What are Optimistic Rollups and How Do They Work?

Ether is more than a cryptocurrency; it has emerged as a blockchain solution that is being used by users across the globe for more than just transferring money in the form of digital apprehension from one wallet to another. Ether offers a myriad of services under the realm of blockchain technologies, such as non-fungible tokens, the development of decentralized apps, the development of other crypto tokens, and more services like this.

You would not believe the daily transactional volume that Ether engages with, that is up to 90,000 transactions taking place in a single day, more than 3000 decentralized apps that have been developed and are currently maintained on its infrastructure, and more than 4000 smart contracts that have been executed using the Ether blockchain technology.

Ethereum’s Congestion Problem and Its Solution

Despite being a highly scalable network, there are some downsides associated with Ether blockchain, sometimes the user activity just skyrockets out of nowhere, and the resources present at hand are not sufficient to maintain or collaborate with the present demand, and that is why the network might become slower.

The problem of scalability is not only associated with Ether blockchain in general but also with other crypto platforms as well because when the demand is increasing at a steady rate and the supply or the present flux of resources is not as handsome as the demand; there are going to be a few roadblocks that need to be jumped over and catered to.

That is why there are solutions out here in the form of optimistic rollups for Ether blockchain and investigating the issues of scalability, and providing each and every user out there with enough bandwidth to interact with many resources and applications of blockchain. Sometimes when users are performing transactions over the Ether ecosystem, they might encounter slight problems in the form of limits on the block times and the block sizes.

These are merely the issues of scalability which need to go away if the blockchain is to thrive and facilitate a large number of individual users interacting with many services and applications of the network. Some of these restrictions are necessary to ensure security and further the cause of decentralization; the limits, however, reduce the capabilities of the platform in terms of scalability.

When there is a high influx of transaction requests, the platform goes into a congestion mode where there are too many users and too few resources to facilitate their requests. Therefore, transaction speeds are reduced across the board, and the transaction fees or gas prices for Ether blockchain go sky high.

This is the reason why many users out there have completely neglected and abandoned the Ether platform in search of other potential viable competitors who can provide higher throughput in terms of completing the transactions at a reduced transaction fee. These problems of scalability are strictly undermining the credibility of Ether blockchain, and without these problems addressed at a potential rate, the future of the platform looks bleak.

This is why there exist scaling solutions in the form of side chains and layer 2 rollups to address these problems in real-time to provide solutions despite consistent rises in the transactional volume and user activity over the platform.

What are Optimistic Rollups?

The understanding of the optimistic rollups can become a lot easier if there is a detailed impression within their definition. The scalability for Ether does not only mean an increase in throughput of the platform in real-time but does nothing for the security aspects of it, scalability and security go hand in hand for any crypto project out there, and these need to be kept in an exact and homogeneous proportion taking into account the scalability of network latency and its throughput.

The scalability for Ether must also prevent any and all concerns pertaining to the introduction of trust-based environments. An optimistic rollup is nothing but a layer two scaling protocol that has been structured in a way that becomes useful for extending and elongating the throughput that is associated with the base layer of Ether.

The working of these rollups is associated with not only mitigating the problems of scalability but also reducing the computational load in a successive manner on the primary Ether blockchain; this way, the stress is not as imminent and peculiar as it would have been if there were no scaling solutions present at hand.

These rollups associate the network with off-chain transactions and their processing which results in an increase in terms of network throughput and processing of transactions across the board.

If you take into account an example for an optimistic rollup, then you would be able to better understand that these are completely different from other scaling solutions that are implemented for the blockchain environments, such as the side chains.

These optimistic rollups usually depend on the mainnet of any blockchain that they are serving for security purposes, and these display transaction results on the plasma chains or the mainnet.

These plasma chains are associated with the verification of all transactions that take place on a blockchain by leveraging the fraud proofs; these do that while the transaction data is being stored at another location.

Working Mechanism of Optimistic Rollups

When it comes to scalability, these optimistic rollups are actually good and show 10 or 100 times better results than if the blockchain didn’t have any rollups, to begin with.

In order to dissect these optimistic rollups and find out what lies beneath each layer, it is important that you understand the phenomena for scaling that lies somewhere deep within an optimistic rollup; this will help you to understand not only the mechanics but also the strategy that is behind the structuring as well as the implementation of these optimistic rollups.

The basic mechanism that is involved within the working of an optimistic rollup is transferring of state storage and computation right from the mainnet towards another location whose whereabouts are not so easily disclosed. In simpler words, the working of an optimistic rollup would only emphasize the moving of transactions outside of Ether.

Once these transactions are completed and verified outside of the mainnet the rollup would then register the whole transaction data on the main network and would call it ‘call data’.

These optimistic rollups are actually involved with the bundling of various transactions in consistently huge batches before these can be submitted to the mainnet.

So actually, what is taking place here is that the transactions request that the mainnet is receiving and issuing all these requests to the rollups, which are taking some of the computation, security as well as the throughput of the network from the mainnet and taking some of the transactions also from there to an undisclosed location and using all those elements to complete the transactions and verify them afterward.

Using this particular method, the optimistic rollups are able to facilitate the spreading of fixed costs throughout these transactions which helps in reducing the end-user fees. It also allows the mainnet of Ether to breathe in a consistent fashion and facilitate as many transaction requests as possible.

These rollups also have compression techniques on board which can be a huge help in the reduction of the amount of data that is being posted on the Ether blockchain. You might be wondering about the ‘optimistic’ element within the optimistic rollups; how do these rollups are assumed to be optimistic?

