Blockchain technology has become a growing concern among financial experts. What makes things popular is that blockchains are very secure, but this can make them slower and more expensive. Some blockchains can not handle many transactions at once. Trying to make a blockchain faster can make it less secure and decentralised. This problem is called the blockchain trilemma. However, there are ways to deal with it. Sometimes, users need to make transactions faster, especially for apps or projects that use blockchain. Blockchain rollups help popular networks handle transactions better.
Highlights:
- Blockchain rollups have emerged as solutions to enhance scalability.
- They reduce congestion and costs while maintaining security by sending summarised transaction data to the main blockchain.
- It has found various applications in different fields of activity.
Understanding Blockchain Rollups
Blockchain rollups help make blockchain networks less crowded by processing multiple transactions off the main blockchain. They are more like self-checkout lanes in a busy store. They speed up transactions by grouping them off the main blockchain, reducing congestion and costs. To keep things secure, a summary of all the grouped transactions is sent back to the main blockchain, just like a receipt. This ensures that side transactions are fast and cheap while still being secure. Rollups use different methods to do this, but their aim is to make blockchain transactions simpler without compromising security.
The Purpose They Serve
On most blockchain networks, regular blocks can only hold a limited amount of data. Because of this, processing transactions takes longer since there is not enough space in each block. The mainnet gives priority to transactions with the highest bids. Thus, it leaves others waiting. As more users and applications join the main blockchain, network traffic increases. This makes transactions slow and expensive, no matter what they contain.
There are two types of information we can post on most blockchains: transactions and data. Storing transaction information and processing it on-chain is heavy for the mainnet. However, data resulting from transactions is lighter and stays the same no matter how many transactions there are. It is like how a check weighs the same, no matter the amount written on it. Instead of storing and processing each transaction individually, blockchain rollups group them together. By processing transactions off-chain and only sending the resulting data to the mainnet, the network can handle more transactions. This has two benefits: it reduces the load on the mainnet and allows one piece of data to hold multiple transactions. Rollups play a crucial role in improving blockchain scalability by processing and submitting more transactions in a single piece of data.
Blockchain Rollups: Locating The Types
There are two main types of rollups: ZK-rollups and optimistic rollups. Both types help reduce congestion on the mainnet, making transactions faster and cheaper.
ZK-rollups
ZK-rollups use zero-knowledge proofs to condense transaction data into a short proof. This is then sent to the main chain. This reduces the amount of data processed on-chain while keeping transactions secure. Zero-knowledge proofs protect privacy by allowing validators to verify transaction accuracy without seeing the transaction details. ZK-rollups work by condensing transaction data into a concise proof using a cryptographic technique called zero-knowledge proofs. It works in the following manner:
- Transaction Data Compression: Initially, all the transaction data is compressed into a compact proof. This proof contains the necessary information to validate the transactions but in a much smaller size compared to including all transaction details directly on the main blockchain.
- Submission to Main Chain: Once the proof is created, it is submitted to the main blockchain. This submission is considerably smaller in size compared to submitting all the individual transaction details.
- Verification: Validators on the main chain then verify the validity of the proof. They ensure that the transactions within the proof adhere to the rules of the blockchain network.
- Confirmation: After verification, the transactions are considered confirmed and processed on the main chain. This confirmation happens without revealing the actual transaction details, maintaining privacy.
- Security through Zero-Knowledge Proofs: Zero-knowledge proofs ensure transaction security by allowing validators to confirm the accuracy of the transactions without needing to access the transaction details. This helps maintain the confidentiality of sensitive information while still ensuring the integrity of the transactions.
Optimistic Rollups:
Optimistic rollups work on the idea that transactions are assumed to be valid unless proven otherwise. They process transactions off-chain and only send the results to the main chain. The main chain uses a fraud-proof method to check if the transactions are legitimate. If no fraud is found, the transactions are approved. But if fraud is detected, the dishonest transactions are reversed. This is how these rollups work:
- Off-chain Transaction Processing: Transactions are processed outside the main blockchain to reduce congestion. This allows for faster and more efficient transaction processing.
- Submission of Transaction Results: Only the results of these transactions are submitted to the main chain once processed. This submission includes cryptographic proof of the validity of the transactions.
- Verification through Fraud Proofs: Validators on the main chain verify the submitted transaction results. Instead of directly verifying each transaction, they focus on identifying any fraudulent activity. This is done through a mechanism known as fraud-proof.
- Transaction Approval or Rollback: If no evidence of fraud is found, the transactions are approved and added to the main chain. However, if fraudulent activity is detected, the dishonest transactions are rolled back, and appropriate actions are taken against the malicious actor.
Utility of Rollups
Rollups offer a way to make blockchain networks, DeFi projects, NFTs, gaming, virtual worlds, and supply chain businesses more scalable. Some important utilities are:
- Scalability Solutions: Rollups bundle transactions off-chain before sending them to the main blockchain, boosting scalability by increasing transaction throughput and reducing fees and congestion.
- Decentralised Finance: Rollups help alleviate congestion and high gas costs in DeFi by making transactions faster and cheaper, thus improving scalability and the user experience.
- Nonfungible Tokens: NFT platforms benefit from rollups by processing NFTs off-chain before submitting them to the main blockchain, reducing the time and costs associated with creating and trading NFTs.
- Gaming and Virtual Worlds: Rollups enable faster in-game transactions, asset transfers, and decentralised governance, enhancing scalability in blockchain-based virtual worlds and gaming.
- Supply Chain Management: Rollups improve security, efficiency, and transparency in supply chain transactions by tracking and validating them.
Final Words
Therefore, blockchain rollups are crucial for improving Ethereum’s scalability. With different versions, they balance security and efficiency. Rollup technology is still evolving, but it shows promise in addressing blockchain challenges. As stakeholders work on enhancing efficiency, blockchain applications are expected to expand.
Disclaimer: We are obsessed with cryptocurrency and love to write articles to express our thoughts. This article is for informational purposes and contains the writer’s personal opinion. Don’t consider it financial advice from the author or the CoinzBTC team. Do your research and think twice before making any investment decisions. CoinzBTC does not take responsibility for any financial losses.
