What Are Rollups And How Can They Help Scale Bitcoin?
January 30, 2024
Rollups are a scaling solution for blockchain systems, helping to eliminate inefficient congestion to enhance maximal efficiency. This guide explains the concept of rollups and what their introduction into the Bitcoin ecosystem will mean to users.
What Are Bitcoin Rollups?
Bitcoin rollups are scaling solutions built on top of Bitcoin. They help expedite transaction speeds by transferring some of the processing load off-chain. Rollups are a type of Layer 2 scaling solution whose protocols enhance blockchain scalability and cost efficiency.
Rollups get their name from “rolling up” a bunch of transactions from a blockchain’s mainnet while these transactions are taken off-chain for processing. Afterward, the transactions are converted into a single piece of data and resubmitted to the original blockchain. This leads to significant technical and cost efficiencies, hence the term “off-chain scaling solution.”
Initially popular within the Ethereum network, rollups are being introduced to Bitcoin as the technology rapidly advances. The concept of Bitcoin rollups was first mooted by Trey Del Bonis and further explored by John Light.
While sovereign rollups are more popular within the Bitcoin ecosystem, optimistic rollups are gaining ground as well, with developers exploring their probability.
How Do Bitcoin Rollup Transactions Work?
Like all networks built on a decentralized consensus mechanism, the Bitcoin network runs into scalability restrictions. The limitations result from the essential trade-offs between decentralization, security, and transaction output.
Bitcoin is designed such that every transaction must be validated, inevitably leading to slower transaction speeds during periods of network congestion due to higher demand.
The Bitcoin blockchain stores two types of information: transactions and data. Processing transactions on-chain and storing transaction information can be heavy and thus too much to ask for of any blockchain mainnet. However, just like the weight of a check remains the same regardless of the amount written in it, the “weight” of data from transactions remains the same irrespective of the number of transactions.
Rather than storing and processing an entire transaction, a Bitcoin rollup Layer 2 solution “rolls up” and combines all those transactions to process them off-chain.
Once the transactions have been processed off-chain, only the resulting data is returned to the mainnet, enabling it to process more transactions. The advantages of this off-chain processing are a reduced burden on the Bitcoin blockchain and a single piece of data holding multiple transactions.
Bitcoin rollups significantly enhance the blockchain’s scalability by facilitating the processing and submitting of more transactions. By addressing scalability challenges without compromising core principles of security and decentralization, rollups significantly alleviate the strain on the Bitcoin mainnet.
Because the burden on the main chain is reduced, network traffic is increased, allowing for processing more transactions in a single block and creating room for more users and applications such as dApps that need more frequent and faster transactions.
Types of Rollups
The most popular version of rollups in the Ethereum space is “optimistic rollups,” which execute batches of transactions off-chain. Optimistic rollups are verified and settled via fraud proofs.
Alternatively, zk-rollups process multiple transactions off-chain and then combine them into a single transaction using zero-knowledge proofs to validate the transactions without revealing their details.
Both of these options are among the most prominent implementations of rollups. It is only with the research around Bitcoin rollups that sovereign rollups have become a talking point as well.
Optimistic rollups increase transaction throughput by stacking multiple transactions into batches processed off-chain. The protocol records the transaction data on the mainnet using data compression techniques, thereby increasing speed, lowering cost, and enhancing scalability by up to 100 times.
Transactions are valid by default without compromising security, as optimistic rollups employ a fraud-proofing method and a dispute-resolution period dubbed a “challenge period.”
Users who doubt the validity of any transaction can submit a challenge within this period. Should the batch be found to be erroneous, the roll-up protocol re-executes and rectifies the wrong transaction and updates the block. The general assumption with optimistic rollups is the belief that transactions are accurate until proven otherwise.
Zk-rollups bundle transactions into batches and use zero-knowledge proof to authenticate the validity of transactions off-chain while keeping sensitive transaction information hidden.
A zk-rollup operator (prover) submits a summary of any required changes within a batch once the transactions have been executed. The operator also produces a validity proof to attest to the accuracy of the changes. The verification process is faster and cheaper since the proofs are considerably smaller than the transaction data.
Zk-rollups use data compression techniques to condense transaction data when writing transactions, thereby reducing user fees. Using the zero-knowledge proofs (ZKP), the prover verifies a transaction by convincing the other party (a verifier) that they possess knowledge by proving only mathematical proof they can generate. With this mathematical proof, the verifier then verifies the legitimacy of the transaction without seeing the details of its contents.
Rollups Are Coming to Bitcoin: Here’s What That Means!
The Bitcoin blockchain, the trailblazer in the crypto world, had to contend with scalability concerns for quite some time. However, rollups are making their way into the Bitcoin ecosystem, which could help the network scale further and create added privacy assurances for users.
Several companies have taken up the challenge of implementing Bitcoin rollups. Three examples include the Web3 company StarkWare, whose goal is to use Bitcoin rollups to enhance the network’s performance; Rollup Bitcoin, whose project aims to provide fast and efficient Bitcoin transactions; and Rust Bitcoin, whose open-source project’s goal is to research and develop innovative solutions within the network.
The entry of Bitcoin rollups could unlock the hindered potential and growth of the network by attracting new developers who build more applications and usable protocols on top of the blockchain.
Increasing transaction volumes will enable Bitcoin to compete with Turning-complete smart contract blockchains that in the past stepped up to fill the gap, especially following reports that rollups could improve the network’s output by over 100x. By facilitating more efficient usage of Bitcoin, rollups will generate extra sources of demand for block spaces, leading to increased revenues for miners and, thus, network security.
Zk-rollups especially have the potential to improve Bitcoin’s smart contract functionality by implementing the execution of an environment where a more flexible smart contract language can be created without making fundamental changes to Bitcoin.
As Bitcoin becomes more scalable, its capabilities to expand beyond a token or store of value are guaranteed because its decentralized, immutable, and secure design will enable it to rival newer networks’ use cases.
Builders are expanding Bitcoin’s efficiency and functionality through various developments and innovations. The list includes recent developments in scaling the blockchain, such as the Lightning Network, Taproot Assets, BRC-20 tokens, and Ordinals, and the entry of Bitcoin DeFi protocols.
These developments represent Bitcoin’s untapped capabilities while remaining true to its decentralized core principles.
Are Bitcoin rollups safe?
Bitcoin rollups are inherently safe in regard to the base layer Bitcoin blockchain, as they only use the network to store transaction data. Once the rollup has batched the transaction, it posts the transaction data to a smart contract on the mainnet. As soon as the Layer 1 block containing the rolled-up transactions has been finalized, no one can censor or modify the data. The Bitcoin blockchain ensures users can verify the data whenever necessary. The technology is well-researched and safely used within the Ethereum space. However, as code is involved, bugs are always a possibility.
Why does Bitcoin need Rollups?
Currently, the Lightning Network is Bitcoin’s primary scaling solution, mainly used for custodial services where payments are the mainstay. However, Lightning has shown it can easily get congested, as happened during the 2022 Ordinals rush due to high transaction volumes. Bitcoin rollups would help to function as another effective solution to offload transactions from the main chain to alternative layers.
By providing a different execution environment, rollups would create space within the Bitcoin protocol for new users and increase fees payable to miners. In the long run, the result would be a more secure Bitcoin network.
By taking data from the zero-knowledge proving engines, rollups would process the data correctly and as securely as digital signatures within the Bitcoin ecosystem today. Moreover, developers will be able to add other programming environments like the Turing-complete smart contracts on the Bitcoin blockchain as desired.