Decentralization Shared Sorter: Security Foundation of Ethereum Layer 2

1. Key Points

• Transaction ordering has become an increasingly serious issue in the Layer 2 ("L2") space. The main role of L2 rollups is to provide users with a secure place for low-cost transactions. L2 rollups provide users with an execution layer and then submit transaction data to the upper Layer 1 ("L1"), such as Ethereum's Arbitrum, Optimism, zkSync, etc.

• A sequencer is an entity with the authority to order transactions into batches. The sequencer receives unordered transactions from users, processes them off-chain into batches, and then generates compressed ordered transaction batches. These transaction batches can then be placed into blocks and sent to the parent L1 chain.

• Rollups do not actually require a sequencer; this is merely a design choice aimed at providing users with a lower fee and faster transaction confirmation experience. For example, just as most rollups use the Ethereum base layer for data availability, they can also use the base layer for sequencing. However, the Ethereum base layer can be relatively inefficient and expensive. This means that so far, every major L2 rollup project has found it more convenient, cheaper, and user-friendly to run a centralized sequencer.

• Because the sequencer controls the order of transactions, it has the right to review user transaction (. Although a complete review is unlikely, as users can submit transactions directly to L1. The sequencer can also extract the maximum extractable value ) "MEV" (, which may cause economic losses to the user base. Additionally, availability may also be a significant issue, as if the only centralized sequencer goes down, users will not be able to use that sequencer, affecting the entire rollup.

• The solution is a shared, decentralized sequencer. A shared sequencer essentially provides decentralized services for rollups. In addition to addressing issues such as censorship, MEV extraction, and availability, the shared sequencer also introduces cross-rollup functionality, unlocking various new possibilities. Espresso, Astria, and Radius are developing innovative shared sequencing solutions, each with unique features in their respective architectures. Espresso aims to leverage EigenLayer to guide its network, while Astria maintains a close relationship with the modular data availability network Celestia. Radius introduces its unique cryptographic mempool into the discussion.

2. Introduction

As the Ethereum L2 rollup ecosystem continues to gain popularity, one often overlooked aspect is the sequencer. The sequencer is responsible for transaction ordering, and by using a sequencer, rollups can provide a better user experience, lower fees, and faster transaction confirmations. However, the issue is that, so far, all major Ethereum L2 projects have found it most convenient, user-friendly, and cost-effective to run their own unique centralized sequencer. Considering the power of the sequencer in transaction review, MEV extraction, and creating single points of failure ) usability issues (, this may be seen as an undesirable outcome and not in line with the spirit of cryptocurrency.

Although most companies have included the decentralization of their respective ranking systems as part of their roadmap, there has not yet been a true consensus on how to achieve decentralization. We should also note that Arbitrum and Optimism have launched their own solutions since the second half of 2021, and it can be said that they have not made substantial progress in decentralized ranking systems.

In this report, we will carefully examine the role of the sorter and the current state of the Ethereum rollup space. Then, we will delve into the projects that are researching solutions, namely the decentralized shared sorting network. We will detail what makes these projects and their solutions unique. We will also reflect on what this might mean for the future development of the Ethereum L2 rollup space.

3. What is a sorter?

Blockchain is a distributed ledger that consists of transaction data ordered in blocks with timestamps. Initially, this transaction data was unordered and unorganized. After sorting, it can be organized into blocks and executed to create a new state of the blockchain. For first layer blockchains like Ethereum, this transaction sorting occurs at the Ethereum base layer itself.

In the most popular scalability solution on Ethereum—Layer-2) "L2" ( rollup layer, transaction ordering has become an increasingly serious issue. Remember, the main function of rollup is to provide users with a secure and cheap transaction venue. Simply put, L2 rollup provides users with an execution layer, and then submits their transaction data to the upper L1, namely Ethereum's Arbitrum, Optimism, zkSync, etc. The batch of transactions submitted to L1 typically contains hundreds or thousands of compressed L2 transactions, thus reducing the cost of sending data to L1.

In the world of L2 rollups, a sequencer is an entity with the authority to group transactions into batches. The sequencer receives unordered transactions from users, processes them into batches off-chain, and then generates a batch of compressed ordered transactions. These transactions can then be included in a block and sent to the parent L1. The batched transactions can also be on a data availability ) "DA" ( layer, which is typically Ethereum, used by most rollups ) currently. It also provides users with a soft commitment, meaning that after receiving a user's transaction, the sequencer will provide an almost instantaneous receipt as a "soft confirmation." A "hard confirmation" is received after the transaction has been sent to the L1 layer.

( Why do Rollups need to use a sequencer, and why is it a problem?

Fundamentally, the sorter has a very clear goal: to improve user experience. Using the sorter for L2 transactions is akin to using a "fast lane," meaning lower fees and quicker transaction confirmations. In fact, the sorter can batch hundreds or thousands of L2 transactions into a single L1 transaction, saving gas fees. Additionally, the soft confirmations provided by the sorter mean that rollup transactions can offer users fast block confirmations. This combination helps enhance the user experience with L2 rollups.

