WEEKLY CRYPTO BYTES #5
What is Rollups in Ethereum World?
WEEKLY CRYPTO BYTES is back after a short break
Roll up: to become more prominent by successive accumulations.
In recent years, even after the beginning of crypto winter, the Ethereum ecosystem has witnessed impressive growth in user adoption with DeFi, smart contracts, and NFTs. However, with this expansion comes the challenge of scalability, which means accommodating more transactions at faster rates and lower fees. One of the promising solutions that has emerged to tackle this issue is rollups. This post will delve into what rollups are, their types, and how they contribute to Ethereum’s scalability.
What are Rollups?
Any software-based system built to cater to real-world use cases, whether AI or blockchain, is based on a layered architecture. When it comes to the Ethereum ecosystem, it finally got a stable layer 1 network with the Ethereum 2.0 upgrade.
Rollups are a layer 2 scaling solution that allows for increased throughput on Ethereum without needing to change the Ethereum mainnet (layer 1) itself. The basic idea behind rollups is to aggregate multiple transactions into one transaction, thereby increasing the effective number of transactions the Ethereum network can process per second.
How Do Rollups Work?
The fundamental concept of rollups is to take computation and state storage off-chain and only submit the resultant data to the Ethereum mainnet. Here’s a simplified step-by-step process:
- Transaction Submission: Users submit their transactions to a rollup smart contract on the Ethereum network.
- Off-chain Aggregation: These transactions are then bundled together off-chain.
- Proof Generation: A Proof of these aggregated transactions is generated.
- On-chain Submission: This proof and some necessary data are submitted to the Ethereum mainnet.
Because only proofs and a minimal amount of data are stored on-chain, the Ethereum network can accommodate many more transactions than it could if each transaction was processed individually.
Types of Rollups:
There are primarily two types of rollups: Optimistic Rollups and zk-Rollups.
- Optimistic Rollups: These rely on the premise that most transactions are honest (optimistic world). They allow for immediate transaction executions off-chain but can be challenged within a specific time frame if believed malicious. If a transaction is challenged and found to be fraudulent, the party responsible for posting it loses a bond they put up as collateral.
- zk-Rollups: They leverage zero-knowledge proofs, particularly zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge), to validate transactions off-chain. Since zk-SNARKs can be validated quickly on-chain, the Ethereum network can be confident in the validity of these transactions without doing all the computation itself.
Benefits of Rollups:
- Increased Throughput: Rollups significantly increase the number of transactions Ethereum can handle per second.
- Reduced Fees: Since rollups allow more transactions to be bundled together, users can often pay lower transaction fees.
- Enhanced Security: Rollups benefit from the security of the Ethereum mainnet since the final data is still stored on-chain.
The Future of Rollups and Ethereum:
Rollups are not just a temporary fix; they are envisioned as a critical component of Ethereum’s future scalability strategy. With Ethereum 2.0 active, combining the benefits of rollups with the capabilities of a Proof-of-Stake (PoS) consensus and shard chains will further amplify the scalability and efficiency of the network.
In conclusion, rollups are pivotal in Ethereum’s quest to become a more scalable and user-friendly blockchain. By leveraging off-chain computation without compromising security, rollups provide a promising path forward for Ethereum’s bustling ecosystem.
credits: This post has flavors of AI used.
