YTWO Report: Decentralized Sequencers
Table of Contents:
- History of Rollups
- The Rollups Problem
- The solution to the problem
- An ecosystem of projects that are developing technologies to solve the problem
- Conclusions
- YTWO Social Media
History of Rollups
Rollups are rapidly gaining popularity. According to CoinGecko, Rollups has a market capitalization of $22,873,661,101 and a trading volume of $1,515,718,563.
The amount of transactions transmitted from Rollups to L1 is equally impressive:
Although L2 Rollups are increasingly ubiquitous, they are still in the research stage and require further improvement. The centralised character of L2 conduct contradicts the underlying principle of decentralisation, and community discussions regarding L2 Rollups continue as a result of their centralised nature.
We are repeatedly confronted with the blockchain trilemma: choose between decentralization, security, or scalability.
Rollups are likewise subject to this problem, which continues to pique the community’s interest and create arguments regarding the future of Rollups.
The Rollups Problem
Sequencers in Rollups are in charge of organizing transaction data to ensure consistency and readiness for execution. Everyone has their own sorting mechanism on the L1 blockchain, however the use of centralized sequencers presents issues in L2.
Decentralisation and security are critical for any Rollups. The primary disadvantages of centralised sequencers are censorship, reordering, and viability risks.
An unmonitored centralized sequencer could potentially modify blockchain transactions or use MEV (maximum extractable value) for personal advantage. It is not subject to the same checks and restrictions that we see in the Beacon Chain, for example.
When Rollup has only one sequencer, the probability of a network-wide point of failure increases; if that sequencer fails, transaction processing in the entire network stops, and the network falls to sleep.
Sequencers in Rollups can help scaling by compressing transactions and reducing total volume, although their use is optional. For example, some Rollups systems may rely on Ethereum’s L1 for data availability. It is possible to transfer transactions straight from L2 to L1, bypassing the sequencer, although this method may be less efficient due to L1 gas prices and long transaction confirmation delays.
Once again, we are faced with a trilemma: we desire decentralization above scalability. And the concept of L2 as lost.
It turns out to be an interesting circumstance, the relatively decentralized Ethereum is the data availability layer for less decentralised Rollups.
The solution to the problem
The solution rested on the shoulders of decentralized (incredibly!) sequencers.
Decentralized sequencers give a method for equitable data sorting in L2. Unlike centralised sequencers, decentralised sequencers are made up of numerous nodes, which improves system stability and efficiency.
One of the main advantages of decentralised sequencers is their ability to successfully address problems that centralised sequencers face, such as centralisation of authority and unfair behaviour.
Transactions are now created using consensus and common norms, which are verified by other nodes (or committees) and sanctioned in the event of harmful behavior.
Sequencers follow almost the same principles as nodes in Ethereum (in the private instance). You block funds to participate in validation or block creation; if you play fairly, you will be rewarded; if you play maliciously, you will face punishments.
Let’s try to categorize the types of decentralized sequencers:
- Proof of interest in leader election: Stake funds, and the system chooses the creators and validators for each block. This method is used by Espresso Sequencer, EigenLayer, and Cosmos ICS.
- MEV auctions provide proof of stake by allowing the highest bidder to generate blocks. This method is used by SUAVE Flashbots, PoE Polygon, and ZkEVM.
- A set of sequencers that do an honest job: Sequencers that aggregate transactions based on the FCFS principle. A distributed strategy, but with numerous evident downsides.
An ecosystem of projects that are developing technologies to solve the problem
Metis
Metis is an Ethereum L2 scaling solution that makes use of decentralized sequencers.
To achieve sequencer decentralisation, the technology requires three key roles: administrator, sequencer, and a PoS-based consensus layer.
EigenLayer
EigenDA is a data availability store developed by EigenLabs and built on top of EigenLayer.
EigenDA stores Roll up transactions until the computed state is complete.
Why this development is great:
- Scalability. EigenDA throughput increases linearly with the number of operators.
- Security. EigenDA is decentralized, with numerous operators registered with EigenLayer. Their portion can be taken away for misbehaviour (as previously stated).
- Decentralisation. EigenDA is inspired by Danksharding, which promises to scale Ethereum DA. EigenDA’s BLOB records are registered in Ethereum contracts, which inherently exposes operators to some risk of curtailment. Ethereum L2s using EigenDA avoid any assumption of trust in another blockchain’s client, which can be fooled by dishonest validator sets.
In general, restakers will be able to delegate a share to node operators who undertake EigenDA validation duties in exchange for money, while Rollups will be able to acquire access by publishing data to EigenDA. It turns out that being malicious makes no sense.
Radius
Radius is a trust-free shared ordering layer that protects users while also providing options for Rollups with high scalability.
Radius employs “Practical Verifiable Delayed Encryption” (PVDE), a cryptographic method based on ZK, to protect users against malicious MEV and censorship.
That is, we don’t decentralize the sequencer and don’t let it do malicious activities. However, it does not provide protection against failures.
Such systems are more straightforward and simple; we merely use cryptographic primitives, no sophisticated decentralization, sequencer committees, or fraud proof nodes.
The use of cryptographic primitives or encrypted memory pools removes the requirement for extra consensus procedures. This has the potential to dramatically improve the sequencer network’s scalability and ultimate confirmation rate.
Astria
It is a separate network with a decentralized collection of sequencers that can take transaction data from different L2s as well as process and sort transactions on any blockchain. Similarly, Astria can handle sort requests from any type of L2.
Simplified, it works as follows:
User submits transaction -> transaction is broadcast to Astria -> Astria’s shared sequencer reaches consensus and assembles transactions into a block -> Other nodes check transactions in the block -> Astria Conductor analyzes the ordered block for the required data for each Rollup, checks the data packet, and then passes the block to the Rollup execution layer for execution.
Espresso
Espresso, like Astia, aspires to be a decentralized shared sequencer network that offers decentralized sequencer services to everyone L2.
User sends a transaction -> transaction data and the unique identifier of that L2 are sent to the Espresso sequencer network -> Espresso nodes will collect the transactions and after broadcast back
In L2, the transaction is carried out using the ordered transaction data that the Espresso network has gathered. Meanwhile, Espresso sends a block commit with transactions to the L1 sequencer contract. L2 should submit a new state message to L1, and the L1 Rollup contract will use Espresso’s block acknowledgement to check the state update sent by L2 to ensure proper execution.
Conclusions
The YTWO team has been following decentralized sequencer technologies and trends for quite some time. We have been actively investigating and examining the significance of decentralized sequencers in terms of L2 advancement, and we believe that:
- L2 advancement will not stop with the adoption of decentralized sequencers
- is only the beginning of a significant development boom, and we intend to continue our way forward by remaining up to date on innovations in decentralized technologies, particularly decentralized sequencers
- the adoption of L2 BTC solutions will create new horizons for technological development of financial applications, helping to the progress of the usage of Bitcoin in the financial industry, but about this in the future.
