Author: Xinwei, Severin MT Capital
TL;DR
Decentralized sequencer, as an emerging technology, aims to optimize the transaction sorting process of blockchain networks in a decentralized manner to improve transaction efficiency, reduce costs, and solve the MEV problem. The development of this technology signifies further efforts in the blockchain field to pursue higher performance and stronger decentralization.
Metis' "self-operated store" model and Espresso's "outsourced module" approach demonstrate two main paths for building and maintaining decentralized sequencers. The former emphasizes internal management and operational security and stability, while the latter provides more flexibility and openness, promoting technological universality and reducing operational burden.
The development of decentralized sequencers heralds potential progress in network security, censorship resistance, transaction efficiency and costs, as well as ecosystem diversity and interoperability in blockchain technology. Further optimization and innovation of these technologies, such as batch processing and state channels, will enhance the performance of L2 platforms, reduce user costs, and promote the formation of a more open and interconnected decentralized ecosystem.
Despite facing challenges in technical implementation, network performance optimization, and governance model design, decentralized sequencers play a crucial role in building a more efficient, secure, and open decentralized world. Future developments may focus on researching more efficient consensus mechanisms, scalable network architectures, and developing user-friendly interfaces and tools to meet the growing market demand and user expectations.
Introduction to Sequencers
As the name suggests, a sequencer sorts the originally unordered transaction data in the blockchain, organizing it into ordered block data for execution. Each L1 blockchain has its own sorting system, but for L2, centralized sequencers have become an increasingly serious issue.
For L2, a sequencer is not necessary. L2 can also choose to use the sorting mechanism of L1. However, for cost and speed considerations, running its own sequencer can provide L2 users with a more affordable and convenient user experience. Running its own sequencer allows L2 to compress hundreds or thousands of L2 transactions into a single L1 transaction submitted to L1, significantly saving gas fees. Additionally, users can enjoy a fast soft confirmation experience provided by L2 sequencers without being constrained by Ethereum transaction throughput. Therefore, for L2, running its own sequencer is an inevitable choice to enhance user interaction experience.
Current Status of Sequencers
Although running its own sequencer can significantly improve user experience, the centralization of L2 sequencers has become an issue that cannot be ignored. Currently, the locked volume of Ethereum L2 has reached 22 billion, and a large number of L2s continue to emerge, but almost all L2 sequencers are centralized, relying on a single sequencer to determine all transactions on L2. Centralized sequencers face many issues, such as the theoretical power of a single sequencer to exclude user transactions, the unrestricted extraction of MEV from transactions, resistance to censorship, and the risk of a single point of failure.
source: https://l2beat.com/scaling/summary
In addressing the complex challenges of MEV, rollups face a delicate balance between maintaining user protection and profitability. This challenge involves how to prevent harmful MEV behaviors such as front-running and sandwich attacks, while effectively utilizing block space to generate income. Although traditionally, rollups protect users from MEV impact by relying on a single operator model and using a first-in, first-out (FIFO) order, this approach may miss out on income opportunities from block space and overlook the important role of economic incentives in promoting the stability and growth of rollups. Additionally, ensuring compliance with the FIFO principle and maintaining transparency in block sorting poses additional operational challenges. Furthermore, using underlying block space as a source of income, while profitable, also raises trust issues for users who must trust operators not to undermine their interests through sandwich attacks, potentially eroding transaction integrity and user trust.
Shared sequencers provide an innovative solution for addressing the MEV problem by introducing a more secure and fair transaction sorting mechanism in blockchain networks, especially for Ethereum's layer 2 solutions such as rollups, bringing significant benefits. By partitioning the block space of rollups into top block space to protect user transactions and bottom block space to allow builders to utilize MEV, shared sequencers effectively balance the demands and interests of network participants. Using practical verifiable delay encryption (PVDE) technology, shared sequencers ensure that user transactions are invisible to malicious actors, preventing harmful MEV practices such as front-running and sandwich attacks. Furthermore, by allowing beneficial MEV activities in the bottom block space, shared sequencers generate income for rollups while maintaining network integrity and user trust. This mechanism not only enhances transaction security and fairness but also supports the sustainable development of blockchain networks through innovative income generation. In short, shared sequencers bring positive changes to the blockchain ecosystem through their unique approach to MEV, achieving a balance between protecting user interests and promoting network health.
