In contrast, optimistic rollups assume that all transactions are valid and submit batches without performing any computation whatsoever, which can lead to significant improvements in scalability. However, they include a challenge period during which anyone can dispute the legitimacy of the data contained in a batch. If a fraudulent transaction is detected, the rollup executes a so called fraud proof and runs the correct transaction computation using the data available on Layer 1. To ensure that they are incentivized to process only legitimate transaction data, sequencers are required to stake ETH. If they perform their duties diligently they receive staking rewards, but if a sequencer submits a fraudulent transaction to the main Ethereum chain, their stake is slashed.

Optimistic rollups

One of the biggest strengths of optimistic rollups stems from the fact that they do not perform computation by default, which can lead to significant scalability gains – estimates suggest that optimistic rollups can offer up to 10-100x improvements in scalability. On the downside, the need to have a challenge period means that withdrawal periods are significantly longer than ZK rollups.

Another big advantage of optimistic rollups is that they are capable of executing smart contracts, whereas ZK rollups are mostly limited to simple transactions.

At the moment, the optimistic rollup space is shaping up to be a battleground for two main competitors – Optimism and Arbitrum. Competition between these two projects is already heating up, with both having already scored some early successes. The two solutions are very similar, with the main difference being the way they generate fraud-proof. There are also differences with regards to their compatibility with the Ethereum Virtual Machine (EVM) and Ethereum tooling.

ZK rollups

Whereas optimistic rollups assume that everyone acts in good faith, ZK rollups seek to ensure that that’s actually the case. The rollup moves bundles of transactions to Layer 2 and generates a validity proof for every bundle. The validity proofs are then submitted to Layer 1 to serve as proxy for their corresponding bundles. This method results in significant data size reduction and in turn lowers the time and gas cost for validating a block. You can achieve further optimization by employing some neat tricks. For example, accounts can be represented as indexes instead of an addresses, which greatly reduces transaction size.

One drawback of ZK rollups is that generating a validity proof is a complex and time consuming process. Another drawback is the aforementioned inability to execute smart contracts, although there are some exceptions, as we’ll see below.

On the other hand, ZK rollups do not require a challenge period, as the validity proof has already verified the legitimacy of transaction data. That’s why ZK rollups allow for very fast withdrawal times. So while ZK rollups are typically not good for general purpose applications, they are great for exchanges and other apps that require simple payments.

There are a number of promising projects that are currently populating the ZK rollup corner of the Ethereum ecosystem: StarkEX and ZKsync and etc.

source: limechain.tech

Rollups are one of the most promising categories of Layer 2 solutions. These solutions move transaction computations off-chain, but store transaction data to the Ethereum chain, which means that rollups are secured by Layer 1.

All this is accomplished via smart contracts whose primary function is to bundle, or ‘roll up’, transaction data and move it off chain for processing. This data is handled by network participants typically referred to as sequencers or validators, who then submit batches of highly compressed transaction data back to the main chain. Those batches contain the minimum information needed to verify whether the transactions are valid.

Because rollups move computation off-chain but still submit (highly compressed) data to the Ethereum mainnet, they can produce gains in scalability without creating data availability issues which is sometimes the case with other Layer 2 solutions. Some rollups also come with the option of off-chain data availability (where no data is actually posted on Ethereum), which can lead to significant gains in throughput, but at the cost of reduced security.

The method of verification is the key distinction between the two types of rollups – zero knowledge (ZK) rollups and optimistic rollups. ZK rollups generate cryptographic proofs that can be used to prove the validity of transactions. Each batch of transactions has its own ‘validity proof’ which is submitted to the main chain.

In contrast, optimistic rollups assume that all transactions are valid and submit batches without performing any computation whatsoever, which can lead to significant improvements in scalability. However, they include a challenge period during which anyone can dispute the legitimacy of the data contained in a batch. If a fraudulent transaction is detected, the rollup executes a so called fraud proof and runs the correct transaction computation using the data available on Layer 1. To ensure that they are incentivized to process only legitimate transaction data, sequencers are required to stake ETH. If they perform their duties diligently they receive staking rewards, but if a sequencer submits a fraudulent transaction to the main Ethereum chain, their stake is slashed.

Optimistic rollups

One of the biggest strengths of optimistic rollups stems from the fact that they do not perform computation by default, which can lead to significant scalability gains – estimates suggest that optimistic rollups can offer up to 10-100x improvements in scalability. On the downside, the need to have a challenge period means that withdrawal periods are significantly longer than ZK rollups.

Another big advantage of optimistic rollups is that they are capable of executing smart contracts, whereas ZK rollups are mostly limited to simple transactions.

At the moment, the optimistic rollup space is shaping up to be a battleground for two main competitors – Optimism and Arbitrum. Competition between these two projects is already heating up, with both having already scored some early successes. The two solutions are very similar, with the main difference being the way they generate fraud-proof. There are also differences with regards to their compatibility with the Ethereum Virtual Machine (EVM) and Ethereum tooling.

ZK rollups

Whereas optimistic rollups assume that everyone acts in good faith, ZK rollups seek to ensure that that’s actually the case. The rollup moves bundles of transactions to Layer 2 and generates a validity proof for every bundle. The validity proofs are then submitted to Layer 1 to serve as proxy for their corresponding bundles. This method results in significant data size reduction and in turn lowers the time and gas cost for validating a block. You can achieve further optimization by employing some neat tricks. For example, accounts can be represented as indexes instead of an addresses, which greatly reduces transaction size.

One drawback of ZK rollups is that generating a validity proof is a complex and time consuming process. Another drawback is the aforementioned inability to execute smart contracts, although there are some exceptions, as we’ll see below.

On the other hand, ZK rollups do not require a challenge period, as the validity proof has already verified the legitimacy of transaction data. That’s why ZK rollups allow for very fast withdrawal times. So while ZK rollups are typically not good for general purpose applications, they are great for exchanges and other apps that require simple payments.

There are a number of promising projects that are currently populating the ZK rollup corner of the Ethereum ecosystem: StarkEX and ZKsync and etc.

source: limechain.tech