In order to fully understand what a sovereign rollup is, we’ll need to first understand the different pieces of a blockchain:
Data Availability and Consensus - makes sure data is available and that there is an agreed upon ordering of transactions. Example: Celestia
Settlement - writes transaction data to the DA layer while publishing new state to the settlement layer. Settlement layers maintain state roots and is a place for dispute resolution and proof verification to take place
Monolithic chains handle all three functions in one architecture. The modular stack scales horizontally by splitting up the three functions into different layers.
A sovereign rollup is a rollup that has the scalability and security of a rollup but the sovereignty of an L1. A sovereign rollup does not need a smart contract layer. Instead, every transaction is published to the data availability layer and settled in another layer.
Benefits of Sovereign Rollups
Sovereign rollups can fork independently of the data/consensus layer. So sovereign rollups define their fork choice rules independent of the data/consensus layer.
Most rollups today do not have the ability to define their own rules for forking.
Settling to a monolithic L1 means that the L1 innately decides which block gets added to the rollup chain. This makes forking very difficult without the L1 initiating the fork itself.
Proof verification happens on the p2p network. Instead of validating proofs on the L1, proofs will be distributed among nodes.
In the optimistic case, a fraud proof is only distributed in the p2p network when there is a dispute.
In the zero knowledge case, a validity proof is distributed in the p2p network with each block.
Execution layers generally act the same.
Execution layers still execute transactions off-chain. However in the modular stack, execution layers will push transactions to the settlement layer.
Sovereign rollups can take advantage of the trust-minimized nature of settlement layers where tokens can easily be transferred between rollups and the settlement layer.
Settlement rollups are similar to sovereign rollups except it can have execution layers on top of it. Settlement rollups are still considered sovereign rollups because they can fork at will, but their purpose is solely to act as a settlement layer for other execution environments.
In an app-chain/app-rollup world, settlement layers can be optimized or restrained such that execution layers powering applications are first class citizens.