Although blockchain has used many ways to increase its security. One example is Fraud Proof. Read the full explanation here!

Understanding Fraud in Blockchain

Fraud, by its very nature, involves wrongful acts committed with the aim of obtaining an unlawful advantage by depriving another person of their rights. Tax fraud, credit card fraud, and wire fraud are some examples of fraudulent behavior that can be carried out by individuals, groups, or even entire companies.

The Emergence of Fraud Proof in Blockchain

In the blockchain world, fraud proof is emerging as a critical technical method for achieving on-chain scalability, whether through sharding or larger blocks. The main goal is to ensure that on-chain data remains available and accurate. By utilizing Optimistic Rollups (ORs), fraud proof has a dual role:

• Reduce costs
• Reducing latency for decentralized applications on blockchain networks.

Mechanism Fraud Proof

To encourage optimal performance, a sequencer who handles ORs must provide fraud proof along with their work. Sequencers are financially rewarded for executing rollups according to consensus rules and are financially penalized for violations by releasing their fraud proofs.

Although state transition fraud proofs are effective, they depend on a critical assumption: the availability of all block data. Without complete data availability, validating the correctness of a block becomes a difficult challenge. This requirement is strict because data may be inaccessible for a variety of reasons, which go beyond the deviation of malicious nodes. The solution lies in making data unavailable as a formidable obstacle for any rogue node.

Scalability Challenges and the Role of Fraud Proof

Scaling a public blockchain requires the integration of fraud proof and erasure codes. These elements empower light-nodes to autonomously decide which blocks to reject, eliminating dependency on a large number of trusting nodes.

Even with the potential use of ephemeral zero-knowledge proofs to verify correctness, the risk of attackers publishing inaccessible blocks remains. This inclusion disrupts other validators, hampering their ability to fully compute the state or create blocks that interact with parts of the state that are now unavailable.

Benefits of Fraud Proof

Fraud proof comes into play when state transitions are executed incorrectly. Its advantages lie in:

• Does not require activation for each state transition
• Only needed when deviations occur

This efficiency reduces computing resource usage, making it suitable for scalability-limited environments.

Challenge Navigation

Despite its advantages, the interactive nature of fraud proof poses challenges. Establishing a 'dialogue' between multiple participants, especially those alleging fraud, opens up opportunities for disruption. An effective protocol must find a balance to ensure security while facilitating communication within the blockchain ecosystem.

Also read:

Large-Scale Crypto Fraud: Rug Pulls Target Thousands of Victims

What Is Starknet: Ethereum Star with Rollup and ZK-STARK

What are Optimistic Rollups: How they work and how they differ from ZK-Rollups

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