Ethereum’s top dapps are increasingly turning to “rollups”

Ethereum’s scaling solutions are heterogeneous, which makes it difficult to monitor.

For those familiar with Ethereum, rollups are the latest must-know technology that debuted at Devcon V in Osaka, Japan a calendar year ago. In fact, the majority of the top 20 Ethereum-based decentralized applications (dapps) have switched to a rollup solution in the coming months or are planning to do so, according to the teams surveyed by CoinDesk.

For example, according to a blog on Tuesday, Coinbase Wallet now offers native support for Optimism’s OVM test network.

Completely different from the fruit variety, a rollup is an off-chain aggregation of transactions within an Ethereum smart contract. Ethereum users can process within the contract with security guarantees that their transactions will not be misused and that they will eventually settle in the mainchain.

The main benefits of transaction aggregation for Dapps have been observed over and over again this summer as the average Ethereum transaction fee broke historic records several times.

Continue reading: Decentralized financial madness is driving Ethereum transaction fees to an all-time high

In the case of the transaction guarantee method, the rollup constructions differ: On the one hand there are Zero Knowledge Proof Rollups (ZKR), which are based on mathematics; on the other hand, there are optimistic rollups (OR) that are based on financial incentives.

Location of the country

Rollups have been part of the concept since 2014, which Ethereum co-founder Vitalik Buterin calls “shadow chains”.

Ethereum developers – like all blockchain developers – have been looking for workable scaling options since the project started in 2015. Most solutions have failed or only partially worked, including plasma and state channels. These bugs led many developers to rethink Buterin’s shadow chains, which we now call rollups.

In fact, in a blog this month, Buterin described rollups as a “scaling strategy for the near and medium-term future” due to the high demand for a scalable blockchain today. Ethereum 2.0 – a new, fragmented proof-of-stake (PoS) blockchain – is intended as a long-term solution, but will not be ready for production for years.

Continue reading: Everything you need to know about Ethereum 2.0

The two best-known rollup companies are Paradigm-backed Optimism, formerly known as Plasma Group, for its OR and Matter Labs for its zk rollup, ZK-Sync. Teams like Fuel Labs and Starkware are also working on much hyped implementations.

Rollups as throughput solutions

However, a point of clarification is needed. Rollups are not a scaling solution for Ethereum or a blockchain, but a “throughput solution”.

Scalability, as Summa co-founder James Prestwich said in a July tweet, increases the number of transactions a network can process without changing hardware requirements.

Throughput, on the other hand, also increases the number of transactions, but requires more hardware to do it.

As Prestwich notes, the hardware problem really boils down to what it takes to validate each transaction. Layer 2 (L2) solutions like ZKR and OVR require additional hardware setups, as evidence to handle rollup transactions in the chain often requires additional hardware support to get the job done.

CCNR vs. OR

The CCNR and OR nexus is the mechanism that proves the validity of transactions. In plain English, this means that the transaction bundle contained in a rollup needs to be checked in some way.

If you step back, you can think of rollups as a kind of mining block. Transactions are moved off-chain, bundled, sequenced, and then sent back to the mainchain.

CCNRs bundle a group of transactions, compress them and create zero-knowledge evidence to certify the validity of the state transitions, as Buterin describes in a blog post from 2019. When the transaction is sent to the mainchain, the block is verified by the attached zero-knowledge evidence.

Continue reading: EY Unveils Zero Knowledge Proof Privacy Solution for Ethereum

ORs, on the other hand, use game theory. Rather than attaching evidence, a sequencer leaves a bond, known as evidence of fraud, that can be confiscated if a sequencer commits a malicious act, such as B. the sequencing of transactions against previous rules.

This makes optimistic rollups optimistic: They assume that everyone is acting ethically, but include a fallback in the event a malicious party arrives.

Compromise

At first glance, CCNRs may appear cheaper than ORs: There is no bond and trust is guaranteed by the zero-knowledge proof.

But CCNRs have some drawbacks, at least for now. On the one hand, CCNRs require special hardware to create the computationally intensive evidence.

For example, the Privacy Coin zcash is based on zero-knowledge proofs and was unable to start shielded transactions on its mobile wallet until this year, as it was difficult to create these proofs without a lot of computing power.

Continue reading: Zcash’s newest hard fork ‘Heartwood’ makes mining private

In addition, CCNRs cannot interact with the Ethereum Virtual Machine (EVM) in the same way as ORs. This limits the use of CCNRs to a few blockchain actions such as a basic transaction.

“The advantage of proof of fraud is its simplicity – Zk rollups require you to write your contracts as a complex zero-knowledge circuit and a lot of fancy math. This means you can’t use the EVM, so you lose half a decade in developer tools and ideas, ”said Ben Jones, co-founder of Optimism, in an email to CoinDesk.

Matter Labs founder Alex Gluchowski told CoinDesk in a Telegram message that optimistic rollups also have their own particular problems.

For example, there is a tension between the size of an OR and the amount of an asset processed, Gluchowski said.

In other words, it is theoretical that an OR-based sequencer processes enough transactions that it is profitable to abuse its position as a sequencer – even if it could cut evidence of fraud. That way, there is likely a cap on the number of transactions that an OR can be entrusted to process compared to CCNRs, he said.

“The more assets an individual OR has, the more vulnerable it becomes to various attacks. And the more transactions there are in a single OR, the more difficult it becomes to run a full node, which further reduces security, ”said Gluchowski.

CoinDesks invest: Ethereum economy is a fully virtual event on October 14th that examines the impact of the far-reaching changes in the Ethereum ecosystem for investors. Learn more.

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