Rollups 101

By Tayyab Hussain.

Ever dealt with the high gas fees on Ethereum?! (Nod to all those who donated during the last Gitcoin Round!!), or had to wait and wait for your transaction to go through? Well, you’re not the only one.

At this point most of us have heard about the challenges of interacting with Ethereum — it’s slow and expensive. Ethereum has been plagued with this issue since almost it’s inception, but I guess that’s what happens when everyone wants to use your service… congestion. That’s great for Ethereum, the protocol, it means that it’s really struck a chord with it’s users and there is great demand for what it is trying to build. But, this makes for an awful experience for the user itself, because they have to share this limited resource with everyone else.

With the high demand for Ethereum and its service — congestion became the annoying reality. It’s great for Ethereum as protocol — depicts that there is a clear demand for what it is trying to build but as a user who has to share this limited resource with others…not so much. And eventually, these users will leave a find a different blockchain better suited to their needs. Now, Ethereum doesn’t want to lose its users/customers, so what can they do? And that’s where rollups enter the picture. But before we move to rollups, let’s look at what Ethereum has tried in the past.

Previous attempts at Ethereum Scaling

Ethereum has attempted to scale in a multi-pronged approach with mixed results:

• Ethereum 2.0 — This is a series of planned upgrades for Ethereum, including the now famous Merge, But, it included many other sophisticated techniques that would be built directly into Ethereum to enable it to scale. But, just like the Merge… this is like trying to change the engine, transmission, tires, brakes, and more on a car while it’s running! Risk is high. Shifting to Proof of Stake was like getting the car ready for maintenance and upgrade, it was just the foundation. (We wrote about the Merge back in August 2022)

Read More: The Merge explained like you’re five, illustrated with beavers (@twofivdev)

• State Channels — This is the technology being used by Bitcoin, specifically the Lightning Network to enable increased throughput and cheaper gas costs. State Channels only work for payments, and the basic premise is that transactions are handled off-chain in a different network and only when a user wants to actually withdraw back into Ethereum do they need to do a transaction that costs gas fees. But, it’s limit to only payments does not account for MOST of what happens on Ethereum, for example swapping on Uniswap or minting NFTs.
• Plasma — This is very similar to a rollup (don’t worry, more to come). Essentially, you offload the computation to a separate chain that makes it much cheaper to do transactions on. But, similar to State Channels you can only do certain types of transactions on Plasma, as it does not support everything. We call this non-generalizable, it is not a computer capable of doing everything and anything that Ethereum can.

State Channels and Plasma are both considered Layer-2’s, scaling solutions that offload transactions to a separate entity instead of directly on Ethereum, but were mostly unsuccessful at getting the necessary adoption. Good thing is that there is a different type of Layer-2 that is quickly gaining traction… Rollups!

Okay, but can we get to Rollups already?

I’m going to use the analogy of congestion from above, it may lose some technical details in translation, but I think it will be the best way to understand what Rollups actually do.

Imagine Ethereum is a two-way single lane road that has all kinds of shops, homes, businesses scattered throughout it. The only way for you to drive, “transact”, with someone on Ethereum is to drive all the way to where they are and perform that action. While driving on this road, you pay transportation costs in gas fees to ensure you can get to where you want to get to.

Now, sometimes there is a major sale at the $PEPE store or NFT’s have become really popular and everyone wants one! So, everyone gets in their car and starts heading on over where they wanna go. And the highway is really congested, meaning you have to sit in traffic burning your gas or bribe the police officers with a lot of Ether to make sure that you can get to where you want to get to before everyone else. Ugh, headache, why can’t Ethereum just add another lane?!

Well, they want to… but just like in real life you risk causing more issues by affecting a major highway, and often delay’s happen. But, then comes this thing called Rollups… and lo behold we have an exit ramp off the highway to a local road system with much more space. Let’s go there! And very importantly, before going there is a monitor, called a bridge contract, that ensures who is checking into this local road system and what they are bringing along with them.

This new local road system has much less traffic, which means it’s faster and cheaper for us to drive around. But, just like any local system it needs it’s own stores and residents to make it worthwhile to visit. So, these local systems convince Uniswap, Compound, OpenSea, artists and others to come build local branches and start hanging out here to attract more people. Many of these businesses actually do end up opening up stores because they don’t want to miss out on the next major economic hub.

Now, of course we don’t want to live our entire life in this one small town. We want to go to the big city where unique interesting things may be happening. (Some funny meme about everyone trying to move to NYC) But, how do we know that you didn’t just make up a bunch of fake money in your local town and try to bring it over to Ethereum. Well, that’s where the bridge contracts come in, they know exactly what you brought in to the town when you first visited, the local town recorded all of the transactions that have been happening in the town, and it tells Ethereum in regular intervals: “hey here is what’s been going on, so you can keep up”. Ethereum says “Thanks for that, but how can I even trust YOU, Mr. Rollup?”. This is where each rollup has it’s own set of mechanisms to prove “Hey, I’m not lying just look at my proof that I so diligently created a system to ensure everything checks out.”

Rollups use two primarily technologies to prove that they are only sharing valid transactions, optimistic (hence Optimism) and zero knowledge (Polygon zkEVM). That’s a detail we will skip for now, but just know that the specific implementation of how this proof is created is the magic sauce for all of these competing rollups.

Creating more space for users while keeping them safe

Amazing! Now, I don’t need to hang out on the Ethereum congested highway to get what I want, I can get all I need on a Rollup and other people also feel the same. We’ve just reduced the congestion on Ethereum, and this is great for Ethereum because more users can use it without all of the slowness or cost. This ultimately attracts more people to see what this Ethereum thing is all about meaning more business for builders and an incentive to offer other products and services. Driving the flywheel.

The purpose of a rollup is to provide a place for users to do all of the things they love on Ethereum, while maintaining of all their existing capital, without making tradeoffs in terms of security or ecosystem changes. There is a mutually beneficial relationship between Ethereum and rollups.

Next week, we are going to go deeper into a specific implementation of rollups called optimistic rollups.

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About the Author: Tayyab Hussain is a builder in the Web3 space with a passion for economic development and a deep love for Arsenal (the soccer club).

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