What are Blockchain Rollups | Zero Knowledge and Optimistic Rollups Explained

Do you want to learn about rollups? Look no further, here is everything you need to know about rollups in crypto

17 Feb 2023 | 7 min read

Table of Contents

Introduction

Ethereum, the term that is now becoming as common as ‘crypto’ or ‘Web3‘; and for good reasons. Starting from the Merge that was finally completed last year, Ethereum has been busy with one upgrade after another. The promising rise of Ethereum has been mainly because it provides an ideal ground for the particular growth of many new innovative blockchain products. For example; NFTs and DeFi. The consistent growth in Ethereum and its decentralized ecosystem is due to the constant development of new applications and innovation that is happening within the ecosystem. The only existing issue to be looked at for further development is the scalability issue of the network. However, Ethereum’s outstanding growth in its activity has now resulted in rising debates for identifying the best suitable scaling solution. The decision now stands between the choice of optimistic rollups versus zero knowledge rollups. A deep dive into both is what we are going to do.

First thing first, rollups are basically one of the several scaling options available. Scaling solutions, in a nutshell, are the methods that helps in making a slow blockchain faster and cheaper. Some of the other scaling systems other than rollups include sidechains and state channels.

A lot of the scaling products are specifically related to Ethereum. The urgency of specific scaling has been rising in demand because transactions on Ethereum are becoming quite costly. Moreover, at core, the Ethereum developers are working on improving the blockchain’s speed and costs over the next few years through a series of updates; the onset of which has been The Merge. Rollups, as per developers, is the solution that can give out the ideal scalability solutions the ecosystem is demanding.

As a matter of fact, the developers think that these scaling solutions are likely to complement the Ethereum upgrades.

What are Blockchain Rollups?

Before diving into the different types of rollups, here is a quick understanding of what rollups actually are. In blockchain rollups comprise of a bunch of transactions which are then turned into one single data. Once done, they are then submitted to the Ethereum mainnet. In short, the rollups take the transactions out of the mainnet to process them off-chain. Once processes, they are then converted into one single piece of data only to be submitted back to the Ethereum mainnet.

Did You Know? Since rollups process the data off chain, they are also known as ‘off-chain scaling solutions.’

Additional Read: Ethereum Shanghai Upgrade

Zero Knowledge Rollups

Thanks to Polygon’s attempt at making the network more efficient, zk rollups have been a very common term in use within the crypto community for the past couple of weeks! The Zero-Knowledge rollup protocols use a complex piece of cryptography known as a Zero-Knowledge proof. This cryptography helps them to determine if a transaction is valid by making use of only minimal information about that transaction. The most interesting part is that these Zero-Knowledge proofs are privacy-preserving, sleek and, the most important part? They are fast and cheap as compared to an Optimistic rollup that needs fund to stay on the network until the dispute resolution period has been closed. ZK-rollups, on the other hand, allows users to withdraw their funds with less of a delay.

Even though ZK-rollups are considerably more complex under the hood, they hold quite a list of advantages over Optimistic rollups in terms of speed and security. Till date, the work that has been done with all of the ZK-rollups that are out in the wild all had specific applications. This means that their possibilities have only supported a specific service or use case. For example; swapping of non-fungible tokens or transferring crypto between addresses. With the recent advances in cryptography, from the teams of Polygon, Matter Labs and Scroll that the crypto community is to see the vastness of ZK being explored; with the teams being close to launching the first zkEVMs. These zkEVMs are ZK-rollups that function identically to Ethereum’s mainnet. Similar to the popular Optimistic rollups, these newer ZK-rollups would be able to support any application developers would care to build on Ethereum, virtually. With processes like this, the ZK-rollups will be making things vastly quicker and cheaper for its end users.

