Ethereum's Rollup is still centralized: Discussing Decentralization of Sequencers

1. Key Points

• Transaction ordering has become an increasingly serious issue in the second layer domain. Second layer rollups mainly provide users with a secure place for cheap transactions, submitting transaction data to the upper first layer.

• The sorter has the authority to group transactions. They receive unordered transactions, process them into groups off-chain, generate compressed ordered transactions, which can then be placed into blocks and sent to the parent layer.

• Rollups actually do not require a sequencer; this is just a design choice to provide a better experience for users. They can also use the underlying layer for sequencing, but this may be inefficient and costly. Currently, each major L2 rollup project has chosen to run a centralized sequencer.

• The sequencer controls the order of transactions, thus having the authority to review transaction ( even though users can submit transactions ) directly to L1. The sequencer can also extract the maximum extractable value (MEV), which may cause economic losses to users. Validity may also be an issue; if the only centralized sequencer goes down, the entire rollup will be affected.

• The solution is a shared, decentralized sorter. This can not only solve issues such as censorship, MEV extraction, and validity but also introduce cross-rollup capabilities, opening up new possibilities. Projects like Espresso, Astria, and Radius are developing innovative shared sorting solutions.

2. Introduction

With the popularity of the Ethereum L2 rollup ecosystem, the often-overlooked aspect of sequencers has become increasingly important. Sequencers are responsible for transaction ordering and can provide a better user experience, lower fees, and faster transaction confirmations. However, currently all major Ethereum L2 projects use centralized sequencers, which may be seen as contrary to the spirit of cryptocurrency.

Although most projects have included the decentralization of sequencers in their roadmap, true consensus has not yet been reached. This report will examine in detail the role and current status of sequencers, explore projects that are developing solutions, and discuss the potential impact this may have on the future development of the Ethereum L2 rollup space.

3. What is a Sorter?

Blockchain is a distributed ledger composed of time-stamped transaction data that is sorted by blocks. Initially, this transaction data is unordered and must be sorted before it can be organized into blocks and executed. For first-layer blockchains like Ethereum, transaction sorting occurs at the base layer itself.

In the Layer-2 rollup layer of Ethereum, transaction ordering has become an increasingly serious problem. Rollup provides users with an execution layer, and then submits transaction data to the upper first layer. The sorter has the authority to group these transactions and generate compressed ordered transactions after off-chain processing.

The main goal of the sorter is to improve user experience, provide lower fees, and faster transaction confirmations. However, it also brings some issues:

• The sorter controls the order of transactions, thus having the authority to review transaction ( even though users can submit ) directly to L1.
• The sorter can extract MEV, which may cause economic losses to users.
• Centralized orchestrators represent single points of failure, affecting the overall effectiveness of the rollup.

Currently, all major Ethereum L2 projects use centralized sequencers, which raises concerns about decentralization and security.

4. Solution: Decentralized Shared Sorter

Espresso

Espresso Systems is building a decentralized shared ordering network aimed at decentralizing rollups and providing secure, high-throughput, low-latency transaction ordering and data availability.

Main Features:

• Using the HotShot consensus protocol, developed based on HotStuff.
• Attempting to leverage the Ethereum validator set to achieve Ethereum-level security
• Collaborate with EigenLayer to guide the network
• Use Tiramisu data availability solution

Latest progress:

• Launched the Americano testnet in November 2022
• Launched the Doppio testnet in July 2023, with the first end-to-end integration with Polygon zkEVM fork.
• Announced partnerships with multiple partners, including Polygon, Injective, AltLayer, etc.

Astria

Astria is building a shared sequencer network while developing Astria EVM.

Main features:

• Achieve consensus on orderly transactions using CometBFT
• Use Celestia as a data availability layer
• Allow rollup to obtain sorted blocks from the sequencer or DA layer

Latest progress:

• Completed a $5.5 million seed round financing in April 2023
• Development cluster released in August 2023
• Developing Devnet

Radius

Radius is building a trustless shared sorting layer, using cryptographic technology for a decentralized sorter.

Main Features:

• Use encrypted memory pools to prevent MEV extraction and censorship
• Create an encrypted memory pool using the PVDE encryption scheme
• Propose an auction-based MEV market

Latest developments:

• Completed a $1.7 million seed round financing in June 2023
• Release roadmap, plan to launch testnet in Q4 2023

5. Outlook

Existing L2 rollups face the following choices:

1. Continue using centralized sorter
2. Sharing sorting network integration with third parties
3. Develop internal proprietary solutions

Each option has its pros and cons, and it is necessary to weigh factors such as decentralization, interoperability, costs, and benefits. Different development paths may emerge in the future, which are worth paying close attention to.

6. Conclusion

Decentralized sequencers are crucial for the development of L2 rollups, as they can address issues such as censorship, MEV extraction, and single points of failure, while also enhancing interoperability. Although challenges remain, the shared sequencer network is expected to bring significant changes to the L2 ecosystem as technology advances and more participants join. This topic will become more heated in the coming months, and it is worth keeping an eye on the choices of different projects and the overall development trends in the industry.