How Do “Fraud Proofs” Work and What Are Their Limitations?
Fraud proofs are a security mechanism that allows network participants to challenge and prove the invalidity of a block. If a validator submits an invalid block, any other participant can submit a fraud proof to the network, which contains evidence of the invalidity.
If the fraud proof is valid, the invalid block is rejected and the validator who submitted it is punished. The main limitation of fraud proofs is that they rely on the assumption that there will always be at least one honest participant who is willing to submit a fraud proof.
If all participants are malicious or apathetic, an invalid block could be accepted by the network.
Glossar
Fraud
Manipulation ⎊ Fraud in cryptocurrency markets often involves deceptive manipulation tactics designed to artificially inflate or deflate asset prices for personal gain.
Fraud Proofs
Attestation ⎊ Within cryptocurrency derivatives and options trading, attestation functions as a critical mechanism for fraud proofs, verifying the integrity of data and computations underpinning on-chain processes.
Fraud Proof System
Detection ⎊ A Fraud Proof System is the mechanism, often cryptographic or game-theoretic, designed to identify and reject invalid state transitions or fraudulent transactions on a blockchain.
Network Participants
Influence ⎊ Network Participants, within cryptocurrency, options trading, and financial derivatives, represent entities exerting agency over market state and price discovery; their actions directly impact liquidity provision and order flow dynamics.
Invalid Block
Rejection ⎊ An invalid block is a proposed block that fails to meet the specific consensus rules of the blockchain protocol.