Optimistic vs. Zk-Rollups: Comparing Layer-2 Blockchain Scaling Solutions

KEYTAKEAWAYS

TABLE OF CONTENTS

• KEY TAKEAWAYS
• POINTS OF DISCUSSION
• THE BLOCKCHAIN SCALING CHALLENGE
• LAYER-2 SCALABILITY AND ROLLUPS
• HOW LAYER-2 ROLLUPS REVOLUTIONIZE BLOCKCHAIN SCALING
• ZK VS. OPTIMISTIC: TWO APPROACHES TO ROLLUP TECHNOLOGY
• REAL-WORLD APPLICATIONS: ARBITRUM AND STARKNET IN ACTION
• COMPARATIVE ANALYSIS: ADOPTION TRENDS IN ROLLUP TECHNOLOGIES
• DISCLAIMER
• WRITER’S INTRO

CONTENT

Blockchain Layer-2 Rollups are scalability solutions designed to accelerate transactions, enhance blockchain performance, and improve scalability. Recent trends show a significant increase in transaction volume across various Layer-1 chains, highlighting the growing demand for better performance, lower transaction fees, and higher network throughput. Rollups offer a promising solution, enabling developers to create more efficient decentralized applications (dApps).

POINTS OF DISCUSSION

1. Introduction to Layer-2 scalability and rollups
2. Types of Rollups – A brief run-through 
3. Are Optimistic Rollups more commonly used than zk-Rollups? A quick comparison
4. Conclusion

THE BLOCKCHAIN SCALING CHALLENGE

With the invention of Bitcoin, blockchain technology regained its main stream prominence as an alternative form of computing and data verification in an open, secure and trustless environment. As blockchain adoption grew, the ever lasting issue of scalability and performance posed a challenge to blockchain infrastructure companies. 

Popularly known as Blockchain Trllemma, the scalability of blockchain infrastructure was 3 pronged. 

“Scalability vs De-centralisation vs Security.” 

In this article, we’ll explore the market adoption and technical advantages of Optimistic rollups versus zk-rollups. But before diving in, let’s start with a general overview of Layer 2 rollups.

LAYER-2 SCALABILITY AND ROLLUPS

Layer-2 Rollup protocols are a way to improve blockchain scalability by moving the task of validating transactions off the main Layer-1 blockchain and onto a secondary layer-2 side chain. Think of it like a smart contract on the main chain that acts as a middleman, sending transaction data to the layer-2 side chain where the actual work of validation happens. 

While the transaction details stay on the main chain, they’re bundled together and processed on the side chain to help ease the load.

(Source: Optimize IAS)

The layer-1 transactions are offloaded in batches to the layer-2 rollup chain.

Once the transaction batches are validated, the validation proofs are posted back to layer-1 chain for verification. 

Rollups address the scalability challenges of layer-1 blockchains without sacrificing the decentralization and security protocols established by the layer-1 network.

Let’s take Arbitrum as an example, built on the Ethereum layer 1 blockchain, Arbitrum is a layer 2 rollup that speeds up Ethereum transactions by 1.07x times. (Source) . It currently powers several DAO’s, NFT’s and DeFi applications. 

HOW LAYER-2 ROLLUPS REVOLUTIONIZE BLOCKCHAIN SCALING

1. zk-Rollups (zero knowledge rollups) : In zk-rollups, transactions are processed off-chain on a Layer 2 side chain and cryptographically validated. The proof of these transactions is then posted back to the main chain. Since only the transactions are executed off chain and cryptographic validation details are shared on the mainnet, zk-rollups provide enhanced privacy, making them ideal for use cases where data security is critical.

Since transactions are processed off mainnet, this helps reduce gas fees and decrease network congestion. They are used widely on Ethereum to speed up transactions and improve throughput. Some of the zk-rollups types are zk-SNARKs ,zk-STARKs and Bulletproofs

(Source: Stack Exchange Network)

zk-Rollups are most ideal for projects that are very dynamic, highly scalable, gas fee friendly and robust. They are most suited for high transaction applications like DeFi projects, Web3 gaming, custom enterprise application, voting, DAO’s where public information is tokenised amongst others. 

