Ethereum is unquestionably the most popular platform for developing decentralized applications and smart contracts. However, the ever-increasing volume of activity on Ethereum has come at a significant cost in terms of scalability. Due to a constant influx of transaction requests, Ethereum experiences high network congestion. Users have to experience reduced transaction speed alongside higher transaction fees. However, there is a solution to this Ethereum scaling problem: Optimistic Rollup.
This post will introduce you to everything you need to know about Optimistic Rollup, its benefits, and the best projects that use it.
Blockchain scaling
As the number of people who use Ethereum increased, the blockchain reached certain capacity limitations. This has increased the cost of using the network, necessitating the use of “scaling solutions.” There are a variety of solutions being researched, tested, and implemented that take different approaches to accomplish similar goals.
There are two ways to scale a blockchain ecosystem:
- Increasing the capacity of transactions on the blockchain itself.
- Modifying how you utilize the blockchain.
You can read more about scaling here.
Rollups
Regular Ethereum blocks can only store a limited amount of data. The network traffic grows as the number of users and applications built on Ethereum grows.
Blockchain rollups combine several transactions into a single data set and submit it to the Ethereum mainnet. They extract transactions from the Ethereum mainnet and process them off-chain before submitting them back to the mainnet. Because of this, rollups are also known as ‘off-chain scaling solutions.’
Rollups help to improve Ethereum’s scalability by processing and submitting more transactions in a single piece of data. Blockchain rollups are classified into two types:
- Optimistic Rollups: also called fraud proofs
- ZK rollups: also called validity proofs
What is an Optimistic Rollup?
Optimistic rollups are a type of Layer 2 (L2) construction that improve throughput and latency on Ethereum’s base layer by moving computation and data storage off-chain. They handle transactions on Layer 2 and group them into a single block on Layer 1, assuming that all validators are honest by default (hence, the name Optimistic). This method allows fixed costs to be spread out over multiple transactions in each batch, which lowers fees for end users.
“Optimistic” rollups assume that off-chain transactions are valid and don’t post proofs of validity for transaction batches that are posted on-chain. This makes a difference between Optimistic Rollups and zero-knowledge rollups, which publish cryptographic proofs of validity for transactions that happen off-chain.
Why do you need an Optimistic Rollup?
By now you must have been aware of what Optimistic Rollups are all about, but it’s important to go over the reasons why the solutions were introduced.
Scalability has become a big problem for Ethereum because the number of transactions is always going up. Because of these problems, the Ethereum network can’t handle more transactions and users as quickly as it could. That is, the future of the Ethereum blockchain can’t be thought of without the ability to scale. In order to solve these problems, scaling solutions like sidechains and Layer 2 rollups are needed.
Optimistic Rollups are expected to have 100x the throughput of the Ethereum Layer 1 chain. If this scaling solution is widely adopted, it should go a long way toward mitigating some of the current congestion on the Ethereum network. More information on how it works can be found here.
Benefits and setbacks of Optimistic Rollups
Here’s everything you need to know about the benefits and drawbacks of Optimistic Rollups.
Pros:
- They significantly improve scalability without sacrificing security or integrity.
- Transaction data is stored on the Layer 1 chain, improving transparency, security, censorship resistance, and decentralization.
- Fraud proving ensures trustless finality and enables honest minorities to secure the chain.
- Rollups benefit from “trustless liveness” (anyone can force the chain to advance by executing transactions and posting assertions).
- Compatibility with EVM and Solidity allows developers to port Ethereum-native smart contracts to rollups or use existing tooling to create new apps.
- Optimistic Rollups rely on well-designed crypto-economic incentives to increase security on the chain.
Cons:
- Delays in transaction finality due to potential fraud challenges.
- Centralized rollup operators (sequencers) can influence transaction ordering.
- If there are no honest nodes a malicious operator can steal funds by posting invalid blocks and state commitments.
