Differences between optimistic rollup and zero-knowledge rollup

Summary

As cryptocurrencies and blockchain become increasingly popular, developers are exploring ways to enhance the system’s ability to meet growing demands, thereby achieving scalability. Sharding, sidechains, state channels, and rollups are all methods of scaling. Blockchain rollups transfer certain transaction processes to secondary chains while storing transaction data on the main Layer 1 blockchain. This article will explore two types of rollups in the crypto space—Optimistic and Zero-Knowledge.

Introduction

Due to the increasing demand in the crypto industry, the capabilities of some blockchains are being pushed to their limits. Insufficient blockchain capacity can lead to network congestion and high transaction costs. To address this, the industry is actively developing and testing scaling solutions aimed at increasing transaction throughput and speed. These solutions can be divided into two groups: Layer 1 and Layer 2.

Layer 1 scaling solutions (such as sharding) involve directly modifying the main blockchain (also known as the base chain or Layer 1 blockchain). Layer 2 scaling solutions operate on top of the Layer 1 blockchain. Examples of Layer 2 solutions include state channels, sidechains, and blockchain rollups.

Blockchain rollups are protocols designed to improve throughput and reduce costs. Their goal is to address many of the issues faced by popular blockchains by bundling transactions and reducing data size, thereby increasing transaction processing and storage efficiency.

What is a Blockchain Rollup?

A rollup is a Layer 2 solution that bundles transaction data and transmits it from the main chain (or Layer 1 blockchain). Transactions are executed off-chain, while assets are stored in on-chain smart contracts. Transaction data is sent back to the main blockchain after completion.

In theory, any Layer 1 solution can perform rollups to improve transaction efficiency and increase the number of transactions processed and recorded within a certain timeframe.

Currently, rollups are divided into two types—Optimistic Rollups and Zero-Knowledge (ZK) Rollups.

What is an Optimistic Rollup?

Optimistic rollups increase transaction output by bundling multiple off-chain transactions into batches. Then, they use data compression techniques to record transaction data on the main chain, helping to lower costs and improve speed. According to Ethereum, optimistic rollups can increase scalability by 10 to 100 times.

How do Optimistic Rollups verify transactions?

To improve efficiency, transactions are assumed to be valid by default. You might wonder if this compromises security for faster processing. However, optimistic rollups employ a fraud-proof mechanism that sets up a dispute resolution period called the “challenge period.” During this time, anyone monitoring the rollup can submit a challenge to verify whether transactions were processed correctly, using fraud proofs.

If an error is found in the batch, the rollup protocol will correct it by re-executing the erroneous transactions and updating the block. Parties that approve the execution of incorrect transactions will be penalized.

Limitations of Optimistic Rollups

Although optimistic rollups do not have a transaction validation process, they do set a challenge period, which is absent in zero-knowledge rollups, increasing the time needed to finalize transactions.

The finality of chains using optimistic rollups is also lower than that of zero-knowledge rollups. Finality is a metric that measures how long users must wait to reasonably guarantee that a transaction will not be revoked or altered. Since funds can only be released after the challenge period, withdrawals via optimistic rollups are delayed. In contrast, withdrawals from zero-knowledge rollups can be immediate once the validity proof is verified by the rollup’s smart contract.

Some also believe that optimistic rollups are less efficient than zero-knowledge rollups. With optimistic rollups, all transaction data must be published on-chain to complete transactions, whereas zero-knowledge rollups only require validity proofs on-chain.

What is a Zero-Knowledge (ZK) Rollup?

Zero-knowledge rollups bundle transactions and submit them to the main chain in batches. For each batch, once the transactions are executed, the rollup operator submits a succinct proof of the changes. The operator also creates a validity proof to demonstrate that the changes are correct. These proofs are much smaller than transaction data, making verification faster and cheaper.

On Ethereum, zero-knowledge rollups reduce user fees by compressing transaction data when writing transactions as call data into Ethereum.

How do Zero-Knowledge Rollups verify transactions?

Zero-knowledge rollups use zero-knowledge proofs (ZKP) to validate transactions. The prover uses ZKP to convince the verifier that they know or possess certain information, thereby verifying the transaction.

Operation:

The prover provides a mathematical proof that only they can generate.

The verifier uses this proof to validate the transaction’s validity.

This proof can be obtained without revealing the underlying content to the verifier.

Benefits of Zero-Knowledge Rollups

If implemented properly, zero-knowledge rollups can offer users high security. A key feature promoting this security is the use of zero-knowledge validity proofs, which ensure that the network only operates in valid states and that operators cannot steal user funds or compromise the system in any way.

Another advantage of zero-knowledge rollups is that users do not need to monitor the network. All data is stored on-chain, and validity proofs are required. Therefore, operators cannot cheat, and users do not need to worry about malicious network behavior. Additionally, zero-knowledge rollups allow users to withdraw funds to the mainnet via data availability proofs of token ownership without collaborating with operators.

Similar to optimistic rollups, zero-knowledge rollups also implement off-chain execution mechanisms to speed up transaction processing.

Differences Between Zero-Knowledge and Optimistic Rollups

The main differences between optimistic and zero-knowledge rollups are as follows.

What is the outlook for zero-knowledge & optimistic rollups?

The future of zero-knowledge and optimistic rollups remains uncertain. As more people adopt cryptocurrencies and blockchain technology, rollups could play a crucial role in improving blockchain efficiency. Blockchains may continue testing various scaling solutions, including sharding, rollups, and Layer 0. We may also see new solutions being created and implemented that can work alongside or replace rollups.

Conclusion

As demand for cryptocurrencies increases and pushes the limits of blockchain, many different scaling solutions have been proposed. In this article, we explored the intrinsic differences between two rollup variants—optimistic and zero-knowledge. As rollups continue to undergo real-world testing, we may eventually see better versions that help us achieve scalability and ultimately enable mass adoption. ()(