In summary, the problems of centralized sequencers stem from the excessive power and risk exposure of single-node sequencers, and decentralized sequencers composed of multiple nodes can effectively address the issues faced by centralized sequencers. Decentralized sequencers can ensure the robustness and effectiveness of L2 sorting while bringing additional benefits. For example, decentralized sequencers represented by Metis can further empower tokens while achieving profit sharing. Shared sequencers enable L2 to operate without building its own sorting network, while also providing more convenient interoperability for multiple shared sequencers on L2. In the long run, the wave of modularization and L2 will inevitably drive the decentralization of sequencers, and there is still enormous market space for decentralized sequencers.
source: https://joncharbonneau.substack.com/p/rollups-arent-real
Decentralized Sequencer Projects
Metis
Elena Sinelnikova, co-founder and CEO of Metis, has been dedicated to blockchain industry education and advocacy, and is a co-founder of the educational non-profit organization CryptoChicks, which is currently the world's largest female blockchain community with members in 56 countries. Kevin Liu, co-founder and product lead of Metis, is also the co-founder and CEO of ZKM, and an active researcher in token economics, DAO, DeFi, and blockchain governance.
Metis is the first to propose and test decentralized sequencers for Ethereum L2.
Metis has transformed the originally single sequencer node into a sequencer pool composed of numerous nodes, achieving decentralization of sequencers through a mechanism of random rotation.
Firstly, Metis' decentralized sequencer network will have an Admin role. The Admin is responsible for managing the decentralized sequencer system, including adding sequencer nodes that meet the requirements to the Sequencer List whitelist, setting the staking limit for individual nodes, and the release speed of block rewards, among other tasks.
Following that, Metis introduced a node staking mechanism. Any node staking 20,000 METIS tokens can become one of the nodes in the sequencer pool. Nodes in the sequencer pool have the right to see the contents of the transaction pool, and the selected sequencer nodes have the right to package transactions.
Next, Metis introduced a PoS node rotation mechanism. Metis will randomly select block producers by combining the staking amount of each node with a randomly dropped hash value. The selected sequencer nodes can then package block transactions.
Subsequently, the packaged batch of transactions requires signatures from at least 2/3 of the sequencers for the batch to be considered valid and submitted to L1. The keys for sequencer node signatures are managed by Metis' PoS consensus layer, which generates and distributes multi-signature keys when sequencer nodes join or exit the network.
Finally, to prevent malicious behavior by sequencers, Metis will also introduce the role of validators to randomly sample blocks, check the correctness of transaction order within the blocks, and impose penalties on nodes engaging in malicious behavior.
source: https://www.metis.io/decentralized-sequencer
Based on the above process, Metis has built a decentralized sequencer architecture based on PoS network consensus. Staking 20,000 METIS tokens allows nodes to become sequencer nodes, making the sequencer nodes more diverse and avoiding single point failures, single point manipulation, and malicious MEV extraction by sequencer nodes. The node rotation mechanism and multi-signature confirmation make the selection of sequencer nodes fairer and to some extent, prevent malicious behavior by sequencer nodes. Validator sampling checks and penalties further reduce the risk of malicious behavior by nodes.
To further incentivize more nodes to participate in Metis' decentralized sequencer network, Metis has introduced additional incentive mechanisms. After successfully producing blocks, sequencer nodes not only receive gas income from the original sequencer but also receive additional METIS token emission rewards. Metis' incentive mechanism may create a positive growth cycle. The prosperity of Metis network transaction activities will drive an increase in sequencer node income. The increase in sequencer node income will attract more users to stake METIS and become sequencer nodes, capturing sequencer income. The reduction in circulating METIS and the increased demand generated by staking will further raise the market price of METIS. The higher price of METIS will increase the asset value of staked nodes and staking rewards, thereby creating greater attractiveness for nodes, attracting more nodes to stake, and forming a closed-loop growth cycle.