Rollups with ZK

Some of the rollups with ZK in the crypto space are as follows:

Loopring: A L2 protocol that allows for non-custodial gas-free decentralized trade.
ZKSync: Popular L2 scaling and privacy engine based on zero-knowledge proofing.
Immutable X: Highly scalable, non-custodial L2 protocol for NFTs

Optimistic Rollups

Now that we have discussed the ZK rollups, let’s take a peak into what is an Optimistic Rollup. These comprise of the new state root that are published by operators without being checked every time by the Rollup smart contract. Other than doing that, everybody hopes for the state transition to be correct. Though, if an incorrect state transition do get published, other operators or users; who are responsible to observe what’s going on in the L1 Rollup contract and executing every single transaction; will be able to point out the invalid transaction. Once the identification is done, they revert the incorrect block, thus, slashing malicious operators.

The whole process takes place in the said manner because as the name suggests, it ‘optimistically’ assumes that all the transactions contained within a rollup are valid. Being optimistic, these rollups give everyone on the network a certain amount of time, which commonly gets to be a week, to contest fraudulent transactions.

One of the benefit of the Optimistic rollup is that since they at first think that the things are correct, the network do not waste time in confirming these things. They are quick! Though they have a drawback, which is that it usually takes about a week to officially withdraw the funds from popular networks like Optimism or Arbitrum.

Rollups that are Optimistic

Optimism: Cheap, scalable, EVM-equivalent architecture based L2 extension of the existing Ethereum software.
Boba Network: Hybrid computational platform and L2 scaling solution that utilizes Optimistic Rollups
Arbitrum Bridge: Ethereum L2 scaling chain.

Comparing ZK & Optimistic Rollips

Criteria	Optimistic Rollups	Zero Knowledge Rollups
DeFi Readiness	Execution model similar to EVM.	Lacks wide-ranging EVM support with few rollups that are EVM compatible.
Validity Proof	Fraud proofs helps in proving the validity.	ZKPs or Zero Knowledge Proofs acts as the transaction validity proof.
Transaction Finality	Takes about one week in transaction finality.	No delay in transaction finality.
Ease of Programming	Better ease of programming as there is no need for approvals.	Complicated cryptographic proofs makes it a little difficult design and implement with ZK rollups.
Transaction Costs	Lower Transaction cost	Higher transaction cost
Trust	No need for a trusted setup	Need s trusted setup to function
Live Monitoring	Verifiers need to maintain live monitoring and the reference state in the state root.	No need for monitoring the layer 2 chain
Security	Emphasises on crypto-economic incentives to ensure roll up security	Cryptographic proofs guarantees security.

Risks of Rollups

Even though the inclusion of rollups brings with it scalability, there are certain risks that come with it as well.

While rollups borrows the security guarantees that are part of Ethereum’s core, they still come with some risks that are relative to Ethereum’s mainnet.

Rollup smart contracts may contain bugs, as at the end of the day, they are an external program.
As both the rollups are in their nascent stage, the networks that they use to operate on are somewhat centralised. Which means, the developers can shut them down if they like.

Conclusion

The differences they separates the optimistic rollups and the zero-knowledge rollups lay it out in the open about how both the solutions can serve distinct use cases. While ZK Rollups tend to appear to be the more secure alternative to optimistic rollups due to its feature of cryptographic proofs, on the other side, optimistic rollups are a better candidate if one is looking for DeFi projects with EVM compatibility.

No matter what the outcome will be, or which rollup will gain the momentum; this whole process is going to be a very important and exciting evolution to observe for the crypto community.

FAQs

What are the different types of Ethereum rollups?

The two types of Ethereum rollups are ZK Rollup and Optimistic Rollup.

What is the difference between zero knowledge proof and optimistic rollup?

The main difference between zero knowledge proof and optimistic rollup is the usage of cryptographic proofs. While zero knowledge proof uses cryptographic proofs, optimistic rollup has a setup that does not require approvals while building.

What is the downside of ZK rollups?

ZK rollups still need to be deep dived into and explored for far more use cases.