Blockchains have, since their inception, slowly but surely begun to enter gaming, finance, logistics, insurance, and other industries. However, they continue to grapple with one bottleneck: scalability — a requirement in securing the future of Web3.
The need for trust-minimization keeps growing with the expansion of the Web3 sector. Protocols now (more than ever) are required to achieve high speed and low data and transaction costs.
At the forefront of the Web3 adoption is blockchain scalability. Through continuous research and developments, critical solutions such as zero-knowledge rollups (Zk-Rollups) emerge, promising to transform blockchains and enhance the power of smart contracts across various industries.
What Are Zk-Rollups And How Do They Work?
Zk-Rollups is a relatively new Layer-2 (L2) scaling solution technology that enhances blockchain networks by increasing transaction throughput and lowering related costs.
With Zk-Rollups, blockchains can bundle transactions in batches and off-chain before compacting them into one data packet, referred to as a “rollup” and forwarding the summarised data to the primary blockchain for verification.
The primary blockchain (Layer-1) is also provided with cryptographic proofs that vouch for the accuracy of all the state changes made.
The state of the Zk-Rollups is maintained by a smart contract deployed on the Ethereum blockchain. Zk-rollups nodes are required to post a validity proof used for verification. In other words, it functions as the witness.
Zk-Rollups have become a formidable force in the race to achieve scalability while increasing the security of Layer-1 blockchains like Ethereum. Node operators no longer need to post every single transaction on-chain. Instead, Zk-Rollups have been designed to group transactions in batches, compress them, and periodically push them to the base layer network they are connected to.
The proofs of the finalized transactions complete the puzzle on Ethereum, as opposed to posting every transaction data on-chain. Zk-Rollups function similarly to optimistic rollups.
Zk-Rollups excels in effectively leveraging the key features of the base layer network, such as censorship resistance and security.
5 Key Things You Need To Know About Zk-Rollups
Zk-Rollups open up the blockchain industry to a new realm where smart contracts are enhanced, transactions are faster, and they cost much less compared to Layer-1 protocols.
This section of the article will discuss and explore the key features, differences, benefits, and drawbacks of Zk-Rollups. So, buckle up as we start to ascend into the realm of the revolutionary Zk-Rollups.
1. Scaleability Only Happens When Congestion is Solved
The Ethereum blockchain suffers from high network congestion and transaction costs, which burden projects building on the network while making it expensive for the ordinary person to interact in the decentralized ecosystem.
The introduction of Zk-Rollups as a distinct Layer-2 scaling solutions provider has significantly transformed the Ethereum protocol, allowing Layer-2 protocols to serve as a bridge between the users and the primary network.
Some of the most distinct features of Zk-Rollups include leveraging on-chain Ethereum smart contracts, off-chain processing of transactions, which are periodically added to the Ethereum blockchain in batches, increased transaction throughput, and lower transaction cost.
The transaction record forms a chain similar to the Ethereum blockchain, also known as a ZK-Rollup chain. There are several critical components of the Zk-Rollups architecture to take note of:
- On-chain contracts: Smart contracts executing on the Ethereum blockchain are at the core of operating the Zk-Rollups protocol. They vary from the primary contract utilized for storing rollup blocks, tracking transactions like deposits, and monitoring the rollup state to the verifier contract used to confirm the validity of zero-knowledge proofs posted by block producers. Ethereum is the base layer of all Zk-Rollups in the ecosystem.
- The off-chain Virtual Machine (VM): An off-chain virtual machine (VM) executes transactions while tracking state storage in Zk-Rollups. This VM functions separately and independently of the leading Ethereum Virtual Machine (EVM). You can refer to it as the secondary layer (Layer-2) of the Zk-Rollup network. The authentication of validity proofs on the primary network (Ethereum) ensures the accuracy of the state changes in the off-chain VM.Some people have come to refer to Zk-Rollups as “hybrid scaling solutions” due to their nature of functioning separately but leveraging security and censorship resistance from the Ethereum Mainnnet. On the other hand, Ethereum is tasked with enforcing the validity of the rollup state change, which guarantees the authenticity and availability of data following each state update. This feature elevates Zk-Rollups above other off-chain scaling solutions like sidechains and validiums, which are responsible for the correctness of the data and security, not to mention that they store transactions in other locations.
2. Validating Settlements While Keeping Bad Actors Away
Zk-Rollups cannot function without the Ethereum blockchain as they require the mainnet for various critical functions such as data availability, transaction finality, and censorship resistance.
As for transaction availability, Zk-Rollups functions by publishing the state data of every single off-chain transaction to the Ethereum network. This feature has been lauded for allowing individuals and businesses to separately and independently modify the state change in rollups, which can then be validated on Ethereum.
