Rollups
Rollups are layer 2 protocols designed to process transactions on top of existing Layer 1 blockchains. They are called rollups because they take multiple transactions from the Layer 2 chain and roll them together for settlement as a group on the Layer 1 chain.
This helps the Layer 1 chain scale by increasing the speed and reducing the cost of transactions while still maintaining a high level of security. Rollups were introduced as a concept to the broader crypto world by the Ethereum developer community were they where initially implemented.
Because of the successful introduction to the Ethereum ecosystem. Many other blockchain projects have started including them in their roadmaps for future development.
Rollups come in two primary flavors. Optimistic and ZK.
Optimistic rollups
Optimistic rollups assume transactions are valid. To invalidate transactions users must contest their validity during a pre-defined time period before they’re confirmed. Typically a week.
The upside is efficiency. Presumption of correctness eliminates the need to invest time and energy validating transactions for confirmation.
The drawback is speed. After initiating a transaction user funds are locked during the time period a transaction can be contested.
Which means if I conduct a transaction on a Layer 2 chain. My funds are locked up for a week after the transaction while other users decide whether or not to contest its validity.
ZK-rollups
ZK-rollups leverage Zero-Knowledge proofs to confirm transactions are valid.
ZK-proofs require minimal information about transactions to confirm them. So transactions can be confirmed quickly and privately. Once transactions are confirmed, users can withdraw their funds almost instantly.
Compare this to Optimistic rollups, which ties up user funds during the dispute window and also publicly displays transaction details so they can be evaluated for disputes.
The drawback is complexity. It can cost more to process transactions since more computing resources are required to perform the complex operations used to confirm them vs. optimistic rollups.
Further Reading
What Are Ethereum Rollups? A Scaling Solution to Cut Transaction Costs