What Are Rollups In Crypto?

What Are Rollups In Crypto?

Scaling blockchain technology is a tricky ordeal. There does not appear to be a go-to solution, although rollups have gotten tremendous attention. Nevertheless, it is an intriguing approach to offering quality of life improvements across blockchains and cryptocurrencies, at least in the short term. 

Understanding Rollups in Crypto

Rollups are a type of blockchain technology that allows for increased scalability and speed while maintaining security and decentralization. Rollups work by aggregating multiple transactions into a single “rollup” transaction, which is then recorded on the blockchain. That approach enables many more transactions to be processed per second while maintaining the blockchain’s security and decentralization. 

Speed and efficiency are two primary benefits of rollups. However, another aspect needs to be pointed out. Users performing rollup transactions will split the fee of the Ethereum transfer and the small cost of rolling up batches of transactions. It creates a more diversified approach to using Ethereum and one that lessens the burden on all participants. 

The prospect of combining various transactions into one is beneficial to high-throughput networks. Ethereum, known for its high gas fees during increased activity, would benefit from this technology. Lowering usage costs benefits users and builders. Moreover, it can attract more people to the network and boost its overall appeal. Rollups will likely play a vital role for the network until Ethereum 2.0 and sharding go live.

Distinguishing Between Rollup Types

Several networks and Layer-2 solutions embrace rollup technology. It is an excellent and efficient solution for many people. However, there are two crucial rollups: optimistic and zero-knowledge variants. They are very different despite using similar technology at their respective cores. 

The zero-knowledge rollup, or zk-rollup, uses zero-knowledge proofs. That approach ensures mathematical proof of statements being true without including additional information. In essence, it provides much-needed privacy when using cryptocurrencies, as there is no further identifying information in the transaction. Some may know this concept as zk-SNARKS, which only permits valid transactions for the rollup. You can find zero-knowledge rollups in Loopring, ZKSync, Immutable X, and other solutions. 

Optimistic rollups assume all submitted data is valid and no nefarious actions occur. Assuming validity allows for faster transactions. However, there also needs to be fraud protection, which occurs through “bunk trades”. All transactions to be bundled are submitted to Ethereum to check their legitimacy. As both transaction parties stake ETH to complete the transfer, it is in their best interest to act honestly. Optimistic rollup technology is prevalent in Optimism, Arbitrum, and other Layer-2 solutions.

Crucial Web3 Infrastructure

One can argue that rollups benefit decentralized finance, NFTs, and even blockchain games today. However, builders always keep one eye on the future. On the advent of Web3, rollups can prove to be robust scaling solutions. Building a decentralized internet is a big step up from scaling one blockchain. However, many entities see merit in embracing that technology to advance the scaling, utility, and viability of Web3. 

The growing list of Layer-2 solutions confirms core blockchains need efficiency improvements. Any project exploring a cross-chain or multichain approach will automatically pay attention to ongoing advances and developments. One example is GTON Capital, building an ecosystem of Web3 infrastructure and products. Its native Ethereum rollup protocol will be home to a decentralized stablecoin serving as the gas currency. 

The GTON Network approach is EVM-compatible and uses Optimistic rollup technology. While its net is a Layer-2 on top of Ethereum, it can be scaled recursively to Layer-3/Layer-4 networks. Any business can run a native permissioned Layer-3 on top of GTON Network. Additionally, builders can develop new DApps running a dedicated L3 to enhance scalability and network capacity. 

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