# Blockchain Technology Revolutionizes Finance and Data Storage

Blockchain technology is set to revolutionize financial transactions and data storage through its decentralized approach. No longer restricted by traditional centralized systems, participants around the world now have access to programmable ledgers and computational platforms.

Notably, with the advent of smart contracts on platforms like Ethereum, blockchain technology has taken on expanded capabilities. Users can now execute a wide range of transactions autonomously through programs stored on the blockchain. However, unresolved security vulnerabilities persist as a significant challenge within the blockchain ecosystem.

# Security Flaws in Blockchain: A Barrier to Mainstream Adoption

For instance, in August 2010, a coding flaw in Bitcoin led to the creation of 184 billion Bitcoin—a problem that was rectified by removing the affected block. In 2016, Ethereum faced a $60 million loss due to the DAO hack, which resulted in a hard fork to resolve the issue. More recently, in 2022, Binance Smart Chain experienced a cross-chain hack that led to the theft of 2 million BNB tokens, prompting an extreme response: a temporary halt and rollback of the blockchain.

These incidents highlight a critical issue: blockchain lacks effective mechanisms for detecting and thwarting large-scale malicious hacks in real time. Given the importance of censorship resistance inherent in blockchain’s decentralized nature, these events are typically addressed post-incident. However, restoring lost trust and value post-crisis is a challenging endeavor, underscoring the need for proactive security systems.

In response to this need, innovations like Zircuit, a rollup-based Ethereum Layer 2 blockchain, are emerging. Utilizing AI for enhanced security, Zircuit introduces an advanced security layer that preemptively detects and blocks malicious transactions to protect users.

# Rollup Blockchains: Emerging Solution to Ethereum’s Scalability Issues

Ethereum, as the most decentralized Layer 1 blockchain, hosts a myriad of actively operating decentralized applications (dApps). However, its network becomes congested during peak usage, leading to high gas fees and slow processing speeds—hallmarks of its scalability problem.

Various solutions have been explored, but since the 2020s, Layer 2 blockchains employing rollup solutions have stood out as the most promising answer to Ethereum’s scalability challenges.

Blockchain primarily serves four functions: execution, settlement, consensus, and data availability. Modular blockchains break these functions into specialized chains, designed to perform distinct roles. Unlike blockchains like Solana or Sui, which enhance scalability within the chain itself, Ethereum focuses on modular solutions to improve scalability by separating functionalities.

Rollup blockchains, a type of modular blockchain, specialize in execution. They operate by processing numerous transactions on Layer 2 without recording each one directly on Layer 1, instead, only the final outcomes are logged on Layer 1. This approach leverages Layer 1 security while significantly increasing transaction throughput and reducing gas fees without requiring consensus and data availability functionalities.

# The Role of Sequencers: Balancing Security and Efficiency in Rollups

While transactions on Layer 1 blockchains are ordered and included in blocks via consensus algorithms, rollups use sequencers that sort user transactions. Currently, almost all rollups are operated by centralized sequencers, a notion contrary to blockchain’s decentralized principles but accepted due to the drastic improvement in transaction processing speeds.

However, centralized sequencers pose security risks. Ethereum, for example, can reorder or filter transactions through services like Flashbots. In contrast, applying similar tools to centralized sequencers in rollup blockchains is challenging, leaving a gap in pre-block inclusion transaction review mechanisms.

# Enhancing Security with AI: Zircuit’s Innovative Approach

Zircuit (ZRC) harnesses the unique attributes of centralized sequencers to introduce an innovative security solution. Having dedicated over a year and a half to researching rollup security tools, transaction compression, and cryptography, Zircuit—backed by several Ethereum Foundation research grants—has developed an AI-based security software that implements a Sequencer Level Security (SLS) protocol. This protocol detects and blocks malicious transactions in the mempool to protect users.

Zircuit’s SLS conducts pre-transaction finalization evaluations using AI to identify and isolate suspicious transactions early, strengthening smart contract and blockchain security without resorting to extreme measures like hard forks or rollbacks.

Moreover, Zircuit boasts 100 percent EVM compatibility, built on the Optimism Bedrock-based zkEVM. It supports major wallets like MetaMask and EVM dApp development tools, simplifying the deployment of EVM-based dApps without requiring developers to learn new programming languages.

# Understanding Sequencer Level Security (SLS)

Zircuit’s SLS enhances sequencer security via a three-step process: malice detection, quarantine-release criterion, and transaction execution. These steps aim to identify, isolate, and process malicious transactions using the sequencer.

1. **Malice Detection**
The first step involves the immediate inspection of transactions reaching the sequencer to determine potential malicious intent. Zircuit employs a hybrid parallel-sequential detection algorithm combining independent and contextual simulations to swiftly filter and rigorously verify transactions.

2. **Quarantine-Release Criterion**
Transactions flagged as malicious are quarantined and temporarily excluded from block inclusion. They remain under scrutiny until they either fail specific criteria and are purged or meet release criteria and are taken out of quarantine.

3. **Transaction Execution**
Finally, transactions that pass the quarantine-release criteria are included in the next block, following standard sequencing rules.

# Zircuit: Carving a Distinct Niche in the Rollup Ecosystem

According to L2Beat, 48 rollup blockchains have launched within Ethereum’s Layer 2 ecosystem, with more to come. Services like RaaS facilitate easy rollup development through modular configurations, spurring the rise of numerous rollup solutions focused primarily on speed and scalability over security.

However, the critical issue of security remains underemphasized, often sidelined in the rush for market entry and cost efficiency. This oversight can leave users vulnerable until problems manifest tangibly.

Blockchain security is paramount, as it prevents malicious transactions from impacting the entire network. Enhanced security would not only ensure scalability but also build the reliable infrastructure necessary for the robust growth of decentralized finance (DeFi).

Zircuit has recently begun supporting the migration of staked assets to its mainnet, achieving the highest TVL growth rate among Layer 2 solutions as of October 30. Amid a flood of emerging rollup blockchains, Zircuit’s differentiated focus on security is expected to attract more dApps and users, cementing its value within the blockchain ecosystem.