In this article, we will explore what validiums are, how they operate, and how they can improve the user experience on Ethereum.

What are Blockchain Validiums?

Blockchain validiums are an advanced layer 2 scaling solution designed to enhance the performance and throughput of blockchain networks, particularly Ethereum. They achieve this by processing transactions off-chain while maintaining security and integrity through the use of cryptographic validity proofs. Unlike other scaling solutions, validiums do not store transaction data on-chain, which leads to significant improvements in scalability but also introduces specific trade-offs, particularly around data availability.

Validiums are primarily responsible for reducing the load on the Ethereum blockchain by processing the majority of transactions off-chain and only sending concise proofs to the mainnet for verification. This off-chain transaction processing approach significantly boosts throughput and reduces congestion on the main network. That leads to a more efficient and cost-effective Ethereum.

What is a Zk-Rollup?

There are a lot of similarities with zk-rollups (zero-knowledge rollups), so it is suiting to briefly explain them before we delve into validiums. 

A zk-rollup is a type of layer 2 scaling solution that bundles multiple transactions into a single batch, processes them off-chain, and then submits a cryptographic proof to the Ethereum Mainnet. This proof, a zero-knowledge proof, safeguards that the transactions within the batch are valid without revealing the specific transaction details. Zk-rollups improve Ethereum's scalability by reducing the on-chain data load while still maintaining the integrity of transactions through cryptographic guarantees.

If you wish to learn even more about zk-rollups, visit our deep dive article here.

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How Blockchain Validiums Work

Validiums operate by processing transactions off the Ethereum Mainnet and verifying their correctness through advanced cryptographic proofs, specifically zero-knowledge proofs. These proofs come in the form of ZK-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) or ZK-STARKs (Zero-Knowledge Scalable Transparent Argument of Knowledge). These cryptographic mechanisms allow validiums to prove the validity of off-chain transactions without revealing any details.

A Step-by-Step Process:

Step 1: Transaction Submission

‍Users initiate transactions by submitting them to the validium operator, who is responsible for managing the off-chain transaction processing. Depending on the implementation, the operator might be a single entity or a rotating set of validators selected via a proof-of-stake mechanism. Either way, operators are essential to managing validiums.

Step 2: Batching and Off-Chain Processing

The operator collects multiple transactions and organizes them into batches. These batches are then processed off-chain. Compared to processing each transaction separately on the mainnet, this off-chain batching greatly boosts transaction throughput, making the process more efficient. Validiums are said to easily handle 9,000 transactions per second.

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Step 3: Proof Generation

After processing the transactions, the operator generates zero-knowledge proofs. These cryptographic proofs demonstrate that the resulting state transitions follow Ethereum network regulations and that the off-chain calculations were carried out correctly. Zk proofs enhance privacy by not disclosing any specifics about the transactions themselves.

Step 4: Proof Verification

The generated zk proofs are then uploaded to the Ethereum Mainnet, along with a state commitment, which is a cryptographic representation of the most recent state of the off-chain system. The Ethereum smart contract verifies the validity of these proofs. This verification process is crucial as it guarantees that the off-chain computations were performed correctly and that the updated state complies with the rules of the Ethereum blockchain.

By following these steps, validiums can efficiently process a large volume of transactions without compromising the security and integrity of the overall system.

Scaling Ethereum

Reducing the amount of data that needs to be processed and stored on the Ethereum Mainnet elevates the capabilities. Keeping transaction data off-chain allows the network to handle a vastly larger number of transactions per second compared to on-chain processing methods. This is particularly beneficial for applications that require high throughput, such as decentralized exchanges, Web3 gaming platforms, and other high-performance blockchain-based applications.

One of the key innovations in validiums is the use of recursive proofs. A recursive proof is a validity proof that verifies the validity of other proofs. This "proof of proofs" can be used to confirm the correctness of several validium blocks simultaneously by aggregating multiple proofs into one. Again, the result is significantly increased scalability of validiums, as a single recursive proof can validate a large batch of transactions. This gives the scale another layer.

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Withdrawals and Deposits

Interactions between the user, the validium operator, and the Ethereum Mainnet: To deposit funds, a user sends assets (e.g., ETH or ERC-20 tokens) to a smart contract on Ethereum, which then updates the validium’s off-chain ledger to reflect the deposit.

