In the last installment of the articles on cryptocurrency training we saw 3 new onchain analysis metrics to be able to visualize data that cannot be seen in a graph. But not only do we have to learn to interpret metrics and graphs, it is also important for our training in cryptocurrencies that we learn about the new features that technology offers us. blockchain. So we are going to learn in this cryptocurrency training what rollups are and what function they have for decentralized networks.
What are rollups?
Rollups are a type of scalability solution that allows transactions to be executed outside the main network of Ethereum, but at the same time stores the data of said transactions in it. Rollups allow the network to scale and in turn continue to increase the security of the Ethereum network. This way, Ethereum mainnet traffic can be moved off of it to process more transactions in total. This is because only some rollup transaction data has to fit into the Ethereum mainnet blocks.
Representation of a rollup. Source: Ethereum.org.
How do rollups work?
In order to execute rollup transactions, they are executed on a separate blockchain that can even execute a specific rollup version of the EVM (Ethereum Virtual Machine in English). After executing the transactions in the rollup, they are grouped and sent to the Ethereum blockchain. It is a fairly simple process; transactions are executed, it takes the data, compresses it and sends it to the Ethereum blockchain in a single block, that is why they are called rollups. At first glance it may seem like a great solution to a problem that has been dragging down the Ethereum network in recent years.
Explanation of how a rollup works. Source: Panther Protocol Group.
But how does Ethereum know that the data sent is true? The exact answer depends on a specific rollup implementation, but in general, each rollup deploys a set of smart contracts to the Ethereum mainnet. These are responsible for processing deposits and withdrawals and verifying evidence. Testing is also the main distinction between different types of rollups. Let's follow the cryptocurrency training to find out where we can use rollups.
Types of rollups
Optimistic
Optimistic rollups send data to the Ethereum main network and assume that it is correct, which is why it has this name. If the data sent is valid, we don't have to worry about anything else. Optimistic rollups benefit from not having to do any additional tasks. In the event that a transaction is invalid, the system must be able to identify it, recover the correct state and penalize the party that executed said transaction.
Detection of an invalid transaction in a rollup. Source: Medium.
To achieve this, optimistic rollups implement a dispute resolution system that is capable of verifying evidence of fraud, detecting fraudulent transactions, and discouraging culprits from submitting further invalid transactions or incorrect evidence of fraud.
ZK-rollups
ZK-rollups (Zero-Knowledge or zero knowledge in Spanish) are the other type of solutions that we mentioned previously in this cryptocurrency training. This solution increases performance on the Ethereum mainnet by moving processes off the blockchain. ZK-rollups can process thousands of transactions in a batch and then only publish some minimal summary data to the Ethereum mainnet. This summary data defines the changes that need to be made to the state of Ethereum and some cryptographic proof that those changes are correct.
How ZK-rollups work. Source: Twitter.
When it comes to ZK rollups, there is no dispute resolution. This is possible thanks to zero-knowledge proofs, hence the name ZK rollups. In this model, each packet of transactions sent to the Ethereum mainnet includes a cryptographic proof called ZK-SNARK. The proof can be quickly verified by the Ethereum mainnet contract when the transaction packet is sent and invalid packets can be rejected immediately.
What protocols work with each type of rollup?
Within the topic of rollups that we have discussed throughout this training in cryptocurrencies, we have seen that we can see optimistic or zero-knowledge rollups. Let's see what are the protocols that work with each type of rollup:
With Optimistic-rollups
Within the panorama of optimistic rollups, we can mainly highlight both the Optimism and Arbitrum protocols. Both work with this type of rollup and in turn are working to achieve an optimistic rollup solution with compatibility with the EVM. Optimism has established partnerships with Uniswap, Synthetic, Maker DAO (with the latter to create a bridge on Optimism between blockchains for DAI). In turn, Arbitrum is available on Uniswap, Sushi, Bancor, Augur, Chainlink, Aave and many more.
TVL (Total Value Locked in English) combined of Arbitrum and Optimism. Source: AMB Crypto.
With Zero-Knowledge rollups
In the short term everyone is focusing on the development of optimistic rollups, but at the same time projects are already working on Zero-Knowledge rollups at high speed. With ZK rollups we have a few options available. —2022/10/curso-formacion-inversion-cryptomonedas-64.pngProtocols that work with ZK-rollups. Source: Chain Debrief.
- Loopring uses ZK-rollup technology to scale its exchange.
- Aztec is focusing on bringing privacy features to its ZK rollup technology.
- ZKTube is working on expanding payments using ZK rollups.
- StarkWare-based rollups are already widely used in projects such as DeversiFi, Immutable X, and dYdX.
- ZKSync is working on an EMV-compliant virtual machine that will be able to fully support any smart contract written in Solidity.
Conclusions from this cryptocurrency training
After finishing this cryptocurrency training on rollups, we have learned the usefulness they offer to the Ethereum main network to not be so saturated and thus allow the network to function fluidly. In this way, it is ensured that the network in the future does not experience the moments of saturation seen in moments such as the Crypto Kitties frenzy of 2017, the DeFi witnessed during the summer of 2020 or the phenomenon of NFTs and metaverses.