Welcome back to Trust Machines' "Scaling Solution of the Week" blog series. With the growing adoption of the blockchain and Bitcoin, scalability has been the center of the conversation lately. Without scalability, network congestion and slow transaction times can lead to high fees and drive away users — the opposite of the mainstream adoption that blockchain strives for.
That’s exactly why Layer 2 solutions like sidechains (which we discussed the week earlier) and rollups exist. They provide the infrastructure for the blockchain to scale further without compromising on security. This week, we are going to focus on Bitcoin rollups — an integral part for efficient development on the Bitcoin blockchain.
Bitcoin rollups are still largely in their innovation phase, but there has been increasing momentum of technology designed to enable rollups on the Bitcoin blockchain. In this discussion, we will delve into what is a rollup and the growing prominence of rollups in the Bitcoin ecosystem.
So, What are Rollups?
Rollups are scaling systems that allow L1 transactions to be processed on an L2, which is generally cheaper and faster. Periodically, multiple off-chain transactions are aggregated in a single batch and then ported back to the main blockchain. A smart contract validates the transactions batch and updates the state of the L1 blockchain.
Simply put, rollups are like a fast lane to process transactions on an L1 blockchain. Imagine the BTC blockchain as a busy lane where each car trying to get through represents a transaction. In the regular system, all the cars (transactions) must use the same busy lane, leading to traffic congestion and high toll fees (transaction costs).
Rollups create an express lane where multiple transactions are bundled together and processed faster and cheaper. Periodically, all the transactions from the fast lane (L1) are reported back to the main slow lane (L1), to make sure the main blockchain has all the records.
What are the Different Types of Rollups?
There are three main types of crypto rollups — optimistic, zero knowledge and sovereign rollups. While all of them provide the same basic functionality of scaling the blockchain, each rollup has its specific advantages and disadvantages.
Optimistic rollups function on the premise of ‘optimism.’ Optimistic rollups assume that most of the transactions in a batch are valid unless someone provides proof to the contrary.
In an optimistic rollup, users initiate transactions on an L1 blockchain that are grouped together in a bundle, processed, and validated on an L2 chain. Validators on the L2 blockchain assume all the transactions are correct, which speeds up the process. This optimistic assumption also reduces the need for resource-intensive verification of all transactions on the main L1 blockchain.
However, if a participant suspects that a transaction or batch of transactions within the rollup is fraudulent or invalid, the participant can submit a fraud proof to the main blockchain. The fraud proof triggers a verification process on the L1 blockchain, which checks the validity of the disputed transactions. In case the transactions are found to be invalid, the main blockchain will roll back to the correct state and penalize the parties responsible for the fraudulent or invalid transactions.
Zero-knowledge (ZK) rollups, also known as validity rollups, focus on a higher level of security and privacy. Like optimistic rollups, a ZK-rollup also moves transaction processing to a secondary blockchain and aggregate transactions in a bundle, or “rollup.”
ZK-rollups use advanced cryptographic techniques called zero-knowledge proofs that allow participants to create a verifiable cryptographic proof. ZK-proofs enable a ‘prover’ to demonstrate to the ‘verifier’ that a statement or claim is true without ever revealing any details about the statement itself.
Therefore, the ZK proof indicates the validity of all transactions within a rollup without revealing the details of each transaction, thereby preserving privacy. These ZK-proofs are summarized for the whole batch of transactions rather than representing individual transactions. The ZK-proof is submitted to the main chain, which then verifies the proof and confirms that all the transactions in a rollup are valid.
Once the verification is complete, the rollup is confirmed, and the results are settled on the main blockchain. This process ensures that the L1 chain maintains a complete and accurate record of all transactions. ZK-rollups are particularly useful for privacy-focused applications like financial transactions and secure data sharing.
Sovereign rollups are a relatively new type of rollups that use an L1 blockchain for data availability while handling its own settlement or verification of transactions. So, in the case of sovereign rollups, the L1 blockchain does not have to verify transactions — it is managed by the sovereign rollup nodes. In other words, L1 blockchains are only responsible for keeping records of transactions while the sovereign layer independently verifies and settles them.
Unlike other rollup transactions, sovereign rollups don’t need smart contracts to confirm rollup execution. Therefore, they can help developers deploy a smart contract rollup on a blockchain that does not support smart contracts, like Bitcoin, by deploying them on an existing sovereign rollup.
How Have Rollups Been Implemented on Bitcoin?
Most rollups have been focused on the Ethereum network. However, with an increasing demand for expanding the scalability and functionality of Bitcoin, more and more developers are working on building Bitcoin-focused rollups.
In October 2022, ZK-rollups gained the spotlight with the publication of John Light’s research paper discussing their implementation on the Bitcoin network.
However, sovereign rollups came into the limelight in March 2023, when Celestia’s Rollkit, a modular rollup framework, announced a research integration. The integrations allowed developers to deploy sovereign rollups on Bitcoin. Rollkit’s integration has breathed new life into discussions surrounding the implementation of all types of rollups on the Bitcoin network.
As Ekram Ahmed, head of marketing and communication at Celestia Labs, said during a Twitter Spaces session in March, as of now, Rollkit only enables the deployment of sovereign rollups. This means that it is not possible to transfer Bitcoin in a trustless manner. It is only possible to transfer Bitcoin in a semi-trusted way using a committee-based bridge, he said.
Ahmed added that in the future, we need “some kind of ZK-CPU proof verification code on Bitcoin” to enable fully trustless transactions.
This is because it is impossible to deploy validity rollups on Bitcoin without introducing certain features that will enable Bitcoin to validate transfer of funds out of the rollup, Light explained during a Q&A session with Trust Machines.
However, Rollkit has already built a foundation to develop rollups on Bitcoin in the future.
Why use Bitcoin Rollups?
Rollups are a promising scalability solution for blockchains because they balance scalability, security, and efficiency. Processing transactions off the main blockchain rollups increases the speed and cost-effectiveness of processing transactions, making the L1 blockchain scalable and efficient.
Rollups anchor their operations to the main blockchain so that the L1 blockchain is the source of security and truth. The periodic verification of transactions on L1 blockchains ensures consistency and points out discrepancies. Therefore, the security and decentralization of layer 1 blockchains extend to rollups. In other words, a rollup on Bitcoin will inherit the high security of the Bitcoin network, making rollups a viable scaling solution.
Scaling with Bitcoin Rollups
Rollups share the burden of processing transactions and help take the load off the main network. Rollups are becoming an important part of the entire Bitcoin scaling ecosystem, helping it scale while relying on the Bitcoin blockchain for security.
While rollup technology on Bitcoin is still in the innovation phase, the launch of Rollkit set the ball rolling for future rollup deployment for Bitcoin users. We’re at an exciting stage of getting the blockchain ready for mainstream adoption, and rollups are an integral piece of the puzzle as the Web3 ecosystem of decentralized technologies and cryptocurrencies expands.