Virtual Rollup

VRC-5

Abstract

The Virtual Rollup network enables participants to transfer rights to locked escrow through state transfers. Virtual Rollups are built on primitives VRC-1 through VRC-4 across two layers: the settlement layer and ZK State Channels.

• VRC-1: ZKSC

  • Processes state transitions

• VRC-2: Virtual Node

  • Handles communication between settlement layer and ZKSC

  • Ensures self-verification

  • Stores states

• VRC-3: VIPE

  • Guarantees state is backed 1:1 against escrow

• VRC-4: VIP

  • Supports permissionless capital flows

Together, Virtual Rollups solve double-spend and counterparty risk. Double-spend is resolved through a common counterparty that interfaces with user. Full Self-Custody is guaranteed in spite of a malicious counterparty because users store state locally which can be redeemed for escrow on the immutable settlement layer. Consider the following attack scenario:

The common counterparty cannot profitably collude with a fictitious user to withdraw escrow because VIPE funds require either:

• universal consent of all relevant participants for immediate withdrawals

• an onchain dispute process

To attack the onchain dispute process, states must be

• Valid: signed by both the participant and counterparty in the ZKSC

• Exploitable: the Escrow-State difference reflected in a stale state exceeds the Escrow-State difference of the live state

This scenario can occur when a participant’s balance genuinely decreased from its initial level before later recovering back to that same amount.

Once the onchain dispute process is triggered, the participant's Virtual Node will automatically override with the valid, live state. If the participant is offline, another Virtual Node may execute the state proof on their behalf, earning the slashing reward.

Therefore, VIPE funds are inaccessible to malicious counterparties. The VIP is not protected by an onchain dispute process and therefore could be drained by a malicious actor. But because the VIP definitionally represents unclaimed funds, it is already considered profit of the counterparty.

Features

• Trustless

• Permissionless

• Full Self-Custody