CMC Live: Will Rollups Conquer Crypto?

CMC Live: Will Rollups Conquer Crypto?

Created 5mo ago, last updated 5mo ago

Rollups are critical to scale Ethereum. But are solutions like Arbitrum and Optimism decentralized enough yet? Let's evaluate their security and path to mass adoption!

CMC Live: Will Rollups Conquer Crypto?

Table of Contents

Arbitrum and Optimism are the biggest rollup solutions in the Ethereum ecosystem. But how exactly do rollups work and why are they getting ever more popular for scaling Ethereum?

This article will:

  • Assess how decentralized rollups are, and whether they are ready for mass adoption.
  • Check Optimism’s and Arbitrum's progress on improving decentralization and overall security of their rollup platforms.

How Decentralized Are Rollups?

When looking at the decentralization of rollups, there are three main areas to focus on.
The first is fraud proofs. These are used to check whether rollups are valid and do not contain fraudulent information. Optimism disabled its fraud proofs in 2021 and is working on a new system called Cannon, but hasn't given a timeline for when it will be ready. Arbitrum has maintained a working fraud proof system since launch and recently upgraded it to be more efficient.
Upcoming changes include Optimism trying to support multiple fraud proof programs and explore zero knowledge proofs. Arbitrum is building a system called Stylus to allow more language support and is working on a new protocol called BOLD to enable permissionless fraud proofs. Arbitrum’s developers have high hopes for this update. They said in the latest CMC Live episode:
“Arbitrum just needs one honest actor to keep the whole ecosystem safe [...] this sets us apart from other rollup solutions.”
The second area is the operators, meaning who is sequencing, proposing and verifying transactions. Currently, both Optimism and Arbitrum have centralized sequencing and proposing handled by their core teams. Arbitrum has expanded the validators beyond just the core team, while Optimism validators can't challenge state roots yet. For ordering transactions, Arbitrum uses first-come-first-served while Optimism uses a priority fee model.
The third focus area is governance, or how upgrades and admin privileges are controlled. Both rollups have DAOs now for governance through token voting. However, the core teams still have admin powers that can override the DAO if needed. Optimism uses an anonymous multisig that is centrally controlled. Arbitrum transitioned to a partly decentralized Security Council for governance.

Optimism's Progress on Decentralization

Optimism considers their upcoming goals like enabling fraud proofs and transitioning upgrade keys to a Security Council as "baseline decentralization." According to a framework from Galaxy Digital scoring decentralization, Optimism remains at "Stage 0." To progress, Optimism needs to ship fraud proofs, enable decentralized validators to challenge state roots and improve admin control over upgrades.

While Optimism has ambitious long-term plans, meeting basic security requirements like fraud proofs should be a priority given rapid ecosystem growth. However, the path to full decentralization will be difficult for all rollups.

Arbitrum's Progress on Decentralization

Arbitrum has led the efforts to decentralize operators. It has expanded validators beyond just the core Offchain Labs team to include 12 other organizations. Arbitrum still uses FCFS transaction ordering. For governance, it transitioned from an Offchain Labs-controlled multisig to a decentralized Security Council. The council has two cohorts, with community elections every six months to determine council members.

Arbitrum's docs originally stated they launched in "mainnet beta" given the centralized controls, which would be phased out over time. The Security Council can still push instant upgrades, but the DAO aims to eventually remove this power.

Arbitrum’s developers are very proud of their decentralization progress.

In the CMC Live episode, they highlighted how “when Optimism went to mainnet, they were only doing whitelisted deployments [...] which we thought was counterintuitive. ETH being gas reduced friction a lot [...] having functioning fraud proofs as well.”

According to the Galaxy Digital framework scoring decentralization progress, Arbitrum is considered a "Stage 1" rollup. To reach "Stage 2", Arbitrum would need to enable permissionless fraud proofs, limit admin privileges, and provide a 30-day withdrawal window for upgrades.

Which Rollup Chain Will Win?

Most likely, no single one.

Even Arbitrum admitted as much on CMC Live:

“There's never going to be just one chain […] there will be multiple chains doing well.”
This sentiment echoes what NEAR Protocol said on another episode about the multichain future. So, if you are going to bet on one winner in the scaling wars, you might want to reconsider your game plan.
But Ethereum rollups seem to be firmly ahead in the race to layer-two scaling solutions. Even Cosmos-based solutions like Canto and Astar are moving to Ethereum L2s. With an Ethereum ETF potentially on the horizon, traders with a long-term outlook have good reason to be confident about Ethereum’s chances to dominate the scaling game.
If you want to learn more about rollups and their role in scaling, listen to the latest CMC Live episode with Arbitrum.

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