Ethereum Rollups explained

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So you're hearing a lot of fuss about Rollups and how it's going to change the Ethereum blockchain. But chances are you can't figure out what this concept is and how it can affect the blockchain and the value of Ether subsequently. Well, then you're in for a bit of a treat here!

To answer what a rollup is, we need first to understand the fundamental problem of Ethereum. 

Where blockchains like Polkadot and Solana make thousands of transactions every second, Ethereum is stuck at around 15 transactions per second. That is a problem they have had since the very beginning. And had they not have been a leading figure in the industry, Ethereum’s weight would have crushed them.

The solution to this problem so far was Ethereum 2.0. Upgradation of the whole blockchain will reframe the structure to allow more transactions in less time using the sharding technique.

But it has been in the process for years without a precise implementation date. 

And then came Rollups, the savior. 

The Basic of Rollups

To understand Rollups, think of an entrepreneur in their early stage. Let's name him Robert. He handles every task by himself. For instance:

  • Creating content, managing clients
  • Pitching ideas
  • Planning marketing strategies
  • All the other stuff

So naturally, Robert is burned out, always in a time constraint, doesn't have time for family or personal life, and gets enough sleep. In short, it's chaos. But then he decides to hire a virtual assistant or personal assistant who can take care of his daily schedules and make sure Robert isn't flooded with small and unimportant tasks. 

It takes off the pressure from Robert and lets him focus on what's truly important and will positively affect the business.

In our story, Robert is the Ethereum blockchain, and the VA is Rollups. 

Previously for every transaction on the blockchain, the blocks would include both the computational data and the final value in a smart contract. So obviously, it becomes a logistical nightmare when unimportant data is saved in a tiny block.

Rollups solve this problem by doing all the computational works of a transaction in their sidechain. Once the computation is done, Rollups store those values in their own chain while sending the final value to the Ethereum blockchain. 

And then, the blockchain decides whether the final result is accurate or malicious. Depending on that, Ethereum either approves or rejects an input from Rollups.

In this way, Ethereum is only storing the necessary information while getting rid of the redundant stuff. 

Ethereum co-founder Vitalik Buterin mentioned in his blog post that "an Ethereum base-layer ERC20 token transfer costs ~45000 gas, an ERC-20 token transfer in a rollup takes up 16 bytes of on-chain space and costs under 300 gas."

So now you understand the basics of Rollups and what it does. Let's dive deeper.

Rollups and Decentralization? 

There are two types of Rollups: Zero-Knowledge and Optimistic. 

Zero-Knowledge or ZK Rollups speed up the reviewing process by implementing validity proof protocol. And Optimistic Rollups writes the transaction on the Ethereum chain as "calldata".

Both of these processes are equipped to 100x the scalability and speed issue of the Ethereum blockchain. You can read more on this here.

A regular Ethereum smart contract works on a majority voting system. That means every block mined is done through a consensus. 

But that's not the case for Rollups. A single entity controls rollup, and the final decision isn't taken democratically. 

Obviously, Ethereum makes the final move on approving or rejecting a Rollup result, but still, many people are concerned about the centralized nature of the system.

However, it's essential to understand that outsourcing computational data doesn't affect the governing system of Ethereum.

The Future of Ethereum

While we wait for ETH 2.0 to redesign the structure of Ethereum Blockchain, it seems like Rollups are the way forward. Companies like Synthetix and dYdX are already using it and the day isn't far when most Ethereum users will rely on Rollups.

Experts like Eric Wall, CIO of Arcane Assets, and Tim Ogilvie, CEO of Staked, think that Rollups make ETH 2.0 less urgent and expect a smooth partnership upon its arrival. 

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