Withdrawals, however, are more complex due to the off-chain nature of validiums. When a user wants to withdraw funds, they submit a withdrawal request to the operator. The operator validates the request and includes it in a batch of transactions, which is then processed and proven through a validity proof. Once the Ethereum verifier contract validates the proof, the user can finalize the withdrawal on-chain.

A crucial anti-censorship feature of validiums allows users to bypass the operator and withdraw directly from the Ethereum contract by providing a “Merkle proof.” This proof demonstrates that the user’s assets are included in the current state root. Even if the operator becomes unavailable or malicious, users can still access their funds.

Data Availability and Data Batching

Data availability is one of the most critical aspects of validiums, as it directly affects the ability of users to withdraw funds and verify transactions. Storing transaction data off-chain reduces the on-chain data footprint but introduces the risk that the data may become unavailable for various reasons. These risks include not only malicious intent but also potential compromise or shutdown.

To manage this, validiums utilize data batching, where transaction data is grouped and stored off-chain by data availability managers. These managers are responsible for assuring that the necessary data is accessible when users need to generate Merkle proofs or withdraw funds. The challenge is that if this data is withheld, users might be unable to perform these essential actions, which is a significant security risk. That is where the Data Availability Committee comes in.

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Data Availability Committee (DAC)

A Data Availability Committee (DAC) is a group of trusted entities that has the particular job of securing the availability of off-chain data in a validium. Be aware of that it is not a single organization, but each validium has its own DAC. They store copies of the state data and provide proofs of data availability. These proofs are checked by the Ethereum verifier contract before any state updates are accepted.

While DACs are easier to implement and manage due to their limited membership, they introduce trust assumptions into the system. Users must trust that the DAC will make data available when needed. If a DAC is compromised, for example, by a malicious actor, it could withhold data, preventing users from withdrawing funds or verifying the state of the validium.

Bonded Data Availability

To address the trust issues associated with DACs, some validium designs use a bonded data availability mechanism. In this approach, participants who manage off-chain data are required to stake tokens as a form of bond. This bond incentivizes honest behavior, as participants risk losing their stake if they fail to provide data when required.

The bonded data availability model reduces the centralization risks of DACs by allowing a broader pool of participants to manage data, provided they meet the staking requirements. This leverages cryptoeconomic incentives so that the data remains available and secure.

It might get confusing at this point. Here is a picture of the whole validation process. 

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Volitions: What are They, and What's the Difference?

Volitions are a hybrid scaling solution that combines the characteristics of zk-rollups and validiums. They allow users to choose whether to store their transaction data on-chain or off-chain, depending on their specific needs. This flexibility offers to balance between the security of on-chain data availability (as in zk-rollups) and the scalability benefits of off-chain data storage (as in validiums).

Volitions are useful for applications that need both high performance and robust security. For example, a decentralized exchange might use the scalable, private infrastructure of a validium for most trades but switch to a zk-rollup for transactions that require higher security guarantees.

While validiums exclusively store data off-chain to optimize scalability and cost, volitions offer enhanced security and adaptability by providing users with the option to store data on-chain when necessary.

Advantages and Disadvantages (Pros and Cons)

Pros:

• High scalability: Validiums can process thousands of transactions per second, far exceeding the capacity of the Ethereum Mainnet.
• Reduced transaction costs: By keeping transaction data off-chain, validiums lower the gas fees associated with transactions.
• Enhanced efficiency: Simply put, validiums run fast transactions.
• Anti-censorship mechanisms: There are several safety features, such as DAC.
• Recursive proofs: Recursive proofs significantly increase scalability by verifying multiple blocks of transactions with a single proof.
• Enhanced privacy: Transaction details remain private because of zero-knowledge proofs.

Cons:

• Trust assumptions: Users must trust the entities managing off-chain data, such as data availability committees or managers, which introduces a level of centralization.
• Data availability risks: If off-chain data becomes unavailable, users may be unable to withdraw funds or verify transactions. However significant effort was made to minimize this risk.
• Limited support for complex smart contracts: Validiums are less suited for general-purpose computation or complex smart contract execution compared to other solutions like optimistic rollups or zkEVMs.

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