The Ethereum blockchain makes this data available through a feature referred to as calldata — which is broadcasted to all network participants. It is worth mentioning that there’s no need to push call calldata in large quantities as this is catered to by validity proofs that verify the correctness of state transitions.
Nonetheless, off-chain data is critical even to users interacting with the rollup, for instance, when querying their account balances, starting transactions, and initiating withdrawals.
ZK-Rollups tap the Ethereum blockchain for transaction finality. In this case, Ethereum is the settlement layer. Note that Layer-2 transactions remain incomplete until their validity proofs are accepted on the Layer-1 protocol.
This is similar to two-step verifications used by platforms operating user accounts like crypto exchanges. They ensure malicious actors are kept at bay and that user transactions cannot be reversed once they are completed and accepted on L1.
Finally, Zk-Rollups needs Ethereum for censorship resistance. As a rule of thumb, Zk-Rollups use a “supernode,” the operator to process transactions, create batches, and submit the compressed blocks to the base layer. This process achieves efficiency, but there are apprehensions about possible censorship likely by malicious operators.
A solution to this risk has been to empower Zk-Rollup users to push transactions directly to the base layer if they suspect censorship from a malicious operator without permission to exit the ZK-Rollup protocol.
3. Optimistic Rollups Can Challenge Transactions
Like Zk-Rollups, optimistic rollups are Layer-2 scaling solutions. However, there are some distinct differences between the two technologies. For instance, optimistic rollups utilize a fraud-proof mechanism that empowers any users in the network to dispute the outcome of an optimistic rollup operation within a specified window (time), as opposed to validity proofs used in Zk-Rollups.
In Zk-Rollups, the correctness of state changes in the rollups is cryptographically verified. On the other hand, Optimistic rollups assume transactions to be valid until their accuracy is challenged.
A time window is provided for network users to challenge the validity of transactions after an optimistic rollup batch has been submitted to the base layer. This time window is referred to as a challenge period — it allows anyone to compute fraud-proof. If approved, the rollup protocol is required to carry out the transaction again while updating the rollup state. The transaction batch would be assumed valid if the challenge period elapses without any disputes submitted.
The challenge period in optimistic rollups implies a seven-day wait period when withdrawing funds to the base layer via a native bridge. However, this challenge can easily be solved by using the services of liquidity providers, which allow users to access the funds by paying a tiny premium — think of it as a withdrawal fee.
Optimistic rollups have, over the years, become the de facto scaling solution due to their ease of use and the slightly lower chance of bug implementation. In comparison, ZK-Rollups are held back by the complexity of implementation. Still, they are promoted due to their long-term view on scalability and security, guaranteed by cryptographically verifiable validity proofs.
4. Benefits and Drawbacks of Zk-Rollups
|Increase overall transaction throughput of the smart contracts ecosystem on Ethereum.||Zk-Rollups tend to suffer from the limitations of the base layer|
|Variable consensus process, ensuring the validity of transactions by rollup operators.||Zk-Rollups fragment liquidity, which leads to challenges in permissionless composability|
|Increased computational bandwidth of L1 – no need to execute every single transaction.||They are complex to implement|
|Zk-Rollups possess key security-enhancing mechanisms||Zk-Rollups are relatively new – more studies are required|
|Lower user and consensus transaction costs||They are likely to carry upgradable risks|
|Highly minimized trust requirements||Zk-Rollups suffer from EVM compatibility issues|
5. The Future of Zk-Rollups is Bright
Despite the limitations highlighted in the table, ZK-Rollups are some of the most promising technologies relevant for scaling the blockchain economy. They stand out because they preserve the security and censorship resistance of the base layer, in this case, Ethereum.
Developers in the blockchain industry are empowered to custom-design Layer-2 protocols with the requirements they specify. This can lead to the creation of highly specialized computing environments without compromising on security.
To fully realize the potential of Web3, the industry will have to think critically about how to transform the existing infrastructure, and Zk-Rollups are at the forefront of this transformation.
The rise of Zk-Rollups might seem challenging, but the technology’s future is certainly not. Several projects have started implementing Zk-Rollups and are shaping the future of scalability in the Ethereum ecosystem by ensuring enhanced security and improved user experience.
Some of these projects include zkSync, a Zk-Rollup solution developed by Matter Labs, StarkWare, a protocol dedicated to building products and networks that excel at leveraging ZK-STARK technology used for scaling blockchains; and Hermez, a brainchild of Telos Foundation designed to provide an efficient and a secure Zk-Rollup protocol for scaling Ethereum.
Several factors, such as widespread adoption, EVM compatibility, continued innovation through research and development, interoperability, user experience, and an increase in diverse use cases, would determine the future of Zk-Rollups.