An Optimistic Rollup is a Layer-2 scaling solution that processes transactions off of the main blockchain to improve speed and reduce fees. It assumes all transactions are valid unless proven otherwise, hence the term "optimistic."

Scaling Ethereum: The Main Challenge

The Ethereum blockchain has faced a major challenge in recent years: high gas fees and slow transaction speeds. This is a result of the network's popularity and the large number of DApps that use it. To solve this problem, developers have been working on Layer-2 scaling solutions. An optimistic rollup is one of the most popular solutions.

It works by "rolling up" hundreds of transactions into a single batch and then submitting that batch as a single transaction on the Ethereum Mainnet. Since all the transactions in the batch are processed off-chain, this dramatically reduces the load on the main network and brings transaction costs down. The "optimistic" part of the name comes from its security model: it assumes all the transactions in a batch are valid unless a participant submits a fraud-proof.

How a Fraud-Proof Works

After a batch of transactions is submitted to the mainnet, there is a dispute period, typically lasting about a week. During this time, anyone can challenge a transaction in the batch by submitting a fraud-proof. If the proof is valid, the fraudulent transaction is reversed, and the malicious party is penalized. If no fraud is found, the transactions are finalized. This system relies on the assumption that at least one honest participant will be available to challenge a fraudulent transaction.

The Big Picture

Optimistic rollups are a crucial tool for scaling Ethereum and other blockchains. They make the network more usable by reducing fees and increasing transaction speeds, enabling new applications in areas like DeFi and NFTs. However, the long dispute period can create a significant withdrawal delay, which is a trade-off that users must consider.