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Proof of Diligence: Cryptoeconomic Security for Rollups

Peiyao Sheng, Ranvir Rana, Senthil Bala, Himanshu Tyagi, Pramod Viswanath

TL;DR

This work tackles the verifier incentive problem in optimistic rollups by introducing a rational watchtower network and a Proof of Diligence (PoD) protocol. Watchtowers continuously verify L2 state transitions, producing verifiable proofs that are rewarded via a bounty mechanism, with penalties for misbehavior. The authors analyze the system through non-cooperative and cooperative game frameworks, showing that with carefully calibrated incentives (and a whistleblower mechanism) the unique equilibrium is diligence, effectively deterring lazy or collusive behavior. The implementation showcases a practical, low-overhead stack on Optimism Bedrock with EigenLayer staking, including on-chain contracts and off-chain clients, and discusses parameter choices, rotation, and privacy considerations to maintain cryptoeconomic security in real-world deployments.

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.

Proof of Diligence: Cryptoeconomic Security for Rollups

TL;DR

This work tackles the verifier incentive problem in optimistic rollups by introducing a rational watchtower network and a Proof of Diligence (PoD) protocol. Watchtowers continuously verify L2 state transitions, producing verifiable proofs that are rewarded via a bounty mechanism, with penalties for misbehavior. The authors analyze the system through non-cooperative and cooperative game frameworks, showing that with carefully calibrated incentives (and a whistleblower mechanism) the unique equilibrium is diligence, effectively deterring lazy or collusive behavior. The implementation showcases a practical, low-overhead stack on Optimism Bedrock with EigenLayer staking, including on-chain contracts and off-chain clients, and discusses parameter choices, rotation, and privacy considerations to maintain cryptoeconomic security in real-world deployments.

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.
Paper Structure (24 sections, 8 theorems, 9 equations, 6 figures, 3 tables, 1 algorithm)

This paper contains 24 sections, 8 theorems, 9 equations, 6 figures, 3 tables, 1 algorithm.

Table of Contents

  1. Introduction
  2. Security Models and Definitions
  3. Rollup Model
  4. Watchtower Model
  5. Preliminaries
  6. Background and Prior Work
  7. The Watchtower Protocol
  8. Proof of Diligence
  9. Incentive Design
  10. Incentive Analysis in Non-Cooperative Games
  11. Cooperative Games and The Enhanced Protocol
  12. Lazy Collusion
  13. Diligent Collusion
  14. Enhanced Protocol with Whistleblower
  15. Implementation and Evaluation
  16. ...and 9 more sections

Key Result

Theorem 1

The diligent strategy in the PoD-Game is a dominant strategy for all watchtowers.

Figures (6)

  • Figure 1: Watchtowers are added to the current L2 security workflow to guard normal path security.
  • Figure 2: (a) Optimistic rollup model and (b) Watchtower model.
  • Figure 3: Watchtower client executes the rollup and observes the commitments on settlement layer, it posts bounty and flags on the payment/stake layer
  • Figure 4: Gas usage of MineBounty operation over 4 weeks of deployment
  • Figure 5: Integration of watchtower network contracts with L2 (green) and Eigenlayer (blue) contracts
  • ...and 1 more figures

Theorems & Definitions (8)

  • Theorem 1
  • Corollary 2
  • Theorem 3
  • Corollary 4
  • Theorem 5
  • Corollary 6
  • Lemma 7
  • Corollary 8