Rollups
Sovereign Assets • Layer 1s • Payment Networks
batched transaction compression
Rollups are a Layer 2 scaling solution that bundle or “roll up” many transactions off-chain and then submit a single, compressed proof or summary of those transactions to a Layer 1 Protocol. This process drastically reduces congestion, lowers transaction costs, and leverages the security of the main chain. Rollups can be either optimistic (assuming transactions are valid unless challenged) or zero-knowledge (using cryptographic proofs for instant validation), making them a powerful tool for blockchain scalability.
Use Case: Platforms like Optimism and Arbitrum use rollups to enable thousands of transactions per second on Ethereum, offering fast, low-cost user experiences while inheriting Ethereum’s security.
Key Concepts:
- Layer One Protocol — The base blockchain where rollup proofs are ultimately posted and finalized
- Layer Two Protocol — Networks built on Layer 1 to process transactions more efficiently, including rollups
- Settlement Finality — Ensures that once a rollup proof is posted to Layer 1, all bundled transactions are considered final
- Throughput — Rollups significantly increase the number of transactions per second compared to Layer 1 alone
- Sidechains — Alternative scaling methods to rollups, using independent chains linked to Layer 1
- ZK-Rollups — Rollups using zero-knowledge proofs for instant cryptographic validation
- Optimistic Rollups — Rollups assuming transactions are valid unless challenged within dispute window
- Scalability — Network capacity that rollups dramatically improve
- Zero-Knowledge Proofs — Cryptographic method enabling ZK-rollup validation
- Gas Price — Transaction costs dramatically reduced through rollup batching
- Smart Contracts — Programs that execute on rollups with L1 security inheritance
- Decentralization — Network property preserved by inheriting L1 validator set
Summary: Rollups are an essential component of blockchain scaling, allowing networks to process massive numbers of transactions with minimal cost, all while preserving the decentralization and security of the underlying Layer 1 protocol.
Optimistic vs ZK Rollups
two approaches to Layer 2 scaling
• Assume transactions are valid
• Fraud proofs if challenged
• 7-day withdrawal window
• EVM-compatible (easy migration)
• Lower computational cost
• Examples: Arbitrum, Optimism, Base
• Prove validity cryptographically
• Validity proofs (instant finality)
• Fast withdrawals (minutes)
• Higher computational overhead
• Complex EVM compatibility
• Examples: zkSync, StarkNet, Scroll
How Rollups Work
the batching and posting process
1. Users submit transactions to rollup sequencer
2. Sequencer orders and executes transactions off-chain
3. Transactions are batched (hundreds to thousands)
4. Batch is compressed into a small data package
5. Compressed data + proof posted to Layer 1
6. L1 stores data, making it available for verification
7. Transactions inherit L1 security once posted
• Gas cost split across batch
• 1000 txs share one L1 posting
• Data compressed efficiently
• Only summary stored on L1
• Execution happens off-chain
• ~10-100x cost reduction
• Data posted to L1 = available
• Anyone can verify the batch
• Fraud proofs catch cheaters
• Validity proofs prove correctness
• L1 validators secure settlement
• No separate trust assumptions
Major Rollup Ecosystems
leading Layer 2 networks
Rollup Risks and Considerations
what to watch out for
• Centralized sequencers (most rollups)
• Upgrade keys held by teams
• Bridge vulnerabilities
• 7-day withdrawal delays (optimistic)
• Complex smart contract risks
• Sequencer downtime possible
• Most sequencers are centralized
• Decentralization “on roadmap”
• Emergency upgrade powers exist
• Fraud proof systems incomplete
• Trust assumptions remain
• Progress being made slowly
• Shared sequencer networks
• Permissionless fraud proofs
• Decentralized prover networks
• Multi-proof systems
• Shorter withdrawal times
• Better bridge security
• Don’t store life savings on L2
• Understand withdrawal times
• Monitor sequencer status
• Use established rollups
• Diversify across L2s
• Keep some funds on L1
Rollups Checklist
understanding Layer 2 scaling
☐ Know rollups batch transactions
☐ Understand L1 security inheritance
☐ Recognize throughput improvements
☐ Know gas cost reduction mechanics
☐ Understand L1 vs L2 relationship
☐ Appreciate scalability gains
☐ Know optimistic rollup mechanics
☐ Know ZK-rollup mechanics
☐ Understand fraud vs validity proofs
☐ Know withdrawal time differences
☐ Recognize ZK proof advantages
☐ Compare vs sidechains
☐ Bridge funds to rollup safely
☐ Understand bridge risks
☐ Know withdrawal procedures
☐ Monitor sequencer status
☐ Track smart contract upgrades
☐ Use reputable bridges only
☐ Know sequencer centralization
☐ Understand upgrade key risks
☐ Recognize trust assumptions
☐ Check decentralization status
☐ Diversify across L2s
☐ Keep L1 backup funds