Metis' PoS decentralized sequencer network is the first attempt to implement decentralized sequencers for L2. The successful implementation of Metis' decentralized sequencer is expected to drive other L2 solutions to advance their decentralized sequencer plans.
Espresso Systems
The team behind Espresso is highly prestigious, with co-founders Charles Lu and Ben Fisch both holding Ph.D.s in Computer Science from Stanford University, and team members having previously worked at top companies in Web2 and Web3 such as Binance Labs, Coinbase, and Google. Previously, Espresso successfully raised $23 million in funding from top venture capital firms such as Sequoia Capital, Coinbase Ventures, Polychain, and Robot Ventures.
Espresso positions itself as middleware between L1 and L2, decoupling sorting and execution, aiming to become a decentralized shared sequencer network, providing decentralized sequencer services to different L2 solutions. Similar to the modularization concept of DA outsourcing, Espresso's services are more like transaction data sorting outsourcing services. Similar to DA outsourcing, Espresso's sorting outsourcing services are also agnostic to chains and virtual machines, and any type of L2 can use Espresso's sorting services.
source: https://hackmd.io/@EspressoSystems/EspressoSequencer
The core idea of Espresso is to provide a modular sequencer middleware for L2. After users send transaction data through the client, the transaction data, along with the identifier of the L2, is sent to Espresso's sequencer network by the L2. Espresso's nodes (nodes of the Espresso Hotshot proof-of-stake system) sort the transactions, broadcast the sorted transactions to subscribers (L2 nodes), and then L2 executes based on the sequenced transaction data. Meanwhile, Espresso also submits block commitments containing transactions to the sorting contract of L1. Finally, L2 needs to send the new state to L1, and the Rollup contract of L1 uses block commitments from Espresso to verify the state updates submitted by L2 to ensure correctness of execution.
source: https://docs.espressosys.com/sequencer/espresso-sequencer-architecture/system-overview
In the future, Espresso also plans to reuse existing verification nodes of Ethereum through Eigenlayer to achieve higher security.
Overall, Espresso's decentralized sequencer solution aligns more closely with the concept of modular blockchain, using sorting outsourcing to achieve decentralized sorting through its own PoS network, forming middleware for a decentralized sequencer network between L1 and L2. The universal sorting service of Espresso enables it to become a shared sequencer network, and any L2 can use Espresso's sequencer services. Furthermore, by jointly using Espresso as a sequencer service provider, L2s can even enjoy more seamless interoperability.
Astria
Astria
Astria's CEO, Josh Bowen, is the driving force behind the project. Josh Bowen has previously worked at Edge & Node, the startup behind The Graph, and Celestia Labs. His past work experience has given him a deeper understanding of concepts such as modularity and decentralization. He has shared important insights about the role of shared sequencers in maintaining blockchain space speed and decentralization. Bowen emphasizes that most application-specific Rollups may not need their own sequencers, and nurturing a more decentralized and modular shared sequencer network is beneficial for building a more decentralized and efficient blockchain system. Josh Bowen's vision for Astria has received support from institutions such as Maven 11, 1kx, Delphi Ventures, and Figment Capital, raising $5.5 million in seed funding.
Similar to Espresso, Astria aims to provide a decentralized shared sequencer network. Astria's shared sequencer network is a middleware blockchain with its own decentralized sequencer set that can accept transaction data from multiple L2 solutions. Similarly, Astria can handle sorting requests from any type of L2. Furthermore, L2 solutions using Astria can also benefit from atomic-level interoperability provided by Astria.
The sorting process of Astria is as shown in the following diagram.
After users submit transactions, L2 submits transaction data to Astria through an interface.
Astria's shared sequencer achieves consensus on transaction sequencing and packages them into blocks through the ComeBFT PoS consensus network. Astria's shared sequencer network uses CometBFT as its consensus algorithm. During the network consensus phase, proposers decide on block transactions and create commitments for the sequenced data for each Rollup. Subsequently, other nodes in the network need to verify and reach consensus on the data to finalize it.
