The Jakarta Update: Tezos Will Have Optimistic Rollups

The Jakarta Update: Tezos Will Have Optimistic Rollups

The Nomadic Labs team has announced the next Tezos protocol update dubbed Jakarta. It will include Transactional Optimistic Rollups (TORUs), which are Layer 2 blockchain upscaling solutions.

In this post, we’ll explain the basics and talk about the way Jakarta can change the user experience in Tezos.

How to Upscale the Blockchain

The Granada update slashed the block time in half, from 60 to 30 seconds, while Ithaca boosted the transaction finalization from 6 to 2 blocks. The throughput of the network remains the same: 40 to 80 transactions per second.

Tezos bakers cannot execute transactions faster as they do not have enough time to process, validate and synchronize transactions.

A dangerous way to speed up the blockchain is to force the speed of nodes. Then you would need a powerful computer to run a node, such as one with a 16-core processor and 256 GB of RAM, as in Solana. The number of validators will be reduced as not everyone would be willing to upgrade their hardware.

The hard way would be to start sharding or clustering, which means breaking up a large network into smaller subnets. The theoretical throughput increases this way yet the actual one does not because transactions between shards introduce constant time delays.

An arguably effective way to solve this would be an L2 solution in the form of rollups. This way, transactions are handled by individual operator nodes, and bakers get the final result of all operations.

How Optimistic Rollups Work (OR)

A rollup is an entity in the blockchain with its own address and balance. Users deposit tokens at this address and receive the same number of tokens at L2. Rollup operators process L2 token transactions and publish the final state of users’ balances in the mainnet.

The Optimistic Rollups feature requires a bare minimum of computation. Mainnet validators use their computational power to obtain cryptographic proof of transaction validity. For example, during a tez transfer from one address to another, validators must ensure that the sender has those tez.

Rollup operators, on the other hand, consider all transactions valid by default and immediately apply them to the state. Therefore, L2 transactions through Optimistic Rollups consume up to 90% less gas than mainnet transactions.

The user can withdraw L2 tokens to the mainnet only after the “dispute period” has elapsed. During this time, the checkup nodes must ensure the validity of the proposed state and, if they detect fraud, fine the operator. If everything’s fine, the mainnet nodes finalize the last known state of the user’s balance, and they receive tokens on L1.

How Optimistic Rollups Would Impact Tezos

Optimistic Rollups will primarily benefit the DeFi-ecosystem. Cheap transactions and smart contract calls are at the baseline of high-frequency arbitrage, intraday trading on DEX, and more active blockchain gaming, among other things.

The Nomadic Labs team plans to first launch Optimistic Rollups only for tez transactions. Rollups for smart contracts will come out later.

An interesting point: in Ethereum, rollups are implemented as a smart contract. Because of this, a deposit and a withdrawal alone may cost over $100. Tezos, on the other hand, could implement Optimistic Rollups at the protocol level as liquidity baking. Such a solution would lower the entry threshold and make rollups available to all users.

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