Zk-Rollups, short for Zero-Knowledge Rollups, refer to a second-layer scaling solution that moves computation and state off-chain while storing transaction data on the on-chain layer of the first-layer network, such as Ethereum. State changes are computed off-chain and then proven valid on-chain using zero-knowledge proofs.
Zk-Rollups significantly improve transaction throughput and help reduce transaction costs while inheriting the security of the underlying layer they are connected to for settlement. Instead of publishing every transaction on-chain, Zk-Rollups periodically publish batches of valid transactions from the second-layer network to the first-layer, effectively leveraging the underlying layer's scalability and security for transaction settlement. Rollups often use data compression mechanisms to reduce the amount of data published on the first layer.
How do Zk-Rollups work?
Zk-Rollups enhance scalability by not requiring the publication of all transaction data on-chain. Instead, they periodically provide batches of valid bundled transactions that are executed through off-chain computation. These bundles are then "rolled up" into a summary of state changes, which is verified by the underlying layer using validity proofs. These validity proofs, based on zero-knowledge proofs, mathematically demonstrate that the proposed state changes on the second layer are correct and result from the execution of the given batch of transactions.
Zk-Rollups typically rely on the underlying layer for data availability, settlement, and censorship resistance. The aggregated state is maintained by smart contracts deployed on the first-layer network. When users submit transactions to the rollup, they are usually submitted to second-layer operators to be included in the next batch of transactions. These operators can be centralized entities known as sequencers, which execute and bundle the transactions, and then submit the batches to the first-layer network. Zk-Rollups can also utilize a proof-of-stake system where the roles of executing and bundling transactions rotate among a set of validators who have deposited funds into the rollup staking contract.
Advantages and disadvantages of Zk-Rollups
Offloading transaction execution and state from the limited capacity of the base layer to a higher throughput computational environment while inheriting the security of the underlying blockchain significantly improves overall transaction throughput in the smart contract ecosystem. The consensus process for validating transaction execution is still performed by the underlying blockchain. It's worth noting that this means the computational bandwidth of the first-layer blockchain is more efficiently utilized as full nodes do not need to execute every transaction; they only need to verify the zero-knowledge proofs and store a smaller amount of transaction data.
Rollups also provide a crucial security mechanism where users can withdraw funds from the second layer even if the Rollup network malfunctions. This is in contrast to sidechains or independent blockchains where network failures can lead to significant fund losses. Due to the fixed cost of proof verification, Zk-Rollups also reduce user transaction costs. Importantly, this means that the cost of consensus decreases with increased usage as it is shared among more users. This is a significant advantage that traditional blockchain environments cannot offer, as user costs tend to increase with usage. Additionally, Rollups employ a 1-of-n trust model, requiring only one honest node to ensure the validity of off-chain computation.
On the other hand, Rollups may not be as fast or inexpensive as independent chains since they are ultimately constrained by the limitations of the underlying layer and its typically expensive block space. Compared to applications that exist on the same underlying layer, Zk-Rollups may also disperse liquidity in the ecosystem and challenge permissionless composability. It's also important to note that rollups are an evolving invention over independent blockchains and may introduce upgradability risks.
Expanding Web3 with the Power of Zk-Roll
Zk-Rollups are one of the most promising technologies for meaningfully scaling the blockchain economy while maintaining its key properties of censorship resistance and trust minimization. Scaling through rollups also has the added benefit of allowing developers to customize second-layer networks according to their specific requirements, creating highly specialized computational environments that still inherit the security of the public decentralized base layer.
A fully realized Web3 ecosystem will have to handle a significant volume of transactions, and as more block space becomes available through widespread adoption of rollups, more activities will be unlocked, and more industries can harness the benefits of blockchain technology.
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