Proof of Diligence: Cryptoeconomic Security for Rollups
CoRR(2024)
Abstract
Layer 1 (L1) blockchains such as Ethereum are secured under an "honest
supermajority of stake" assumption for a large pool of validators who verify
each and every transaction on it. This high security comes at a scalability
cost which not only effects the throughput of the blockchain but also results
in high gas fees for executing transactions on chain. The most successful
solution for this problem is provided by optimistic rollups, Layer 2 (L2)
blockchains that execute transactions outside L1 but post the transaction data
on L1. The security for such L2 chains is argued, informally, under the
assumption that a set of nodes will check the transaction data posted on L1 and
raise an alarm (a fraud proof) if faulty transactions are detected. However,
all current deployments lack a proper incentive mechanism for ensuring that
these nodes will do their job “diligently”, and simply rely on a cursory
incentive alignment argument for security. We solve this problem by introducing
an incentivized watchtower network designed to serve as the first line of
defense for rollups. Our main contribution is a “Proof of Diligence” protocol
that requires watchtowers to continuously provide a proof that they have
verified L2 assertions and get rewarded for the same. Proof of Diligence
protocol includes a carefully-designed incentive mechanism that is provably
secure when watchtowers are rational actors, under a mild rational independence
assumption.
Our proposed system is now live on Ethereum testnet. We deployed a watchtower
network and implemented Proof of Diligence for multiple optimistic rollups. We
extract execution as well as inclusion proofs for transactions as a part of the
bounty. Each watchtower has minimal additional computational overhead beyond
access to standard L1 and L2 RPC nodes.
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