Rollups are centralized?

Rollups moves computation off-chain, while storing minimal transaction data on-chain. In this basic sense, Rollups is like a “draft paper” for Ethernet computing.

Source: Benjamin Simon


Let’s start with an analogy.

Imagine we’re back in middle school math class. As middle school math teachers tend to be cold, our teacher hands us a sheet with a list of a hundred long division problems, each with a very large number. Our task, we were told, was to work out as many of the problems as possible. But the tricky part was that we had to use the same sheet of paper to write out the answers and perform each step of the calculation. After only a few minutes, we had to face the absurdity of the task: it was simply impossible to squeeze so many complete solutions onto a single sheet of paper.

What does this nightmarish story have to do with Rollups ?

In this analogy, the piece of paper is like an ethereum block, and these mathematical problems are smart contract transactions. Ether is currently extremely crowded. There are too many transactions that need to be packed into each block. To make matters worse, most of these transactions are computationally intensive (i.e., they require a lot of computation), such as flash loans or transactions made through aggregators. Gone are the days of simple transfers and payments (pre-DeFi).

That’s the point. Just like the math teacher in that metaphor asked us to fill in every hard line of long division on a piece of paper, Ether must handle and record every line of calculation for every transaction.

That is, until Rollups came along.

Rollups shifts calculations off-chain, while storing only a minimal amount of transaction data on-chain. In this basic sense, Rollups is like the “draft paper” of ethereum computation. rollups handles all the messy data processing, enabling an exponential increase in the number of smart contract transactions contained within a single ethereum block by batching (“rolling up”) transactions.

This metaphor helps describe the problem Rollups is trying to solve (i.e. “network congestion due to computational overload”) and even gives us a vague idea of the Rollup solution (i.e. “moving computation off-chain”). But as for how Rollups work, what they look like, and why they excite us so much, we need to dig a little deeper.

What is a Rollup?
Essentially, each Rollup is a separate blockchain with a few modifications. Like Ether, each Rollup protocol has a “virtual machine” that executes the smart contract code; the Rollup’s virtual machine runs independently of Ether’s own virtual machine, the EVM, but it is managed by one of the Ether smart contracts. This connectivity allows Rollups to communicate with Ether, Rollup executes transactions and processes data, and Ether receives and stores the results.

On a technical level, the key difference between the Rollup chain and other more traditional blockchains is the way in which new blocks are generated.

Typically, a blockchain is a distributed network maintained by multiple parties (i.e. ” miners” or “validators”, depending on the type of consensus of the blockchain). These parties work together by consensus to produce blocks. Simply put, the parties vote on how to process a set of transactions, or in other words, how to construct the next block. Blocks that receive majority support are permanently written into the blockchain.

In contrast, the Rollup chain doesn’t operate by majority decision rules. Instead, a single party monitoring the state of Rollup can send a so-called “assertion” to Ether (the L1 base layer) about how a particular batch of transactions should be processed. Importantly, EtherChannel will accept or reject this assertion independently, regardless of whether most other parties to the Rollup support it. In practice, this usually means that a single party in the Rollup chain will be assigned the task of processing transactions and producing blocks.

And so on … . are Rollups centralized?
This centralized nature of Rollup block production is part of the reason why Rollups can process transactions so efficiently. But it also raises an obvious and worrisome question: How can Rollups ensure that block production is correct without a majority consensus? What happens if the block producer happens to be malicious?

This centralization is confusing for crypto users who are used to consensus-based blockchains. In fact, if the story ended here, we might (incorrectly) conclude that Rollups is just “a database replicated by a single party,” as Avalanche co-founder Kevin Seqniqi recently (mis)interpreted in a tweet.

Rollups are centralized?

In fact, this allegation of Rollup centralization is more of a logical misunderstanding than a mistake. Typically, centralized blockchains without robust consensus mechanisms are indeed vulnerable to corruption and hostile takeovers; however, in the unique case of Rollups, this lack of decentralization is not actually an issue for their security or reliability. To understand why this is the case, we need to go deeper.

The importance of data availability
Recall the unfortunate math assignment we started with. The “draft paper” for calculations allowed us to simply write down questions and answers on the main form; Rollups are like “draft paper” in that they “move smart contract calculations off-chain, while storing minimal transactional data on the chain.”

In fact, this last part, “storing transactional data on the chain,” is crucial to how Rollups work. In a Rollup chain, only the computation (data_processing_) takes place off-chain, while each transaction processed by the Rollup still stores its input data (aka “calldata”) on the Ether.

What is the importance of keeping transaction data on the chain? In the math homework analogy, the piece of paper we end up handing to the teacher includes the long division questions and their answers, which allows the teacher to check our work, even if we don’t write out the individual steps of the calculation on it. Similarly, the persistent availability of data on the chain means that any computation on top of Rollup can be repeated by the Ethernet base layer.

In short, Rollup’s on-chain data availability allows for a built-in review process. Ethernet can “double check” the integrity of transactions processed on the Rollup chain before they are permanently booked – almost like the U.S. Supreme Court’s power of judicial review. The limitations are an advantage.

Limitations are an advantage
Thus, the key feature of Rollups is their limitation; Rollups only push transactions to the (Ethernet) base layer; they cannot force the base layer to accept them because Ethernet can override any Rollup transaction if necessary. Because they are subject to this review process, Rollup transactions are considered to lack true certainty.

Given this limitation of Rollups, we can return to the unresolved allegation above about the centralization of Rollups. a single block producer of a Rollup may attempt to process transactions in bad faith, but if it does so, Ether (the underlying layer) will simply reject the batch after the review process is complete, and the block producer will be penalized.

Currently, the way the “review process” works depends on whether Rollup is an Optimistic Rollup or a ZK Rollup, but for both, the review process is much more efficient than Ether’s own processing of transactions.

In short, the Rollup system is based on “checks and balances”, which ensures that Ether remains a sovereign chain: Ether’s own consensus is the ultimate arbiter of truth.

Sidechains, however, are a different story. Lacking the same review process, sidechains process transactions through their own, completely independent consensus mechanism. Sidechain transactions are somehow “finality”, while Rollup transactions are not (until they are confirmed on Ether). Therefore, sidechains require a greater assumption of trust, as they do not benefit from Ether’s own decentralized security. In fact, I think sidechains are more similar to EVM-compatible Layer 1 than to Rollup.

Summing up
To recap: Rollups move computations off-chain to free up more space on the chain. The availability of data on the chain is critical, as it allows Ethernet to double-check the reliability of Rollups transactions. This review process, in turn, acts as a “check” on the production of Rollup blocks, eliminating the need for a consensus mechanism.

Rollups ultimately allow ethereum to have its cake and eat it too: they free up more on-chain capacity without breaking the decentralized security of the network. At least in my opinion, this is the most elegant scalability solution we could hope for.

Thanks to t11s and Hasu for their comments and suggestions.

Posted by:CoinYuppie,Reprinted with attribution to:
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