Optimistic Rollup

Understanding Optimistic Rollup

An Optimistic Rollup is a layer 2 scaling solution that uses off-chain computation to securely record transactions in the layer 2. The rollup’s “state” on the main underlying blockchain is updated periodically by publishing a merkle root of the rollup’s transactions. A network of external validators verifies the correctness of the Merkle roots before the state is updated at a later time. If there are any inconsistencies, validators can submit fraud proofs during the dispute period, which may result in rolling back the system’s state to the previous valid state.

Compared to zero knowledge rollups, the main disadvantage of optimistic rollups is the time it takes for layer 2 users to withdraw their funds back to the underlying blockchain. Since optimistic rollups rely on external validators to check the merkle roots for potential cheating before updating the state, there needs to be enough time for validators to review and challenge the activities in the layer 2.

On the other hand, optimistic rollups have a significant advantage over zero knowledge rollups when it comes to supporting smart contracts. They are more versatile and can enable smart contracts similar to the underlying smart contract-enabled blockchain. This native support for smart contracts within the rollup simplifies the launch of applications without the need for additional development efforts.

Author: Ross Middleton, co-founder and CFO at DeversiFi

Ross Middleton is the co-founder of DeversiFi, a decentralized finance (DeFi) trading platform built on StarkWare’s scalable technology. In his role, he manages finances and oversees DeversiFi’s project partners and key customers.

Prior to DeversiFi, Ross gained experience at Ethfinex and Bitfinex exchanges. Before entering the crypto industry, he worked as a professional energy trader and analyst in London for ten years. Ross traded global energy on desks at companies like Centrica, Gazprom, and RWE, using advanced proprietary fundamental-backed trading strategies. Besides his trading career, Ross is an angel investor and an Ironman triathlete. His extensive experience in both traditional and non-traditional asset trading, along with his connections in the alternative finance space, contribute to his valuable insights. Ross holds a BSc in economics.