What are optimistic bridges? -Overview and what they offer

*This blog is a transcription of the December 2022 Pheasant blog here.

Pheasant Network is one of the first projects that propose optimistic bridges as a scalability solution. We have incorporated the optimistic concept used in rollup development to bridges, a pivotal technology for Ethereum’s interoperability, to lower the barrier to entry in the Layer 2 space and enhance scalability of the network.

We at Pheasant Network believe, moving forward, optimistic bridges will grow their presence and gain widespread adoption throughout the industry. In this article, we will explore what optimistic bridges are and their offerings to Ethereum’s bottlenecks.

🏁 Goal: Understanding the optimistic bridges overview

👦 Target: Beginner

📖 Summary:

• Optimistic bridges are inspired by the concept of optimistic rollups.
• They process bridge transactions “optimistically”.
• As a result, they reduce gas fees significantly.
• Seamless token transfer from Layer 1 to Layer 2 helps Ethereum scale.
• Improved bridge technology leads to enhanced interoperability.

Optimistic bridges are a token-bridge technology inspired by the optimistic rollup philosophy. Users can enjoy much cheaper gas fees when bridging tokens by processing transactions “optimistically”.

In our previous blog post, we explained that optimistic rollups, as the name suggests, process transactions optimistically by rolling them up. In this method transactional data are compressed to a massive degree and then computed optimistically, resulting in a significant decline in the gas fee.

Now, you might wonder what it means to “optimistically process” transactions. Let’s dig into how it works.

Ethereum, or Layer 1, checks all the transactions on-chain, meaning whether it looks valid or fraudulent, all transactions are equally verified. Since this validation (or invalidation) process requires running smart contracts, gas fees will be charged.

Optimistic rollups were invented to address this inefficiency of needing to go through all the transactions. They provide better efficiency by splitting up the transaction process into two phases — first, they “roll up” multiple transactions in a batch before executing them all at once off-chain and then verify only fraudulent-looking transactions on the Layer 1 blockchain. Gas fees will be much cheaper as the base layer only needs to check suspicious transactions on-chain unlike Ethereum mainnet which processes any transactions submitted.

Pheasant Network has applied this optimistic concept seen in the Layer 2 development to bridge technology and has come up with a new scalability solution, optimistic bridges, a system which processes bridging transactions optimistically. Just like Ethereum inspects only suspicious transactions on the Layer 1 level in the case of optimistic rollups, Pheasant Network’s optimistic bridges do not require Layer 1 to verify all of the transactions, but only invalid-looking ones when users transfer their tokens to a different chain. This leads to a drastic cut in the gas fees for token bridges.

Roadblock to the Ethereum and Layer 2 growth

When users move assets from Layer 1 to Layer 2, it’s the Layer 1 that checks the validity of the transfer. This is to ensure the correctness of the transactions submitted off-chain on Layer 2, and therefore, all the transactions are subject to monitoring. Like any other transactions on-chain, the validation process costs some gas.

However, as the demand for Ethereum surges, the gas fees have also skyrocketed, forcing users to pay more ETH when transferring funds between Layer 1 and Layer 2, which prevents them from comfortably managing their assets on multiple layers and chains. This is a critical challenge that could determine Ethereum’s future success and could potentially hinder the growth of the entire ecosystem if not solved appropriately.

We believe lowering gas fees for bridging tokens is one of the most urgent and imminent challenges we need to find solutions for because bridges serve as an entry point to Layer 2, a technology undertaking an essential role in Ethereum ecosystem growth. In other words, the adoption of optimistic bridges can directly affect Ethereum’s ecosystem growth.

Inefficient capital flow

High gas fees cause inefficient capital flows of the entire ecosystem.

Let’s take a look at an example. Alice sold an NFT on a marketplace on Layer 2 for some ETH equivalent to $100. She received the ETH and now tries to convert it to DAI via Uniswap on Layer 1 because the exchange offers the highest liquidity of all the platforms in the ecosystem. In this scenario where she wants to exchange her ETH on Layer 2 with DAI circulating on Layer 1, Alice needs to transfer her ETH existing on Layer 2 to Layer 1 through a bridge.

If she were to use a traditional bridge, she would probably have to pay an enormous amount in gas fees (often over $50) depending on the network conditions, which would be half of the sale value in this case. In addition, she needs to factor in the protocol fee to Uniswap for the ETH-DAI swap. With such a large gas fee combined with the protocol charge, she would most likely end up with much less money than the $100 she earned by selling the NFT in the first place.

With optimistic bridges that offer lower gas fees, users will no longer have to worry about losing a huge chunk of their assets like Alice and can go back and forth between layers seamlessly.

Becoming the standard for bridges

2020 saw the invention of a number of Layer 1 chains, which encouraged the development of multi-chain bridges in 2021. Lately everyone’s attention is on Ethereum again after the Merge, a transition to proof-of-stake, has finally been implemented.

As the hashtag #L222 shows, 2022 is the year for Layer 2. As Layer 2 technology emerges, the demand for optimistic bridges also rises as they can not only enhance the interoperability of Ethereum but also improve its scalability.

The wide adoption of optimistic bridges with much cheaper gas fees unlocks users’ freedom to transfer tokens between Ethereum and Layer 2. In addition, more capital injection to Layer 2 means higher liquidity for the Ethereum ecosystem as a whole. We are excited to see you join the optimistic token bridge experience with us.

Pheasant Network offers an optimistic interoperability protocol designed to unify Layer 2 infrastructures with a comprehensive suite of solutions. Our optimistic Bridge-as-a-Service (BaaS) allows developers to seamlessly integrate native bridges and swap functionalities into their applications. A community-driven project, we focus on contributing long-term value to the Ethereum ecosystem and serving the public good.

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