Thread by @GSpasov

It was promised, so I shall deliver! Thread on "The state of the rollup ecosystem in Aug21" and why I think the @0xPolygon and @PolygonHermez merger signifies the beginning of the next phase of scalability. Expect a paper at some point too. Lets go!

https://twitter.com/GSpasov/status/1426438001664614400?s=20

Before we begin, I'd like to formally state that neither I NOR my company @LimeChainHQ has ANY working relationship with any of the projects mentioned below. We don't know the people, we don't get paid by these projects. This makes me as unbiased as possible.

Quick spoiler: state of the rollup ecosystem is very positive and a lot of work is done. Much like anything these days, fractions have formed that take the occasional jab at each other, but still seem on the same page. What are the fractions?

Zero-knowledge rollups and optimistic rollups. ZK ones rely on a zk proof to come along with the rollup block of transactions. The transactions are not necessarily private, but the property of much quicker verification enables L1 to just do the easiest work and rest is offchain.

With ZK rollups, no malicious rollup can enter the L1 chain as the L1 verification is the guardian. It has its limitations though - state modification verifications are hard and in some cases, you need trusted setups to make the cryptography work.

Optimistic rollups on the other hand take the "innocent until proven guilty" approach. Rollup blocks are accepted by the L1 and are treated as valid. External validators check these blocks and if something is wrong, submit a "fraud proof" thus reverting the block. In order for..

all of this to work, the block submitters (known as operators, block producers, or sequencers) need to post a bond, that gets taken if they cheat. In addition somewhat long time window is allowed for blocks to be proven fraudulent. So let us observe the ecosystem

Starting on the optimistic side, we've a darling project that caused some debate recently - @optimismPBC . Optimism is a rollup that tries to reuse as much code of the #ETH ecosystem as possible. They have modified GETH and the Solidity compiler to their purposes.

Optimism supports Solidity smart contract execution with some limitations and uses an auction as a unique way of choosing the sequencer (the L2 node that orders the transactions and extracts the MEV). Optimism has no token and fees are paid in $ETH.

Next we have @arbitrum . Their team has been working a long time on the predecessor of their rollup and delivered with a bang, beating Optimism to the punch. The two project are very similar in a sense, except for the way transactions are sequenced and the fraud proofs resolved.

Arbitrum uses L1 for transaction sequencing. In other words you send your compact instructions in the L1 Inbox smart contract and they get processed FIFO. If MEV is to be extracted, it needs to happen here. As for fraud proofs, Arbitrum uses divide-and-conquer way of slicing...

proof into smaller chunks until finding disagreement. Then the L1 decides who is wrong and the bond gets taken away from the wrongdoer.

Next we have Fuel by @fuellabs_ . Instead of smart contracts, they have chosen UTXO state. UTXO based state allows for efficient state work. They support ETH and tokens. They have used Yul for fraud proofs smart contracts instead of Solidity, thus highly optimizing the proof.

Fuel has operators, BUT there is a priority operator ran by fuel (getting the fees). The priority operator is guaranteed to process transactions first. Others can choose to run an operator, but the code is not open source - only binaries. Costs are priced in USD - 1 to 3 cents.

Last on the Optimistic side, we have @CelerNetwork . Celer actually has a sidechain. In order to sparkle some rollups, they allow you to emit an event from your smart contracts that aggregators can process and roll up into L1. Anyone can become an aggregator given they stake CELR

Aggregators are chosen on round-robin principle, but the network has committed to move to proof of burn. Fees are paid in the chain CELR token.

Moving on to the ZK side. @zksync - a SNARK-based zk rollup. In zkSync a validator receives the transactions and produces rollup blocks. Currently, there is only one validator and 4/7 multisig controled by @the_matter_labs can add new ones.

Impressively, @zksync allows for smart contract execution. The drawback is that the L1, only verifies the changes of the trees of accounts and balances, and the state is not included. Therefore the contract state is kept in the L2 in the (currently single) validator.

Next, @loopringorg - enables the creation of L2 DEXes rather generalized rollups. Loopring allows you to spin up your own DEX and be the operator for it (thus getting the fees). The operator is required to post a hefty bond in their LRC token.

@StarkWareLtd is an interesting one. I can classify it more as a framework for building ZK, but they have a DeFi-focused L2 rollup called StarkEx. As implied by the name StarkWare uses and pioneers STARKS with the major breakthrough of the creation of @CairoLang.

This is important because SNARKS require a trusted setup, and STARKS don't. STARKS however are magnitudes more inefficient in verification (therefore use more gas).

So there is a way for you to generate a circuit via Cairo and get a generalized verifier smart contract. The only drawback lies on the proving side, where shared proving service (SHARP) is used to generate and register the proofs in L1.

SHARP is closed-source and is operated by @StarkWareLtd . It will be open-sourced soon™️ under non-trivial license. Listen to @zeroknowledgefm episode with StarkWare for more info on this. Cudos to @AnnaRRose

@aztecnetwork have been pioneering privacy for a long time now. They created PLONK, which became the de facto proving scheme for SNARKS as it requires less trusted setup. Combine PLONK with the Perpetual powers of TAU and you negate most SNARK trust requirements. Thanks Aztec!

Aztec is now working on zk.money - privacy first rollup. Admittedly the validator is currently centralized, but they have committed to decentralize it. The rollup is still on testnet. Saved for last we have Hermez

So @hermez_network is a SNARK based rollup with a decentralised operator. Decentralisation of the operator comes in the form of auction for slots to be an operator. The auction is based on the HEZ token. The fees in the network are paid in the token of the transaction.

The awesome part is that the auction money are brought back into the ecosystem through EF and Gitcoin.

Now as to why I believe the Polygon and Hermez merger is a gamechanger. Lets examine several factors.

Firstly, @0xPolygon with their sidechain has proven time and time again that they care about the ETH and blockchain ecosystem. If we have to be fair, the prospect of ETH2.0 rendering the side-chain a bit obsolete is a sad one as we would be losing one of the good guys.

With the Hermez merger, Polygon has a clear route to stay relevant post ETH2.0 and continue doing its thing.

Secondly, No rollup to this date has gotten any major traction. Polygon did it first for sidechains, and here is a safe bet that they can do it again for rollups. Imagine the masses of people using the sidechain now having the option to go the rollup route and get higher security

Thirdly, I second the opinion of @VitalikButerin that in the long run, ZK rollups will likely get the bigger share of the rollup space. Hermez being a ZK rollup gives Polygon a long term solution, rather than asking them to work on a borrowed time.

(That being said I believe both types of rollups will have their specific suitable use cases)

Lastly, and for me most importantly, the teams behind the two projects. If ZK rollups are to get adopted it is all pending on the advancement of the ZK technology. If I had to put my money on someone to advance it I'd stake on @jbaylina . His teams have proven track records...

with tools like Circom, SnarkJS and more. I mean He was talking about ZK identity in 2018 in the Devcon in Prague. Half of us were still ecstatic as we learned how to use hashes at the time. I trust them to build this tech too, without any compromise on decentralisation.

So in short, we have awesome proven teams, technology for the future, and masses of users waiting to start using it. That's what I call a game-changer!

Big shout and thanks to @zeroknowledgefm and @AnnaRRose for her awesome content on rollups this year. Most of the things talked about there are not available in the docs.