Definition
A fraud proof is a cryptoeconomic mechanism used to demonstrate that a specific state transition in a blockchain or Layer 2 system was executed incorrectly or dishonestly. It encodes enough information for an on-chain verifier, such as a smart contract on the base layer, to recompute or check the disputed step and determine whether the transition violates the protocol rules. Fraud proofs are central to optimistic rollups and similar constructions, where transactions are initially accepted as valid but can be challenged within a defined dispute window.
In systems that rely on fraud proofs, the security model assumes that at least one honest participant will monitor published data and submit a proof if a Sequencer or other operator behaves maliciously. The proof typically targets a narrow portion of the computation, minimizing verification costs while still allowing the base layer to enforce correctness. When a fraud proof is accepted on-chain, the invalid state update is reverted or corrected, and the party responsible for the invalid claim may be penalized according to the protocol’s incentive design.
Context and Usage
Fraud proofs are closely associated with rollup architectures that post transaction data or state roots on-chain while executing most activity off the base layer. By relying on fraud proofs instead of upfront heavy verification, these systems can increase throughput and reduce fees, while inheriting security from the underlying chain where the proofs are verified. The effectiveness of fraud proofs depends on robust Data Availability, since observers must have access to the underlying transaction data to reconstruct and challenge incorrect state transitions.
Within a Layer 2 environment, the Sequencer is typically the party proposing new batches of transactions and corresponding state roots, which become subject to potential fraud proofs. The base layer’s on-chain contracts define how proofs are submitted, how disputes are resolved, and how finality is delayed until the challenge period expires. As a concept, fraud proofs formalize the idea that correctness is enforced not by trusting off-chain actors, but by allowing any participant to prove misbehavior directly to the base chain.