Fraud Proof

What Is A Fraud Proof?

In blockchain technology, particularly in Layer-2 scaling solutions, fraud-proof mechanisms are used to detect and dispute invalid transactions. These mechanisms operate under the assumption that transactions are legitimate by default. However, if a party suspects a fraudulent state transition (an invalid transaction), they can submit a fraud proof to dispute the transaction. 

This proof serves as evidence to a verifier, typically the main blockchain (Layer 1), that the challenged transaction is indeed fraudulent. The verifier then investigates the proof and, if valid, can revert the fraudulent transaction and restore the system to a legitimate state.

How Does A Fraud Proof Work?

Fraud proofs are based on an optimistic approach. All transactions are initially considered valid and processed in batches. The fraud proof comes into play only if someone suspects a fraudulent transaction within a designated challenge period.

Here's a breakdown of the process:

1. Transaction Batch Processing: A group of transactions is processed and bundled together.

2. Challenge Window: This period allows anyone to submit a fraud proof if they suspect an invalid transaction within the batch.

3. Fraud Proof Submission: If fraud is suspected, proof is submitted to the verifier (usually the main blockchain).

4. Proof Verification: The verifier investigates the proof to determine its validity.

5. Action: If the proof is valid, the fraudulent transaction is reversed, and the system reverts to the last confirmed valid state. If no valid proof is submitted during the challenge period, the batch is considered legitimate.

Important Note: Fraud proofs often involve a time delay due to the challenge window. This delay ensures ample opportunity for disputes while maintaining system efficiency.

What Is the Difference Between Validity Proofs and Fraud Proofs?

Both validity proofs and fraud proofs aim to ensure the integrity of transactions, but they approach it differently:

• Validity Proofs: These proofs guarantee the legitimacy of each transaction upfront. With validity proofs, every transaction is accompanied by cryptographic evidence of its correctness. The main blockchain only accepts transactions with valid proofs. This method offers faster withdrawals but requires more computational power.

• Fraud Proofs: As mentioned earlier, fraud proofs operate under an optimistic assumption. They are more lightweight and require less computation compared to validity proofs. However, they come with a delay due to the challenge window for disputes.

Choosing between validity proofs and fraud proofs depends on the specific needs of the blockchain system. Validity proofs are ideal for scenarios where fast withdrawals are crucial, while fraud proofs might be preferred for their efficiency in processing large transaction volumes.

Both validity proofs and fraud proofs serve as fundamental components of blockchain security, particularly for zk-rollups and optimistic rollups, safeguarding against vulnerabilities and Sybil Attacks.

ZK fraud proofs are an alternative where ZK is used in the dispute module and finality times are slashed to 1 day. Some rollups utilizing ZK fraud proofs include Automata.

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