what is the term for a rollup that relies on the assumption that the sequencer processing transactions at layer 2 is honest, and addresses malicious behavior through subsequent penalties?
The term for a rollup that relies on the assumption that the sequencer processing transactions at layer 2 is honest, and addresses malicious behavior through subsequent penalties is called Optimistic Rollup.
Optimistic Rollup is a layer 2 scaling solution designed to improve the scalability and efficiency of blockchain networks. It operates on the assumption that the majority of transactions are honest and compliant with the protocol. In this approach, instead of validating every transaction on-chain, a sequencer processes and bundles multiple transactions off-chain into a single “rollup” transaction. This rollup is then submitted to the main chain for verification.
If the sequencer is honest and has correctly processed the transactions, the rollup is accepted and confirmed on the main chain. However, if the sequencer behaves maliciously or includes invalid transactions, there is a mechanism in place to penalize and challenge their actions. This mechanism is enforced through smart contracts and involves economic incentives and penalties for the sequencer.
Optimistic Rollup offers several advantages, including scalability improvements by reducing the on-chain congestion and transaction fees associated with processing every transaction on the main chain. It also allows for faster transaction finality and a higher throughput of transactions.
However, it is important to note that Optimistic Rollup does have limitations. One significant limitation is the need for users to trust the sequencer to process transactions honestly. If the sequencer becomes malicious, it can potentially disrupt the integrity of the entire rollup. Despite this limitation, Optimistic Rollup is an innovative solution that has gained traction in the blockchain community as a promising scaling approach.