- The security model relies on at least one honest node executing rollup transactions and submitting fraud proofs to challenge invalid state transitions.
- Users must wait for the one-week challenge period to expire before withdrawing funds back to Ethereum.
- Rollups must post all transaction data on-chain, which can increase costs.
Top 5 Optimistic Rollups projects
Optimism
Optimism is an EVM-compatible, Optimistic Rollup chain leveraging Ethereum’s security guarantees. Optimism uses construction to roll up thousands of off-chain transactions and save users on gas fees.
Instead of running all computation and data on the Ethereum network, Optimism puts all transaction data on-chain and runs computation off-chain, increasing Ethereum’s transactions per second and decreasing transaction fees.
Total Value Locked (TVL): $554.74m
Here is a full overview.
Arbitrum
Arbitrum is an Optimistic Rollup project designed to improve Ethereum’s user fees and transaction speed by moving computation and data storage off-chain. The Arbitrum Virtual Machine (AVM) supports EVM-compatible smart contracts, allowing users to use their favorite dApps for a fraction of Ethereum’s fees.
Already, most of Ethereum’s major DApps are online within Arbitrum’s ecosystem. You can connect to each one with the MetaMask wallet. The difference between Ethereum’s DApps and Arbitrum’s transaction fees is huge, so it would be wrong not to use Layer 2 solutions.
Total Value Locked (TVL): $1.03b
Boba Network
Boba Network is a blockchain Layer-2 scaling solution and Hybrid Compute platform offering lightning-fast transactions and fees up to 100x less than Layer-1.
Hybrid Compute technology brings the power of Web2 on-chain for the first time, allowing smart contracts to call any external Web2 API to execute complex algorithms such as machine learning classifiers, pull in real-world or enterprise data in a single atomic transaction, or sync with the latest state of a gaming engine.
It’s own unique features such as: providing a swap-based system for quick exits from L2 to L1 (the standard exit period of rollups is 7 days) and an additional cross-chain messaging such as a message-relayer-fast.
Total Value Locked (TVL): $4.08M
Metis network
Metis is an Ethereum Layer-2 Optimistic roll-up platform. It originally sprang from a fork of Optimism. It is a scalable, low-cost, and functional L2 protocol based on Optimistic Rollups. Metis’s unique stack can be applied to different use cases, including dApps, DAOs, and DeFi. It separates the computing and storage of the Ethereum construct for layer 2.
Anyone can benefit greatly from joining Metis ― from a developer, a project team, a startup, or a scaleup, to an established enterprise. It is making blockchain accessible, affordable, and adaptable for anyone to build, run, and grow any app, business, and community using blockchain technology.
Total Value Locked (TVL): $90.39 M
Cartesi
Cartesi Rollups is a set of on-chain and off-chain components that implement an Optimistic Rollups solution and provide the general framework for building DApps. It provides an over 10,000x increase in computational scalability for blockchain. The Cartesi version of Optimistic Rollups uses interactive fraud proofs.
Cartesi is the first Blockchain OS. It allows developers to build decentralized logic with Linux and standard programming environments preserving the decentralization and security of blockchains. That means moving beyond Solidity and coding smart contracts with rich software tools, libraries, and services developers are used to. All while, being free from scalability limits.
Total Value Locked (TVL): 283M
Conclusion
This article covered blockchain scaling, the need for it, the various methods of scaling, rollups, Optimistic Rollups, and, finally, the best projects whose technology is based on it.
Optimistic Rollups are an inevitable requirement for Ethereum’s future. Almost every other decentralized app plans to use Ethereum, but the network can only handle a certain number of transactions at once. So, scaling problems on the Ethereum network can be fixed with scaling solutions like these.
They can help by providing developers with cutting-edge methods to accelerate the development of decentralized apps with unmatched speed, vital built-in security protocols, and low operating costs. The benefits of Optimistic Rollups will become more significant as we move forward in the world of decentralized applications and smart contracts.