Ethereum is undoubtedly the most influential blockchain project in history and has contributed the most to the development of the distributed ledger network. However, despite the huge success of the Ethereum blockchain, the challenge – especially in the context of decentralized dApps based on smart contracts – is becoming to find effective ways to improve its scalability. One of these is to be Optimistic Rollups proposed by Optimism

Optimistic Rollups – what is it?

All transactions carried out on a blockchain require verification for their correctness. This makes the highest cost of maintaining a blockchain network is to ensure its security in a decentralized way. For this reason, all smart contract operations are performed on the computers of all users of a given blockchain. 

Optimistic Rollups aim to increase the throughput (number of transactions processed per second) of the blockchain network by ensuring that these transactions are not processed on the devices of all users of the network. Although published on the Ethereum network, the trades will not actually be executed. In this scaling technique, the transaction data on the chain is maintained in a compressed form, allowing for a higher number of transactions per second (TPS). 

The idea behind optimistic rollups is that operations are always fair, and no confirmatory calculations are necessary. The verification task will rest solely with a few or a dozen aggregators, who will be subject to checks to eliminate the risk of fraudulent operations. If any discrepancies are found, appropriate reports will be generated. An alternative to Optimistic Rollups are ZK-rollups. While in the case of the first solution, each transaction can be questioned, in the case of the second one, they are valid by assumption (so-called fraud-proof).

Optimistic rollups (also referred to by the acronym ORU), understood in this way, will help scale the Ethereum network’s smart contracts and dApps. Ethereum co-founder Vitalik Buterin is also optimistic, saying that “rollups will be the dominant scaling paradigm for a few years“.

Problems with the Ethereum network – what are they due to?

Layer 1 (L1) is the underlying protocol, the Ethereum blockchain. On the other hand, layer 2 (L2) is any protocol built on top of Ethereum – its job is to help scale applications by handling transactions outside the Ethereum Mainnet (Layer 1). The process is done while leveraging Mainnet’s robust decentralized security model. 

Optimism is a Layer 2 scaling solution for Ethereum. According to its premise, instead of performing all computation and data on the Ethereum network, Optimism places transaction data on-chain and runs computation off-chain, thereby increasing the number of Ethereum transactions per second and reducing the associated transaction fees.

Optimism – a scaling solution 

The rollup from Optimism (formerly Plasma Group), which has been under heavy development since 2019, is a scaling solution designed to free the Ethereum network from the massive transaction volumes that currently require time-consuming and expensive processing. Its implementation aims to reduce transaction fees and avoid delays in transferring funds. 

This scaling is to be guaranteed by combining multiple transactions into one. Optimism uses a smart contract to pass transaction data from the Ethereum main chain to the Layer 2 network, where a sequencer can combine multiple transactions into a batch and then send that batch back to the main chain using a single transaction. This will create batch packets, where a particular transaction will be received on the Ethereum blockchain, executed on the Layer 2 solution and then sent back to the Ethereum network. Performing computations off-chain will significantly ease the burden on the network and improve its security.

The highly anticipated scaling solution for the Ethereum network, called Optimism, was soft-launched in March 2021 as Optimistic Virtual Machine (OVM) and in partnership with Synthetix. According to numerous figures, scaling can help reduce transaction fees on the chain by up to a hundred times. As a result, the project is attracting much interest – its developers have secured $25 million in funding from investment firm Andreessen Horowitz.

Like other recently introduced optimistic rollups, Optimism will be an undeniable catalyst for growth for the Ethereum network and the applications built on it. So it’s worth keeping up to date with the latest data.