Layer 2 scaling solutions are protocols that run on top of the Ethereum layer 1 (L1) blockchain, but do not require every node to validate every transaction. Instead, they use various techniques to compress transactions, aggregate them into batches, and periodically submit them to the L1 as proofs or fraud proofs. This way, they can increase the throughput and lower the cost of transactions, while still inheriting the security and finality of the L1. These solutions aim to reduce the congestion and high fees on the Ethereum network by moving transactions off-chain, while still maintaining security and decentralization.
zkRollups are a type of layer 2 scaling solution that use zero-knowledge proofs (ZKPs) to verify the validity of transactions off-chain. ZKPs are cryptographic tools that allow one party to prove to another that a statement is true, without revealing any information about the statement itself. For example, Alice can prove to Bob that she knows the password to a website, without revealing the password or the website.
In zkRollups, transactions are executed and validated by a network of relayers, who generate ZKPs for each batch of transactions and submit them to the L1 as validity proofs. These proofs are very succinct and can be verified by anyone in a few milliseconds, without requiring the full data of the transactions. Therefore, zkRollups can achieve high scalability and low latency, while preserving the privacy of users.
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However, zkRollups also have some drawbacks. First, generating ZKPs is computationally intensive and requires specialized hardware and software. This limits the number of players who can participate in the network and increases the centralization risk. Second, ZKPs are not compatible with all types of smart contracts, especially those that involve complex logic or external data sources (oracles). Therefore, zkRollups are more suitable for simple and standardized transactions, such as token transfers or decentralized exchanges.
Optimistic Rollups are another type of layer 2 scaling solution that uses a different approach to verify the validity of transactions off-chain. Instead of using ZKPs, they use a game-theoretic mechanism called optimistic execution. In this mechanism, transactions are executed and validated by a single operator, who submits them to the L1 as fraud proofs. These proofs are not verified by default, but rather assumed to be valid unless someone challenges them within a certain time period. If a challenge is successful, the operator is slashed, and the transaction is reverted.
By using optimistic execution, Optimistic Rollups can achieve higher scalability and lower cost than zkRollups, since they do not require generating ZKPs. They can also support any type of smart contract that can run on Ethereum, since they use the same virtual machine (EVM) as the L1. Therefore, Optimistic Rollups are more flexible and general-purpose than zkRollups.
However, Optimistic Rollups also have some drawbacks. First, they rely on the assumption that there are enough honest participants who can monitor and challenge fraudulent transactions. This introduces a security risk if the operator colludes with other parties or bribes them to stay silent. Second, they require a long withdrawal period (typically one or two weeks) for users to exit from layer 2 to layer 1. This is because users need to wait for the challenge period to expire before they can claim their funds on the L1. Therefore, Optimistic Rollups sacrifice some usability and liquidity for scalability.
Validium is a hybrid between zkRollups and Optimistic Rollups that combines their advantages and disadvantages. In Validium, transactions are executed and validated by relayers who generate ZKPs for each batch of transactions and submit them to the L1 as validity proofs. However, unlike zkRollups, these proofs do not include the full data of the transactions, but only their hashes. The full data is stored off-chain by data availability providers (DAPs), who are incentivized to keep it available for anyone who requests it.
By using this design, Validium can achieve higher scalability than both zkRollups and Optimistic Rollups, since it reduces the amount of data that needs to be submitted to the L1. It can also support any type of smart contract that can run on Ethereum, since it uses ZKPs instead of optimistic execution. Therefore, Validium is more efficient and versatile than both zkRollups and Optimistic Rollups.
However, Validium also has some drawbacks. First, it relies on the assumption that there are enough DAPs who can store and serve the full data of the transactions off-chain. This introduces a data availability risk if the DAPs collude, censor, or go offline. Second, it requires users to trust the relayers and the DAPs to provide them with the correct data of the transactions, since they cannot verify it by themselves. Therefore, Validium sacrifices some security and decentralization for scalability.