Layer2 Proof Series (Part 1) - OP Stack Fraud Proof: Problems, Solutions and Innovations

Overview

Layer 2 solutions have emerged as a promising approach to address Layer 1 scalability challenges. This series focuses on L2 proof solutions, with particular emphasis on fraud proof mechanisms. Fraud proof systems are cryptographic mechanisms designed to validate and verify transactions or computations on the blockchain, ensuring the integrity and security of distributed ledger operations.

Quick overview of the Optimistic Rollup workflow

The Optimistic Rollup workflow consists of seven key steps that establish a complete transaction verification pipeline. First, users initiate transactions on the Layer 2 network by sending them directly to the L2 sequencer. The L2 sequencer then executes these received transactions using its copy of the L2 chain and generates a new state root that reflects the updated ledger state.

Following execution, the sequencer transmits both the original transactions and the newly computed state roots to the Layer 1 blockchain. Upon receipt, the L1 smart contract enters a time window designated for challenges, during which any participant on the blockchain can raise objections against the validity of transactions or execution results provided by the L2 sequencer. This challenge phase is critical for maintaining system security and preventing malicious behavior.

After the challenge period has elapsed, the Layer 1 blockchain finalizes the record of the L2 execution. If a sequencer is proven to be dishonest during the challenge phase, appropriate penalties are applied and the state roots are re-computed to ensure accuracy and restore system integrity.

Why proving mechanism matters for L2 security

The fraud proof mechanism and challenging system are fundamental to mitigating risks associated with dishonest sequencer behavior. By leveraging cryptographic proofs, the correctness of rollup transactions and state roots can be independently verified by any participant on the L1 blockchain without requiring full re-execution of the entire transaction history.

Optimism implements an extended challenge window during which various participants in the system—including users and independent verifiers—can verify the correctness of execution results and state roots. This extended verification period provides sufficient time for the community to identify and challenge potentially fraudulent submissions, establishing a robust security model that depends on economic incentives and cryptographic verification rather than blind trust in a single entity.

Fraud Proof vs Validity Proof

Two distinct categories of proof solutions exist in the blockchain ecosystem, each with different operational philosophies and trade-offs. Validity proof systems require that when a sequencer submits execution results to Layer 1, they must also include cryptographic validity proofs. These proofs enable any participant on the Layer 1 network to immediately verify the correctness of execution results without necessitating re-execution of transactions on the L2 chain, though they require more complex mathematics and zero-knowledge proof systems.

Fraud proof systems, also known as fault proof systems, operate on a different assumption. They assume sequencer honesty by default and rely on a challenge mechanism to ensure correctness guarantees. In this model, participants have a time window to challenge potentially fraudulent submissions, shifting the burden of proof from the sequencer to the challenger, which can be more efficient in scenarios where the majority of submissions are honest.

Fraud proof solutions

Fraud proof implementations can be categorized into two primary approaches: non-interactive and interactive solutions, each with distinct architectural characteristics and performance implications.

Non-interactive fraud proof introduction

Non-interactive fraud proofs operate by directly re-executing all transactions from L2 on L1. This approach requires substantial supporting infrastructure capable of running L2 transactions within the L1 environment and verifying the L2's state changes through L1's verification layer. The fundamental challenge of non-interactive fraud proofs centers on two critical problems: re-executing transactions from L2 on L1 and solving state inconsistency issues between the L2 and L1 environments to enable accurate verification.

The Optimism Virtual Machine (OVM v1)

To address state consistency problems in non-interactive fraud proofs, the Optimism protocol incorporated several sophisticated techniques. State commitments are produced periodically by L2, generating cryptographic proofs of the entire L2 state. Data availability is ensured when L1 validators confirm that required data is available and accessible on the L1 chain. Execution verification occurs when L1 validators re-execute transactions using L2 data within the L2 context. Cross-chain communication mechanisms are implemented to facilitate interaction between L1 and L2 layers. Finally, well-designed incentive mechanisms encourage participants to behave honestly.

The OVM's core innovation was creating a "container" that makes L1 re-execution feel functionally equivalent to running on L2. This was accomplished through account state preload, which prepares L2 account states for execution on L1; modified implementation of EVM bytecodes related to storage and state access; deployment of smart contracts on L1 that modify user contract bytecode for external data access; and changes to the Solidity compiler to generate OVM bytecode instead of standard EVM bytecode.

The shorthand of OVM

While innovative, the OVM solution presented several significant disadvantages. The approach introduced considerable complexity through modifications to the original contract bytecode compiler, requiring developers to understand and work with non-standard bytecode. Code size enlargement resulted from replacing opcodes with function calls, which added extra instructions and increased deployment costs. Gas consumption increased significantly because function calls typically consume more gas compared to single opcodes, making OVM transactions more expensive. Performance limitations arose because the OVM was not yet fully optimized, creating potential bottlenecks in transaction processing.

Optimism's interactive fraud proof introduction

Interactive fraud proofs represent a paradigm shift in fraud-proving mechanisms, utilizing a back-and-forth protocol between two parties—a defender and a challenger—to verify the validity of state transitions. This approach is expected to be more efficient than traditional fraud proof mechanisms because it enables the two parties to focus computational resources on the specific parts of the state transition where they disagree, rather than requiring complete re-execution of all transactions.

