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The Layer 2 narrative has been heating up especially on the Ethereum network. As the space advances, so will the development of L2s. A big advantage of rollups is that they get cheaper the more people use them – and not the other way around as with L1s.
Recently, a lot of attention has been focused on ZK-Rollups. If used correctly, they might be able to overcome the blockchain trilemma of scalability, security, and decentralization. However, these rollups are not the only solution available. There is another type called optimistic rollups
Ok, let’s jump into it.
What Are Rollups?
Rollups are Layer 2 solutions that execute transactions outside of the Ethereum base layer.
Even though the transactions are executed outside of the base layer (Layer 1), the data is still posted to the Layer 1 protocol. Consequently, the rollups are being secured by the L1.
In order for the transactions to be correctly verified and executed, operators must stake a bond in the rollup contract.
Rollups are useful because they:
- Reduce gas fees.
- Increase transaction speeds.
- Here is an illustration of how Rollups work:
- Now that we’ve outlined the purpose of Rollups, let’s dive into ZK and Optimistic Rollups.
ZK-Rollups
ZK-Rollups (short for Zero Knowledge Rollups) is a scaling solution that increases transaction volume and speed by bundling hundreds of transactions into one transaction per transfer. So, instead of transactions being validated one at a time, the smart contract verifies all of the bundled transactions at once. ZK-Rollups use a combination of on-chain and off-chain functions to validate transactions.
The great thing about ZK-Rollups is that all of the transaction data is not needed in order to reach a consensus (verify the transaction). Only the validity proof is needed to validate a block.
Requiring less data to validate a transaction is what helps make the transaction faster and cheaper. But wait, there’s more!
With ZK-Rollups there are also no delays in transferring funds (in contrast to Optimistic Rollups) because the accepted validity proof’s fund data has already been verified. This is made possible through the use of Merkle trees.
ZK-Rollups also have a healthy ecosystem that is growing by the day. Some of the notable projects are:
- Immutable X
- DYDX
- Starkware
- zkSync
- Hermez
- Aztec
- Loopring
Optimistic Rollups
Optimistic Rollups are a scaling solution that do not run on the base layer of Ethereum. Instead, they sit parallel to ETH on Layer 2.
ORs are unique in the fact that they notarize transactions instead of performing computations. A merkle root of the rolled-up transactions is published and checked by external validators to ensure that the data is correct.
If there is suspicion of fraud, the transaction is disputed. The OR will run a fraud-proof:
There is a gas cost associated with running a fraud-proof, but it is reimbursed once the proof is complete.
The biggest drawback of Optimistic Rollups is undoubtedly the 7-day waiting period for withdrawals!
There are currently two main iterations of Optimistic Rollups and a thriving ecosystem:
- Arbitrum
- Optimism
- Uniswap
- Synthetix
- Lyra
Which Rollup Is Better?
- ZK-Rollups and Optimistic Rollups both have their pros and cons. Let’s compare them below.
- ZK-Rollups pros and cons are:
NOTE -
If you are looking to buy into something that combines both technologies, Polygon is a one-of-a-kind, privacy-focused rollup that combines Optimistic Rollups with Zero-Knowledge (ZK) cryptography commonly used in ZK-Rollups. It creates a scalable and private hybrid of the two popular technologies. Polygon is currently available on most exchanges. If you are looking to buy it from a trusted exchange in Australia, we recommend using Coinspot.