It is important to remember that rollups do not require sequencers; they are simply a design choice made for a better user experience. For example, just as most rollups use Ethereum L1 to enhance data availability, they can also use it for sequencing. Justin Drake of the Ethereum Foundation recently referred to these as "rollup-based." However, the base layer of Ethereum is likely to be relatively inefficient and expensive, especially considering the large volume of L2 transactions. Essentially, the transaction throughput of rollups will be limited by the data sequencing rate of Ethereum L1. Users will also experience the same transaction confirmation delays as when trading on Ethereum. This means that, so far, every major L2 scaling project has found it more convenient, cheaper, and easier for users to operate a centralized sequencer. Although L2 users can submit transactions directly to L1 to bypass the sequencer, they must pay gas fees for transactions on L1, and the transactions may take longer to complete. This largely goes against the original intention of executing transactions using L2 rollups.

Since the sequencer controls the order of transactions, theoretically it has the right not to include user transactions in it ). However, if users are able and willing to pay the gas fee, they can also submit transactions directly to L1 (. The sequencer can also extract MEV from the transaction pool ), which will be detailed later ###, and this may cause economic losses to the user group. If there is only one sequencer, as is the case with all major rollup transactions currently, the risk of centralization will be greater. In this case, availability may become an issue; if the only sequencer fails, the entire rollup will be affected. A multi-sequencer setup can reduce this risk.

With this setup, the sorter can be seen as a semi-trusted party for the user. Although the sorter cannot prevent users from using L2, it can delay users' transactions, resulting in users paying additional gas fees and extracting value from users' transactions.

( The relevance of MEV

MEV is particularly important here. MEV refers to the value obtained from block production, exceeding first-order mining ) or staking ( block rewards and gas fees. It is the value extracted by manipulating transactions within the block, namely by including, excluding, and changing the order of transactions. For example, common forms of extracting MEV include front-running and sandwich attacks.

Given the role that sequencers play in L2 rollups, they can understand all off-chain user transactions. Moreover, since these sequencers are often run by the projects themselves or affiliated teams, such as the Optimism Foundation for OP Mainnet and the Arbitrum Foundation for Arbitrum One and Nova, many users are concerned that they cannot see potential MEV extraction. Even without these concerns, as projects run their own centralized sequencers, the trustworthiness and degree of decentralization of these protocols will also impact users. The credibility and decentralization of these protocols will certainly be questioned.

) Status of the sorter market

At the time of writing this article, all major Ethereum L2 versions rely on centralized sequencers. As more Ethereum transactions shift to L2 solutions, it appears that a significant number of transactions ###, namely those on L2, are influenced by centralized forces in the form of a unique sequencer, even though Ethereum's validator set itself is decentralized.

As expected, most of these companies have already addressed the decentralization issue of their respective sorters and included it as part of their roadmap. While this is a positive signal indicating that decentralization is part of the L2 vision, we should note that Arbitrum and Optimism have launched their own solutions since the end of 2021, and it can be said that they have not made substantial progress in decentralized sorters.

Most top companies seem to be allocating resources to improve their core products and features, rather than focusing on decentralization. This is not entirely a criticism, as in a competitive environment, focusing on decentralization before having a competitive product is not in any company's best interest, which is somewhat understandable. However, as internet companies mature, this perspective is changing, and discussions are quickly shifting towards sorting decentralization and enhancing credibility.

( Other issues

It is worth emphasizing that there is some discussion about the level of risk posed by relying on centralized sorters.

As mentioned above, since the sequencer controls the order of transactions, they can exclude user transactions and can also extract MEV. However, the sequencer ultimately cannot completely exclude users from rollup transactions. Users can bypass the sequencer and submit transactions directly to L1 ) as long as they are willing to and are ready to pay the increased gas costs ###. While misbehaving sequencers may lead to transaction delays and users incurring extra fees, they cannot completely censor transactions. Prior to this, no major L2 company has been extremely focused on decentralizing its sequencer, which is likely one of the reasons. Nevertheless, the issue of sequencers reordering transactions to extract MEV remains, especially in private mempools like OP Mainnet.

Perhaps a bigger issue lies in real-time performance. Given that the main rollup programs are running on a single centralized sorter, if these sorters encounter problems, the entire rollup program can be adversely affected. While users can still complete transactions by directly accessing L1, this is not a particularly sustainable method and is unlikely to work for most transactions. Keep in mind that the whole point of using L2 rollups is to save on transaction costs. Given that one of the fundamental ideas behind cryptocurrencies is to prevent reliance on a single centralized provider, just like in traditional finance, the centralization of sorters is clearly an urgent issue that needs to be addressed, and it is also one of the key unlocks that shared sorters will bring to the L2 rollup market.

4. Solution: Decentralization Shared Sorter

( Overview

The new solution to the above problem is a decentralized shared sequencer. Although the solutions of different projects vary, the fundamental idea of replacing a single centralized sequencer is the same. Here, "shared" refers to multiple different rollups being able to use the same network, meaning that transactions from multiple rollups will be aggregated before being sequenced.