What is a fraud proof in Optimistic Rollups?

Understanding Fraud Proofs in Optimistic Rollups

1. Optimistic Rollups operate under the assumption that all transactions posted to the layer-2 network are valid by default. This optimistic approach allows for faster processing and reduced costs compared to on-chain validation. However, mechanisms must exist to detect and correct any malicious or incorrect state transitions.

2. A fraud proof is a cryptographic mechanism used to challenge an invalid state update. If a validator or watcher detects a discrepancy between the proposed state and what should have occurred based on the transaction data, they can submit a fraud proof to the layer-1 blockchain.

3. The fraud proof includes specific data such as the incorrect state root, the set of transactions involved, and a step-by-step computation trace showing where the error occurred. This trace enables the mainchain to re-execute only the disputed portion of the computation, minimizing overhead.

4. Once a fraud proof is submitted, the layer-1 contract verifies it by replaying the relevant transaction using the provided execution trace. If the proof confirms the state transition was indeed invalid, the rollup reverts to the last correct state, and the malicious actor who submitted the faulty batch is penalized.

5. The security model relies on at least one honest node monitoring the chain. As long as one participant checks the validity of state updates and is capable of producing proofs, the system remains secure against fraudulent behavior.

How Fraud Proofs Differ from Validity Proofs

1. Unlike zero-knowledge rollups that use validity proofs (such as zk-SNARKs) to proactively prove correctness before acceptance, Optimistic Rollups defer verification. They assume honesty until proven otherwise, which reduces computational load during initial posting.

2. Fraud proofs reactively identify errors, meaning disputes occur after a block has been published. This introduces a delay known as the challenge period—typically seven days—during which anyone can contest a batch.

3. Validity proofs require complex cryptographic computations for every transaction batch, increasing the cost and technical barrier for operators. Fraud proofs avoid this burden unless a dispute arises.

4. The reactive nature of fraud proofs makes them more accessible for decentralized participation. Users do not need specialized hardware or deep cryptographic knowledge to monitor and challenge blocks.

5. While validity proofs offer immediate finality, fraud proofs trade speed for decentralization and lower operational costs, aligning with Ethereum’s ethos of permissionless participation.

The Role of Watchers and Incentives

1. Watchers are off-chain nodes tasked with continuously monitoring the state commitments published by sequencers. These entities download rollup data, recompute state transitions, and compare results against the claimed outcomes.

2. Economic incentives drive participation in fraud detection. Anyone who successfully submits a verified fraud proof receives a reward, often funded by slashing part of the bond posted by the dishonest sequencer.

3. To prevent spam and ensure accountability, challengers usually must stake collateral when initiating a dispute. If their claim is invalid, they lose this deposit.

4. Multiple independent watchers increase the likelihood of catching fraud early. Even if most actors collude or go offline, a single honest participant is sufficient to maintain security.

5. Projects implement incentive layers or integrate third-party services like decentralized watchdog networks to ensure persistent surveillance over rollup chains.

Common Questions About Fraud Proofs

If no participant submits a fraud proof within the challenge window, the batch becomes finalized on layer 1. This underscores the necessity of active monitoring. Without at least one honest and vigilant observer, the system risks accepting invalid states.

Can fraud proofs be faked or abused?

Fraud proofs undergo rigorous on-chain verification. An incorrect or malformed proof will fail during re-execution and result in the challenger losing their bond. This economic disincentive deters frivolous or malicious challenges.

Why do Optimistic Rollups have withdrawal delays?

Withdrawals are delayed to allow time for fraud proofs to be submitted. When a user initiates a withdrawal, the funds remain locked during the challenge period so they can be frozen or reverted if fraud is detected.

Are fraud proofs required for every transaction?

No. Fraud proofs are only generated when a discrepancy is found. Most transactions proceed without incident, and the system operates smoothly under the assumption of validity unless challenged.