One of the key components of Optimistic Rollups is the mechanism for detecting and resolving fraudulent activity through fraud proofs and disputes.
Optimistic Rollups rely on the assumption that at least one honest participant is monitoring the system and will actively challenge any fraudulent activity. This honest participant is essential for the security of the rollup because they help ensure that invalid state transitions or transactions are detected and rectified.
Fraud proofs are a critical component of Optimistic Rollups that enable the detection and resolution of invalid state transitions. They consist of a challenge-response mechanism that allows any participant to challenge a rollup if they suspect that it contains an invalid state transition.
If a participant believes that an Optimistic Rollup contains an invalid state transition, they can initiate a dispute by submitting a challenge on the Ethereum mainnet. This challenge typically includes a bond or stake to ensure that the challenger has a financial incentive to only challenge rollups that they believe are genuinely fraudulent.
Once a challenge is submitted, the aggregator responsible for the rollup has a predetermined amount of time to respond to the challenge. The aggregator must provide a valid response to the challenge, demonstrating that the state transition in question is, in fact, valid. If the aggregator fails to provide a valid response within the allotted time, the rollup is considered invalid, and the challenger’s bond is returned.
In some cases, the dispute process may involve an interactive verification game between the challenger and the aggregator. This game allows both parties to progressively narrow down the specific point in the rollup where the alleged fraud occurred. The interactive verification game can involve multiple rounds of communication between the challenger and the aggregator, with each round helping to identify the specific transaction or state transition that is under dispute.
Once the dispute process is complete, the Ethereum network will determine whether the rollup is valid or invalid based on the information provided during the challenge and response process. If the rollup is deemed valid, the challenger’s bond is forfeited, and the aggregator’s rollup is accepted. If the rollup is deemed invalid, the aggregator’s stake is slashed, and the challenger’s bond is returned.
Watchtowers are specialized nodes in the Optimistic Rollup ecosystem that continuously monitor the rollups being submitted to the Ethereum mainnet. Their primary function is to ensure that all rollups are valid and to initiate disputes in case they detect any invalid state transitions.
Watchtowers are incentivized to participate in the ecosystem by earning a portion of the slashed aggregator stake if they successfully challenge a fraudulent rollup. This financial reward helps ensure that there are sufficient watchtowers monitoring the system, making it more difficult for bad actors to submit fraudulent rollups without detection.