dYdX

Validity proofs ensure state correctness

Each update to the system state must be accompanied by a ZK Proof that ensures that the new state was derived by correctly applying a series of valid user transactions to the previous state. Once the proof is processed on the Ethereum blockchain the L2 block is instantly finalized. The system state is represented using Merkle roots.

1. Enforcing Consistency on the On-Chain State - StarkEx documentation

Zero knowledge STARK cryptography is used

Despite their production use ZK-STARKs proof systems are still relatively new, complex and they rely on the proper implementation of the polynomial constraints used to check validity of the Execution Trace.

• Funds can be lost if the proof system is implemented incorrectly.

1. STARK Core Engine Deep Dive

All data required for proofs is published on chain

All the relevant data that is used to recover the L2 balances Merkle Tree is published on-chain as calldata. This includes, in addition to the proven new state, the complete list of differences of the users' balances from the previous state.

1. ZK-Rollup - StarkEx documentation
2. UpdatePerpetualState.sol#L82 - Etherscan source code

The system has a centralized operator

The operator is the only entity that can propose blocks. A live and trustworthy operator is vital to the health of the system. Typically, the Operator is the hot wallet of the StarkEx service submitting state updates for which proofs have been already submitted and verified.

• MEV can be extracted if the operator exploits their centralized position and frontruns user transactions.

1. Operator - StarkEx documentation

Users can force exit the system

Force exit allows the users to escape censorship by withdrawing their funds. The system allows users to force the withdrawal of funds by submitting a request directly to the contract on-chain. The request must be served within a defined time period. If this does not happen, the system will halt regular operation and permit trustless withdrawal of funds. Perpetual positions can also be force closed before withdrawing, however this requires the user to find the counterparty for the trade themselves.

• Users can be censored if the operator refuses to include their transactions. They can still exit the system.

• Funds can be lost if the user is unable to find the counterparty for the force trade.

1. Censorship Prevention - StarkEx documentation
2. Forced Trade - StarkEx documentation

Regular exit

The user initiates the withdrawal by submitting a transaction on L2. When the block containing that transaction is proven the funds become available for withdrawal on L1. Finally the user submits an L1 transaction to claim the funds. This transaction does not require a merkle proof.

1. Withdrawal - StarkEx documentation

Forced exit

If the user experiences censorship from the operator with regular exit they can submit their withdrawal requests directly on L1. The system is then obliged to service this request. Once the force operation is submitted if the request is serviced the operation follows the flow of a regular exit.

1. Forced Operations - StarkEx documentation
2. Forced Withdrawal - StarkEx documentation
3. Full Withdrawal - StarkEx documentation

Emergency exit

If enough time passes and the forced exit is still ignored the user can put the system into a frozen state, disallowing further state updates. In that case everybody can withdraw by submitting a merkle proof of their funds with their L1 transaction.

1. Forced Operations - StarkEx documentation
2. Forced Withdrawal - StarkEx documentation
3. Full Withdrawal - StarkEx documentation