What Are Rollups In Crypto? ZK- Rollups & Optimistic Rollups Explained

Understanding what rollups are in the blockchain ecosystem, and how they work is not as complex as you think.

In fact, they are still very much in their early stages of development, and no one can categorically tell what they can be or do in the next 5 to 10 years. But one thing we do know is that they are here to stay for the long run.

Currently, Ethereum is the only major blockchain project that uses rollups to increase transaction speed on its main network while lowering transaction costs.

In this article, I try to cover everything you need to know about rollups as a scaling solution, how they operate, and the future of rollups in the blockchain.

What are Rollups in Crypto?

Simply put, Rollups are Layer-2 scaling solutions that help bigger blockchain networks like Ethereum run transactions with speed while maintaining low gas fees.

These scaling solutions do this by bundling multiple transactions together into batches and taking them off the main chain to process them. Once the transactions are complete, they are sent back to the main chain.

By doing this, they reduce congestion on the main chain while taking advantage of the blockchain’s security.

Currently, there are two main types of rollups, and they are:

• Optimistic rollups
• ZK-rollups
  

Crypto Projects such as Arbitrum, Optimism, StarkNet, and Loopring have embraced roll-up technology to enhance user experiences in decentralized applications (dapps) on Ethereum and other blockchains.

What are ZK-Rollups?

Also known as Zero-Knowledge Rollups, ZK rollups are well-known layer 2 scaling solutions that use zero-knowledge proofs to determine the validity of transactions before moving them to the main blockchain. These proofs allow for quick and easy verification by anyone in the blockchain.

How do ZK-Rollups work?

ZK-rollups work by batching multiple transactions into a single, larger transaction and executing them off-chain.

Once transactions have been processed, Instead of sending individual transactions to the main chain, they submit a summary of the necessary changes to represent all the transactions within a batch by generating validity proofs to demonstrate the accuracy of these changes.

The validity proof serves as a cryptographic assurance that the proposed changes to Ethereum’s state genuinely reflect the execution of all transactions within the batch.

Currently, ZK-rollups operate as an off-chain protocol layered on top of the Ethereum blockchain while being managed by on-chain Ethereum smart contracts.

Top ZK-rollup projects

Below are popular ZK-rollup projects in the crypto space :

StarkNet/StarkEx

StarkNet is a decentralized ZK-rollup network that enables scalable and secure smart contracts on Ethereum. StarkEx is the scaling engine behind StarkNet, powering various ZK Rollup projects such as dYdX, Sorare, Immutable, and DeversiFi.

ZKSync

ZKSync is a trustless protocol for scalable and cost-effective payments on Ethereum. ZKSync supports not only payments but also smart contracts, NFTs, and privacy features.

Loopring

Loopring is a protocol for building high-performance, non-custodial exchanges on Ethereum. Loopring offers a mobile wallet app and a payment platform that facilitate ZK Rollup transactions.

Immutable X

Immutable X is a layer-2 protocol designed for creating and trading NFTs on Ethereum. It lowers gas fees, enhance scalability, and reduce the environmental impact associated with NFT minting and trading. Immutable X stands out as the first ZK Rollup solution that supports ERC-721 and ERC-1155 standards for NFTs.

Best ZK-rollup coins to buy

Below are some of the best ZK-rollup coins to invest in:

• Mina Protocol (MINA)

• Dusk Network (DUSK)

• Polygon (MATIC)

What are Optimistic Rollups?

Optimistic rollups are layer 2 scaling solutions that operate on the basis that all transactions within a batch are valid by default unless proven otherwise.

They provide scalability and efficiency improvements while remaining compatible with most Ethereum smart contracts.

Just like zk-rollups, optimistic rollups can support complex applications like decentralized exchanges and lending platforms.

How do Optimistic Rollups work?

Optimistic rollups execute transactions by putting together multiple transactions into batches before sending them off-chain.

However, unlike zk-rollups, optimistic rollups do not provide validity proofs after returning transactions to the main chain.

Instead, these rollups rely on a challenge period during which anyone can submit a fraud-proof to dispute the validity of a transaction.

If no fraud-proof is submitted within the challenge period, the transaction is accepted and finalized on the Ethereum blockchain. But if a fraud-proof is submitted and verified, the fraudulent transaction will be reverted immediately.

This ensures the security and integrity of the main blockchain are intact by allowing participants to challenge and rectify any malicious or erroneous transaction.

Top Optimistic Rollups projects

Below are popular optimistic rollup projects in the crypto space :

Optimism (OP)

Optimism is an optimistic rollup that executes smart contracts off-chain by making use of the optimistic virtual machine (OVM). Optimism has the sole aim to reduce gas fees, support fast withdrawals, and interoperability with other layer 2 solutions.

Arbitrum (ARB)

This is a popular optimistic rollup project which is designed to minimize Ethereum’s gas fees while increasing transaction speed by moving computation and data storage off-chain.

It offers features like fast withdrawals, arbitrary message passing, and cross-chain communication.

Arbitrum launched its mainnet beta in May 2023 and has gained traction from popular projects like Uniswap, Aave, Chainlink, and MakerDAO

Boba Network (BOBA)

The Boba network is a very simple optimistic rollup project that aims to enhance the user and developer experience on Ethereum. Boba Network offers low-cost transactions, fast confirmations, and seamless cross-chain transfers.

It supports NFTs, gaming, and social tokens, and integrates with platforms such as OpenSea, Rarible, and Audius.

ZK-Rollups Vs Optimistic Rollups: Differences and Similarities

Although zk-rollups and optimistic rollups seem to operate almost in the same way, there are still some major differences between the two.

Differences between ZK-Rollups and Optimistic Rollups:

Below I will be highlighting their differences and similarities.

Verification method:

ZK-rollups use zero-knowledge proofs, while optimistic rollups assume transaction validity by default and only verify if challenged.

Results:

Optimistic rollups can handle more transactions than zk-rollups due to simpler computations.

Gas costs:

ZK-rollups save more gas than optimistic rollups since they require less data on the main chain.

Security:

ZK-rollups are immune to censorship attacks and have no dependency on users or validators, while optimistic rollups can be vulnerable to censorship attacks and rely on users and validators for fraud detection.

Latency:

ZK-rollups have higher user latency but lower finality latency, while optimistic rollups have lower user latency but higher finality latency.

Privacy:

ZK-rollups provide high user privacy by hiding transaction details, while optimistic rollups have lower user privacy as transactions can be seen by individuals in the blockchain.

Compatibility:

Optimistic rollups have high compatibility with Ethereum, while zk-rollups have lower compatibility and require the rewriting of smart contracts.

Similarities between ZK-Rollups and Optimistic Rollups:

• They both aim to improve the scalability of the main chain. and reduce fees.
• They both move transactions by bundling them in batches before moving them off-chain for processing.
• They both take advantage of the security of the main chain and rely on it for finality and dispute resolution.
  

Future of Rollups in Web3

The future of rollups in Web3 is very promising because they provide a solution to the scalability and security challenges in major blockchain networks.

Rollups are not only a technical solution but also a potential service for Web3 applications.

Projects such as Ethereum, StarkNet, Arbitrum, and zkEVM are leading the way in integrating rollups into blockchain ecosystems.

As more projects adopt and innovate on roll-ups, we can anticipate the emergence of diverse and powerful Web3 applications soon.

Rollups as a Service (RaaS) frameworks will make it easier for dApps to leverage rollups for their specific use cases, further enhancing the seamless experience for developers and users in Web3.

Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.