Optimism's current implementation in development, known as project Cannon, targets verification using only a single MIPS instruction executed on L1, representing a dramatic reduction in on-chain computation requirements.

The Cannon overview

The Cannon project aims to achieve several ambitious objectives. It eliminates smart contract modifications at the opcode level, avoiding the complexity of EVM-on-EVM scenarios. The solution provides a simplified mechanism for L2 state access and significantly reduces costs for on-chain fraud proof verification.

Cannon achieves these goals through several key features. A unified states access solution is implemented via preimage oracle, a sophisticated mechanism that enables access to Layer 2 state using hash values as keys. Rather than re-executing transactions at the contract level, Cannon utilizes Geth-level replay, which operates closer to the actual client implementation. On-chain verification is optimized to require only a single MIPS instruction, dramatically reducing computational overhead. The op-program serves as the bridge for accessing and generating preimage data, and the dispute game mechanism enables collaboration between defender and challenger to identify problematic instructions.

The process of Cannon

Cannon's architecture comprises several critical components working in concert. The op-program is a client-server implementation of preimage data access where the op-program client is compiled into MIPS instructions, while the op-program server handles querying and obtaining preimage data. Cannon itself functions as a MIPS emulator capable of executing MIPS instructions, containing both the mipsevm component and on-chain smart contracts. MIPS.sol provides the core implementation of the on-chain MIPS instruction interpreter, while PreimageOracle.sol assists in serving preimage requests from MIPS.sol.

The workflow operates through a clearly defined sequence. The MIPS-backed op-program client is loaded into the Cannon MIPS emulator, which generates the initial state for the fraud proof process. Execution begins from the start point, running given steps in mipsevm while recording related access and saving preimage data as required. The dispute game initiates when challengers identify discrepancies between the L2 rollup state change and the one recorded on L1. Both defender and challenger employ binary search to identify the specific instruction generating different states. Finally, fraud proof materials are prepared and submitted to MIPS.sol for on-chain verification.

Optimism's interactive fraud proof challenges

Despite its innovations, Cannon faces several significant challenges. The choice of MIPS instruction set was motivated by native Golang support, ease of interpreter implementation, and architectural simplicity, but this specialized instruction set creates learning barriers. The potential for Golang runtime exploits presents security concerns, as Cannon patched several Golang runtime functions including disabling Golang garbage collection, which may cause out-of-memory errors in memory-intensive scenarios.

The fraud proof challenge timing window presents the most significant drawback from a user experience perspective. The extended window requires users to wait for a period before they can withdraw tokens, creating friction for time-sensitive applications. Additionally, the security of both L1 smart contracts and off-chain components requires careful consideration and ongoing scrutiny.

Alternative solutions

The blockchain community continues to explore alternative approaches to fraud proofs, with several proposals focusing on zero-knowledge based fraud proof mechanisms. These solutions are designed to reduce or entirely eliminate the interactive phase of traditional fraud proofs, potentially offering faster finality and reduced complexity, though with different trade-offs in terms of computational requirements and fraud proof generation time.

L2 Proof advancement initiatives

As significant L2 blockchain implementations utilizing OP Stack technology continue to develop, projects are actively advancing fraud proof mechanisms through multiple initiatives. These efforts focus on improving the efficiency of fraud proof off-chain infrastructure, optimizing the challenge timing window to provide faster finality for users, helping improve and solidify related on-chain contracts through rigorous testing and auditing, and exploring alternative business-driven solutions that may better serve the needs of diverse applications and user communities.

Conclusion

This article has traced the evolution of Layer 2 fraud proof systems, examining both historical approaches and current interactive fraud proof innovations through project Cannon. The analysis has covered the architectural design principles of OVM, including its attempt to create an EVM-compatible execution environment on L1, and has delved into the intricate design and implementation details of Cannon, which represents a significant advancement by reducing on-chain verification to a single MIPS instruction. These developments demonstrate the ongoing evolution of Layer 2 technology toward greater efficiency, reduced costs, and improved user experience while maintaining security guarantees essential for blockchain applications.

FAQ

What are fraud proofs?

Fraud proofs are cryptographic evidence used to challenge the validity of transactions on blockchain networks. They ensure transaction integrity and are essential for blockchain scalability solutions.

How do fraud proofs work in Optimistic Rollups?

Fraud proofs enable users to challenge incorrect L2 states proposed by sequencers. Optimistic rollups post transaction data and rely on third parties to verify L2 state by rebuilding it. If discrepancies are found, challengers can challenge the state on L1 through a bisection game mechanism, identifying incorrect computation steps and executing one-step proofs to prove fraud.

What is the difference between fraud proofs and validity proofs?

Fraud proofs validate transactions after a delay by challenging false transactions, while validity proofs confirm transactions instantly using zero-knowledge cryptography. Validity proofs are more efficient and provide immediate finality, whereas fraud proofs require a waiting period for potential challenges.