Dynamic Fraud Proof

TL;DR

This paper introduces Dynamic Fraud Proofs, a fraud-proof mechanism that enables near-instant finality in transaction processing by dynamically adjusting challenge periods and verifier interactions, improving over traditional optimistic rollups.

Contribution

It proposes a novel assert/challenge construction with dynamic challenge periods and verifier selection, enhancing speed and security in fraud-proof systems.

Findings

Achieves sub-second finality in ideal cases

Dynamically delays settlement upon fraud detection

Addresses censorship through inverted challenge process

Abstract

In this paper, we present a novel fraud-proof mechanism that achieves fast finality and, when combined with optimistic execution, enables real-time transaction processing. State-of-the-art optimistic rollups typically adopt a 7-day challenge window, during which any honest party can raise a challenge in case of fraud. We propose a new assert/challenge construction called "Dynamic Fraud Proofs" that achieves sub-second finality in ideal scenarios, while dynamically delaying settlement in the event of fraud detection and challenge resolution. The system relies on 1) a dynamic challenge period and 2) a configurable number of randomly selected verifier nodes who must interactively approve a state commitment without raising a challenge. If these conditions are not met, the state is not finalized, and the challenge period and approval criteria are dynamically adjusted. We provide a detailed analysis of the system's design, explaining how it maintains the assumption of a single honest node and addresses censorship attacks by inverting the traditional challenge process. Additionally, we formalize the system's probabilistic security model and discuss how bonding, incentives, and slashing mechanisms can encourage honest behavior, thereby increasing the likelihood of fast settlement in ideal scenarios.