Rollup

A rollup is a system that processes transactions off a base blockchain. It then records the necessary data and the outcome on that blockchain.

What is a rollup?

A rollup is a Layer 2 solution. That’s an additional system built on top of a blockchain, such as Ethereum. It helps process more transactions without requiring Ethereum to execute every transaction itself.

The rollup bundles many transactions and records the results on the base blockchain in a compact form. This can lower the cost per transaction. Smart contracts, or programs on the blockchain, check which updates and withdrawals are valid.

A rollup isn’t a coin or token. Some rollups do have their own token, but they don’t have to.

An example of a rollup

Imagine a thousand people making payments through a rollup on Ethereum. The rollup processes these payments off Ethereum and bundles the results.

The rollup then publishes the necessary data and one update on Ethereum. So the thousand payments aren’t each processed as separate, regular Ethereum transactions.

Why are rollups important in crypto?

Rollups can support applications where cost and transaction speed matter, such as payments and token trading. That’s why you’ll often see the term in discussions about Ethereum scalability and Layer 2 networks.

There are different types of rollups. An optimistic rollup initially treats an update as valid but allows time for someone to prove fraud. A ZK-rollup uses a cryptographic proof to check that an update was calculated according to the rules. In this context, ZK doesn’t automatically mean that transactions are private.

Rollups aren’t risk-free. Their security also depends on smart contracts, administrator permissions, and how transactions are ordered. If one party controls that order, it may be able to delay or block transactions. With some optimistic rollups, moving funds back to the base blockchain can also take longer.