These optimistic rollup projects actually assume the validity of off-chain transactions without having to publish any validity proofs of on-chain transaction batches. These use a fraud-proof mechanism for identifying true transactions with discrepancies.

If a user is not content with the working of the optimistic rollups and they would want to have the present data for a recently verified transaction of theirs, then they can challenge the role of batch within a specific time window after they have submitted their request on Ether.

However, these users would be receiving a harsh penalty for the sake of including an incorrect transaction within the block in events of failure when it comes to fraud-proof.

Use Cases of Optimistic Rollups

When you have come to understand the working mechanism of optimistic rollups actually, you’ve only come to have a brief impression of its capabilities. Its use case is dynamic and diverse all at the same time, and without referring to the use cases in extensive length, it would be impossible to understand the true potential of optimistic rollups.

Execution of Transactions

Many operators that also act as miners over a dedicated blockchain actually take the responsibility of executing transactions and processing them as an optimistic rollup.

Users who want to get their transactions validated actually have to submit these to the validators, and then the validators work on the aggregation of the transactions while at the same time compressing the data of the transaction and publishing the results back on the main net of Ether.

It is important that you know about how the mediation of transaction takes place and how any user has the ability to become a validator. To become an optimistic rollup validator, it is important that they also offer a bond after the development of blocks which is like a ‘proof of stake’ system taking place outside of the main net of Ether.

With the latest Merge update, the capabilities and functionalities of Ether blockchain would be converting from proof of work consensus protocol to proof of stake consensus protocol. Validators can also incur penalties on the bond if invalid blocks are created when publishing the results back on the main net of Ether.

Certain optimistic validators have the autonomy to avoid a permissionless validator system. These rollups actually rely on a single sequencer for executing the chain, who would ultimately take the responsibilities of validators. The sequencers have better control over the ordering mechanism of the transaction in question, and these have the sole authority over submitting the transactions on the new chain of Ether.

Undergoing State Commitments

Each and every optimistic rollup have its state organized in a proper fashion so that the blockchain could understand just where that particular optimistic rollup stands, the state of the roll-up could be organized in the form of a Merkle Tree.

This can also be termed the state tree, which contains all the relative information about the present state of the rollup. The roots of the tree are going to point towards the present state of the rollup, and these also go through the hashing as well as storage present within a rollup contract.

All the present transitions of a rollup and its state on the main Ether chain have the ability to generate new states for that roll which is orchestrated by an operator or a validator via the computation of a new state root. During the execution of posting batches on the main Ethernet is when these operators have to submit both the old and new state roots.

Making the Mainnet Fraud-proof

Another highlight of these optimistic rollups is that they emphasize fraud-proof. You don’t have to enter in proof of validity if you want to publish blocks on the blockchain and to be able to do so, you need the help of an optimistic rollup; otherwise, it would become an impossible feat.

Users, on the other hand, have the ability to challenge any state transition in a dedicated time window with the dedicated, optimistic rollup. When such a challenge has been submitted, the protocol would then begin the fraud-proof calculation.

During the process, all the fraudulent and groovy transactions taking place in a single block can be dissected and caught on the layer one network, which would also detect invalid blocks. These disputed transactions could then be interchanged with fresh data for that particular transaction that is now fraud-proof.

Multi-Round Interactive Proving

This is another highlighted element that you need to understand about optimistic rollup and its various functionalities. Multi-round interactive proving is just back and forth interaction that deals with disputes between the challenger and the operator.

All the interactions that take place between the challenger and the operator fall under the supervision of a layer one verified contract, which is going to follow up the decision around the veracity of the claims made either by the operator or challenger.

It is the duty of the operator to divide the assertion for a concerned transaction into two equal portions while following the challenge to a dedicated rollup block.

It is important that all the roll-up blocks contain the same computation steps; after that, the challenger is advised to select the rollup block and the section protocol, which would start and then continue the process of the division until both the parties that were involved in the challenge have worked on the dispute for a specific rollup block.

In such extreme cases, the layer one contract will be pushed into play to resolve all the disputes by singling out the fraudulent party, whether it was the challenger or the operator.

Fraud proving is an extreme highlight when it comes to an understanding of the functionalities of how the optimistic rollups work because they are going to ensure a trustless finality that is not biased neither to the operator nor to the challenger. These rollups actually guarantee that the transactions that have taken place in batches whose data has been already submitted on the main net of Ether are actually valid, and their eventuality could be confirmed.

These fraud proofs are actually the validity proof that someone might require for rollup blocks; as a consequent result, the optimistic rollups do have a better chance of penalizing those malicious nodes that are challenging honest operators and pointing a finger toward their dedication regarding the validation as well as the assertion of transactions taking place on the blockchain network.

Drawbacks of Optimistic Rollups

The most incredible setback that is associated with these optimistic rollups is going to be a delay in the finality of the transactions because they have to scrape off security, communication as well as throughput from the main network of Ether and take that towards an undisclosed location for the execution as well as the validity of the transactions in question.

Once that is done, the optimistic rollups would then have to submit each and every clause of data that was published during the observation, as well as validation of transactions. All of this requires tons of time, and on top of everything, if there is a challenge made by the challenger that there was some sort of fraudulent activity that has taken place during validation and assertion with their transaction, then it is the duty of the rollup to finalize the dispute once and for all.

It does handle every aspect of the task brilliantly but on its own might require more time when it comes to the validation of a single transaction which kind of defeats the purpose of having a scaling solution in the first place.

This single setback, however, could be avoided with the help of adding more resources to the mainnet of the Ether blockchain and providing the rollups with a pertinent time window during which all matters of validation need to be addressed.

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