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Optimism network launches testnet fault-proof system in pursuit of decentralization

OP Labs implemented its modular fault-proof system on the OP Goerli testnet.

OP Labs, the developer of the Optimism network, launched a testnet version of its fault-proof system, according to an Oct. 3 blog post. Once it completes testing, it will allow for “a more decentralized and efficient Superchain,” the post stated. The new system is currently deployed to the Optimism Goerli network.

Optimism Goerli block explorer. Source: Etherscan

Currently, OP Stack-based networks use centralized sequencers to bundle transactions and submit them to Ethereum. Users cannot submit fraud proofs to block the sequencer if it submits incorrect data, creating the possibility of fraudulent transactions being confirmed if an attacker can control it. L2Beat has warned of this risk in its report on Optimism, stating, “users need to trust block Proposer to submit correct L1 state roots.”

OP Stack-based networks like Optimism and Base are intended to be optimistic rollups — a type of layer 2 that relies on Ethereum for its security. In a January 2021 essay, Ethereum co-founder Vitalik Buterin argued that optimistic rollups must allow users to submit fraud proofs to block fraudulent withdrawals to Ethereum. Otherwise, they’re not truly decentralized.

In November 2022, Buterin claimed that some rollups could have “training wheels” that keep them temporarily centralized while they work on a fraud-proof system but argued that they should work toward decentralization.

OP Labs claims the new fault-proof system will help fulfill the goal of decentralization for OP Stack networks: “The system is designed to eventually enable secure bridging without central fallback.”

Related: BNB Smart Chain Optimism-powered layer-2 opBNB hits mainnet

In addition, it claimed the new system is modular, allowing each network to develop its own system for preventing fraud. It consists of three separate components: a fault-proof program (FPP), a fault-proof virtual machine (FPVM) and a “dispute game protocol.” Because these three components can be implemented separately, it opens up the possibility for each network to “custom-build a fault proof system.”

According to the post, this will create more diversity in the Optimism Superchain, ultimately making the whole ecosystem more secure. A network could even decide to use zero-knowledge proofs (ZK-proofs) as a type of fraud-proof, the team stated. ZK-proofs are generally utilized in zero-knowledge rollups, but not Optimistic ones.

OP Labs has been trying to build an interconnected web of blockchain networks called the “Superchain.” To accomplish this, it created the OP Stack, a set of software tools that can be used to create custom blockchain networks. Avail network has created “OpEVM” software designed to accomplish the same objective while using Avail as the base layer instead of Ethereum. Polygon’s ZK Supernets and zero-knowledge Ethereum Virtual Machine Hyperchain are other examples of Superchain competitors.

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Ethereum Believers May Be Staring Down Opportunity As ETH Reaches Another Low Against Bitcoin: CryptoQuant CEO

Optimism transaction volumes surpass Abitrum’s for the first time in six months

Optimism lost the top spot to Arbitrum in January, after the end of its season one “quest," but has regained it after Worldcoin launched on July 25.

The Optimism network has surpassed Arbitrum in transaction volume for the first time in six months, according to July 27 data from blockchain analytics platform Artemis. Both networks are layer 2s of Ethereum that use optimistic rollup technology, which compresses and batches transactions before submitting them to Ethereum, potentially lowering transaction fees.

Optimism fell behind Arbitrum based on volume in January, as season one of its “quest” feature ended. However, it recovered the top spot on July 25 as Worldcoin launched.

Data from Artemis shows that the networks had similar levels of transaction volume from August to December 2022. In December, Optimism pulled ahead of Arbitrum but fell behind again in January. This coincides with season one of Optimism’s “quest” feature, which rewarded users for performing various on-chain activities. Arbitrum also saw a dramatic increase in volume in March, when it launched its Arbitrum (ARB) token and airdropped it to users.

Logarithmic chart of daily transactions for Optimism and Arbitrum. Source: Artemis

In June, Optimism implemented its Bedrock upgrade to lower transaction fees, resulting in a 67% surge in transaction volume. Still, Artemis data shows that this surge was not enough to overtake Arbitrum at that time.

Related: Worldcoin launch on Optimism divides opinion — crypto community has its say

From July 23-26, Optimism transactions increased even further, going from 490,500 to 809,070, an increase of nearly 65%, pushing Optimism into the top spot between the two networks. The final two days of this period coincided with the July 25 launch of Worldcoin on Optimism.

The recent surge in Optimism activity may also be influenced by the upcoming launch of Coinbase’s Base network, which its developers say will be connected to Optimism as part of an upcoming “Superchain.”

Despite winning the race for transaction volume, Optimism is still far behind Abitrum in terms of capital deposited into its contracts, also called total value locked (TVL). According to blockchain analytics platform DefiLlama, Optimism has only $923 million TVL, whereas Arbitrum has over $2 billion TVL.

