Fraud proof is a technical method in blockchain that enables scalability through sharding of larger blocks and ensures the accuracy of on-chain data. It uses Optimistic Rollups (ORs) to reduce costs and latency for decentralized applications. Sequencers processing ORs provide fraud proofs and face rewards or penalties based on consensus rules.
The primary challenge with state transition fraud proofs is their reliance on complete blockchain data, even if a fraction of the data is missing, it can impede the block’s validation, which demands complete data. While Zero-knowledge proofs can confirm correctness, scammers might publish inaccessible blocks, hindering validators’ computation and block communication. Fraud proofs, along with erasure codes, allow light nodes to independently reject blocks and pinpoint incorrect state transitions, scaling blockchains without relying on trustworthy full-nodes.
Their advantage lies in their deployment only in response to issues, thereby reducing the demand on computing resources, and fitting well in scalability-constrained scenarios. However, they establish dialogue/interaction between protocols that can be disrupted, particularly by the party alleging fraud.