A fraud proof is a technological method that functions as a bond in a decentralized environment that uses Optimistic Rollups (ORs)
What Is a Fraud Proof?
The term ‘fraud’ is defined as wrong conduct committed with the goal of gaining an illegal advantage by depriving the victim of a right. Tax fraud, credit card fraud, wire fraud, and many others are all examples. Fraudulent conduct can be perpetrated by a single person, a group of people, or a company as a whole.
To reward good performance, a sequencer required to process ORs must provide a fraud-proof with their work. Sequencers are compensated financially for executing rollups per the consensus rules, and they are penalized monetarily for breaking them by forfeiting their fraud proof.
Scaling public blockchains requires the use of fraud proofs and erasure codes. They allow light nodes to make their own decisions about which blocks to reject without having to rely on a plurality of trustworthy full-nodes.
Fraud proofs show that a state transition was made incorrectly. The fundamental benefit of fraud proofs is that they aren’t required for every state transition, but only when things go wrong. As a result, they use less computing resources and are more suited to a scalability-constrained setting. The interaction of these protocols is their biggest disadvantage: they establish a ‘dialogue’ between numerous participants. A dialogue/interaction/communication necessitates the presence of the parties, particularly the party alleging fraud and permits other parties to disrupt the conversation in various ways.