Ethereum Believers May Be Staring Down Opportunity As ETH Reaches Another Low Against Bitcoin: CryptoQuant CEO

Aave V3 launches on Ethereum layer-2 network Metis

Ethereum layer-2 protocols continue to attract the biggest players in the decentralized finance sector, with liquidity protocol Aave deploying on scaling network Metis.

Decentralized liquidity protocol Aave has deployed on Ethereum (ETH) layer-2 scaling platform Metis, bringing a host of decentralized finance (DeFi) features and products to its ecosystem.

Aave’s community recently voted in favor of a proposal deploying on zero-knowledge (zk) proof EVM zkSync, paving the way for the DeFi protocol to tap into powerful performance improvements delivered by the scaling infrastructure.

A number of different zk-proof-powered layer-2 protocols are being developed by Ethereum ecosystem participants, providing the wider space with a choice of infrastructure to scale their respective platforms.

While Aave has yet to deploy on zkSync Era, it has announced its deployment of V3 of its protocol on Optimistic rollup scaling protocol Metis. The latest version of Aave’s protocol is touted to benefit users across both protocols, with Metis users set to benefit from the provision of DeFi borrowing and lending services.

Ethereum.org highlights the main difference between optimistic rollups and zk-rollups. The former processes transactions off-chain before publishing data on-chain, with a time frame for network participants to challenge the validity of transaction data

Zk-rollups meanwhile executes transactions off-chain and submits large batches on-chain using a single proof of validity, with no need for the network to validate the data.

The team from Metis highlighted a number of ways in which users of its ecosystem can benefit from Aave’s deployment. This includes borrowing assets with less collateral with Aave High-Efficiency mode, improved risk management with supply and borrow caps as well as siloed borrowing to reduce exposure to potential market contagion.

Aave’s Isolation mode also increases the pool of collateral assets, its Cross-Chain Portals provide access to wider DeFi solutions and its Gas Optimization also reduces transaction fees.

Podcast: Layer-2 project exec zooms in on the capabilities of Ethereum scaling solutions

Aave is renowned in the DeFi space, with over $5.5 billion in total value locked in the protocol. V3 of the DeFi liquidity protocol was deployed on Ethereum’s mainnet in Jan. 2023, following its launch on a number of Ethereum layer-2 protocols, including Avalanche, Arbitrum, Optimism and Polygon.

1inch Network, another prominent DeFi player, also opted for zkSync to deploy its aggregation and limit order protocols, while Uniswap token holders voted in favor of deploying on Polygon’s zkEVM roll-up solution in April 2023.

Magazine: ZK-rollups are ‘the endgame’ for scaling blockchains: Polygon Miden founder

Ethereum Believers May Be Staring Down Opportunity As ETH Reaches Another Low Against Bitcoin: CryptoQuant CEO

White hat finds huge vulnerability in ETH to Arbitrum bridge: Wen max bounty?

The ethical exploiter thanked Arbitrium for the 400 ETH payday, but said such a find should be eligible for the max bounty of nearly 1,500 ETH, or $2 million.

A self-described white hat hacker has uncovered a “multi-million dollar vulnerability” in the bridge linking Ethereum and Arbitrum Nitro and received a 400 Ether (ETH) bounty for their find.

Known as riptide on Twitter, the hacker described the exploit as the use of an initializing function to set their own bridge address, which would hijack all incoming ETH deposits from those trying to bridge funds from Ethereum to Arbitrum Nitro.

Riptide explained the exploit in a Medium post on Sept. 20:

“We could either selectively target large ETH deposits to remain undetected for a longer period of time, siphon up every single deposit that comes through the bridge, or wait and just front-run the next massive ETH deposit.”

The hack could have potentially netted tens or even hundreds of millions worth of ETH, as the largest deposit riptide recorded in the inbox was 168,000 ETH worth over $225 million, and typical deposits ranged from 1000 to 5000 ETH in a 24-hour period, worth between $1.34 to $6.7 million.

Despite the earning potential from the ill-gotten gains, riptide was thankful that the “extremely based Arbitrum team” provided a 400 ETH bounty, worth over $536,500, however they added later on Twitter that such a find “should be eligible for a max bounty,” which is worth $2 million.

Neither Arbitrum nor its creator company OffChain Labs have publicly commented on the exploit, Cointelegraph contacted OffChain Labs for comment but did not immediately hear back.

Related: ETHW confirms contract vulnerability exploit, dismisses replay attack claims

Arbitrum is a layer-2 Optimistic Rollup solution for Ethereum, clustering batches of transactions before submitting it to the Ethereum network in an effort to minimize network congestion and save on fees. Arbitrum Nitro launched on Aug. 31st, an upgrade aimed to simplify communication between Arbitrum and Ethereum as well as increasing its transaction throughput at lower fees.

Similar style bridge hacks have been successful for exploiters this year, notably the $100 million stolen from the Horizon Bridge in June and the recent Nomad token bridge incident in August which saw $190 million drained by the original and “copycat” hackers repeating the exploit.

Ethereum Believers May Be Staring Down Opportunity As ETH Reaches Another Low Against Bitcoin: CryptoQuant CEO