2. Optimistic rollups: Like zk-rollups, Optimistic rollup is another layer-2 Ethereum scaling solution that processes transactions off the mainnet. 

Optimistic rollups are called “optimistic” because they assume all off-chain transactions are valid by default, without requiring individual proof for each batch posted on-chain. This contrasts with zero-knowledge rollups, which use cryptographic proofs to confirm the validity of off-chain transactions.

If there’s a dispute, Optimistic rollups let validator nodes stake tokens and challenge a transaction’s validity within a designated time period, known as the Challenger time. If the transaction is proven invalid, the nodes that initiated the challenge are rewarded, else the challenging node can be penalised for false challenge. 

Just like zk-rollups, multiple off-chain transactions are bundled into large batches before submitting them to Ethereum. By doing so, one can divide the fixed costs across all the transactions in a batch. This further reduces gas fees for the transaction. 

ZK VS. OPTIMISTIC: TWO APPROACHES TO ROLLUP TECHNOLOGY

Let’s have a quick look at one example of both Optimistic rollup and zk-rollup chains.

1. Arbitrum: is a layer-2 scaling solution that is built on Ethereum layer-1 chain. Designed to speed up transactions and reduce transaction costs, Arbitrium improves Ethereum performance without compromising the security and decentralisation.

Here are some salient features: 

• Uses Optimistic Rollup architecture that allows it to execute transactions off-chain and posts the transaction data on the mainnet (Ethereum)
• Consists of trusted nodes that stake a certain amount of Ethereum tokens to qualify as validators
• It is fully compatible with Ethereum smart contracts, making it highly developer-friendly and supporting a wide range of dApps.
• Ideal solution to for De-Fi and Ethereum apps that have a large volume of transaction

2. Starknet: is also a layer-2scaling solution for Ethereum mainnet. It operates on a type of zk-rollup called zk-SNARK (Scalable Transparent Arguments of Knowledge).

Starknet bundles multiple transaction and validates them on its layer-2 zk-proof nodes. 

Let’s have a look at some key features:

• Unlike Optimistic rollups, zk-rollups have no challenge period as part of transaction verification, hence transaction speeds are faster
• zk-SNARK’s do not require a private, robust infrastructure like zk-STARK’s, hence it’s easier to set up. 
• Starknet’s architecture offers high scalability and is capable of handling thousands of transactions per second (TPS). 
• With cheap gas fees, higher transaction speeds, rock solid security and seamless integration with Ethereum mainnet, Starknet is ideal for De-Fi, gaming and NFT projects. 

REAL-WORLD APPLICATIONS: ARBITRUM AND STARKNET IN ACTION

Let’s compare both of them to reach a conclusion.

1. Security: Optimistic rollups are considered less secure, since the verification happen on chain, whereas, zk-rollups are considered more secure since the transactions are executed off-chain and only the cryptographic proofs are posted on the layer-1 chain. 

2. Scalability: Both of our rollup candidates help increase Ethereum scalability and help reduce transaction execution load on the Ethereum chain. All in all they help in increasing the transaction rate and reduce gas fees

3. Interoperability: Optimistic rollups are interoperable with other chains apart from Ethereum, whereas zk-rollups are limited to Ethereum mainnet at the moment. 

4. Privacy: Optimistic rollups offer limited privacy since the transactions are executed on the mainnet, whereas zk-rollups offer better privacy since the transactions are executed off-chain, making it ideal for privacy centric projects. 

5. Complexity: Optimistic rollups are easy to implement and does not require a high level of technical expertise, whereas zk-rollups are more complex and require technical sound expertise to implement.

6. Gas Fees: zk-logins offer a lower gas fees since they do not require fraud proofs for a batch of transactions, however, Optimistic rollups have a higher gas fees since the transactions are executed on the layer-1 chain.

COMPARATIVE ANALYSIS: ADOPTION TRENDS IN ROLLUP TECHNOLOGIES

Are zk-rollups losing out to Optimistic rollups? 

Optimistic rollups are currently more widely used than zk-rollups, mainly because they’re easier to implement and don’t require as much technical expertise to set up. However, the advantage Optimistic rollups have right now may be short-lived, as zk-rollups, with their stronger privacy and security features, are poised to play a key role in ensuring scalability down the road.

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