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Optimistic Rollups are genius, and unlike other L2 solutions, can be fairly easily explained

So the whole idea behind optimistic rollups is that the L1 network “optimistically” accepts the results of a smart contract as calculated by a group that runs the same contract’s code independently outside the network (L2).

This is great because it means you’re not spending expensive network computation time handling the internal smart contract logic, you only pay to set the final outcome’s values on the network.

The issue then becomes, what if that group cheats and changes the outcome? That’s where the real genius of the solution comes in. Since the smart contract logic is still deployed, but not running, on L1, anyone can independently verify that the results are correct by running the inputs through the smart contract themselves on their own system, and checking that they get the same output as the outside group did.

In the event that they have a different outcome, they can pay a fee to have the L1 network actually rerun the logic, but this time using the smart contract that’s normally unused on L1. If the L1 network finds a different result, then all results that were produced from that point forward by the outside group are undone, and never actually finalized on the L1 network.

The downside of this is that there has to be a delay between when the optimistic rollup runs the contract, and when the result is finalized to L1, to give people time to potentially invalidate the result.

However, if you keep your money in the optimistic rollup, you can continue to use that money for additional transactions in the same rollup, even though it hasn’t been finalized on L1 yet.

It’s an absolutely genius way of optimizing things, because you take advantage of basic game theory to allow the network to offload most computation off network, while still maintaining a trustless system.

I’m continually amazed by the genius applications of game theory to smart contracts, I never fully appreciated them until the past year or so.

I highly recommend this post by Vitalik if you are interested in a more technical explanation:
https://vitalik.ca/general/2021/01/05/rollup.html



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6 Comments

  1. I’m a little less sure of how ZK-rollups work, but if I understand correctly, it’s the same concept, except you have a mathematical way of confirming that the output is correct, without doing all the same work that was necessary to get that output.

    Because this verification is much less processor-intensive, it can be automatically done for each output done by the outside group, so no delay for finalization is needed, since L1 can independently verify the result is correct, without doing all the same processing.

    This is especially useful for cryptographic operations that commonly are very expensive to compute, but cheap to verify (compression is similar in that sense, expensive to compress, cheap to decompress).

    Can someone correct me if I’m wrong on that?

  2. Yeah man/woman, it really is a sight to behold watching the innovation and ingenuity in the space. It’s motivating, inspiring, hope-filling, perplexing, wondrous, and whatever else (!).

    I think that the saying “necessity is the mother of invention” is apt here and for the entire DLT space itself. We’ve come to realize that the current financial architecture is, pretty much, hazardous to the health of people across the world – and have come together, nominally speaking, to change that and make it healthier and more nutritious, if-you-will, for everyone.

    Anyway, thanks for the quick explainer. Definitely gives me a much, *much* better idea on how Optimistic Rollups work. I’ve still some questions, like, what are the penalties and who is penalized for a “bad” smart contract? Furthermore, what sort of delay are we talking about here and how does that affect transactions, trading, staking/unstaking, etc…? Are we talking a few blocks delay or half-day delay?

  3. Copy and paste from the other day, I asked this but didn’t get an answer. Maybe you have some insight? I’m curious how the actually affects the average end user who is holding ETH.

    > So for the sake of having this make sense to me, let’s use my exact situation as an example. I buy ETH from my exchange (I’m Canadian, usually use Shakepay) then send to my Ledger. From there it sits until I cash out (send back to Shakepay and exchange to fiat), exchange for other crypto (send to Binance) or buy something (usually something processed through Shopify). So if I as an end user want to take advantage of faster, cheaper transactions, is there anything I can do or do all these companies – Shakepay, Binance and Shopify – need to migrate to Optimism, and there’s nothing I can control on my end? And if that’s the case, how does it work if say Ledger migrates but Shopify doesn’t. If I want to buy something would I need to pay big fees and have a long wait time for my eth to go from Optimism to mainnet?

  4. What’s so genius about it? Won’t it increase latency and the time for txs to reach finality? Disregarding horrible UX for a second here. Sure, you’ll get a minor TPS increase, but at what cost?

  5. I was skeptical about optimistic rollups offering any real change the ETH ecosystem, but after reading about it more I have come to conclude that yes, they are genius and likely to be very impactive

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