Once the transaction data is sorted, Astria's Conductor parses the data required for different Rollups for each sequenced block, verifies the batch of data, including verifying if the block has been finally confirmed, if the extracted Rollup data is complete, correct, and properly sorted, and more. After verification, the Conductor converts the sequenced data of Rollups into a list of transactions and passes it to the Rollup's execution engine for execution.
source: https://docs.astria.org/docs/overview/why-decentralized-sequencers/
- L2 solutions seeking faster user experience can receive fast block confirmations for users by reading soft commit sequenced blocks from Astria through an interface. L2 can also read hard commit sequenced blocks written by Astria through the DA layer.
source: https://docs.astria.org/docs/overview/why-decentralized-sequencers/
Astria's decentralized sequencer network, similar to Espresso's solution, aims to provide decoupled decentralized sequencing services for any L2 solution. L2 solutions can further simplify their development process and operational costs by outsourcing sequencing services and enjoy atomic-level composability between L2 solutions.
Radius
Radius focuses on developing a trustless shared sequencing layer to address the challenges of harmful MEV extraction and censorship in the blockchain space. Radius has successfully raised a pre-seed round of $1.7 million from investment firms such as Hashed, Superscrypt, Lambdaclass (Ergodic Fund), and Crypto.com.
Radius also aims to build a trustless, censorship-resistant shared sequencer network. Unlike Espresso and Astria, Radius's most significant feature is its ability to effectively reduce harmful MEV through encrypted memory pools.
The overall architecture of Radius's shared sequencer network is similar to mainstream shared sequencer networks. Users submit encrypted transaction data and proofs to the sequencer layer through Dapps. The sequencer verifies the transaction data and proofs provided by the users and sorts them. Subsequently, Rollup accepts sequenced blocks from the sequencer network, executes transactions in order, and submits the executed state and state proofs to the settlement layer.
source: https://docs.theradius.xyz/developer/architecture
Interestingly, Radius introduces encrypted memory pools to prevent harmful MEV extraction by sequencers. The transactions submitted by users are encrypted and submitted to the sequencer network in encrypted form. The sequencer cannot decrypt and view the specific content of each transaction when sorting transactions, preventing MEV extraction through malicious sorting or insertion of transactions.
Radius divides the block space into top space and bottom space. The top space is dedicated to user transactions and effectively avoids harmful MEV through encrypted memory pools. The bottom space introduces an auction-based open market for traders, where bundled transactions for cross-Rollup benign MEV, such as benign arbitrage and liquidation, can be created. Subsequently, traders submit the bundled transactions and bids to the sequencer, which selects the highest bid bundled transaction to include in the block, maximizing the profit of Rollup and nurturing a benign MEV competitive market.
When comparing Espresso and Astria, Radius has two significant advantages. First, by introducing encrypted memory pools and dividing the block space into top space and bottom space, Radius can effectively eliminate harmful MEV transactions, nurture a benign MEV competitive market, and maximize Rollup's profits. Second, the introduction of encrypted memory pools prevents individual sequencer nodes from malicious MEV activities, eliminating the need for additional consensus mechanisms to ensure the correctness of sequencing, greatly improving the final confirmation speed and scalability of the sequencer network.
SUAVE (Single Unifying Auction for Value Expression)
The SUAVE solution was proposed by the Flashbots team, a pioneer team dedicated to solving the MEV problem in the Ethereum ecosystem. The team consists of professionals with deep backgrounds in computer science, mathematics, psychology, and economics. According to LinkedIn, the team currently includes 28 employees with expertise ranging from Python programming, blockchain technology, machine learning to C language.
The Flashbots founding team includes Philip Daian and Stephane Gosselin, with the latter resigning in October 2022 due to disagreements with the team on the censorship system. Additionally, Alex Obadia, another co-founder and top strategic researcher, left Flashbots for personal reasons in June 2023. Core members include Andrew Miller, known for his research on cracking Intel SGX code, currently serving as the Director of Trusted Execution Environment and SUAVE research. Miller plans to take a temporary leave from his assistant professor position at the University of Illinois, focusing on electrical and computer engineering in academia. Another core member, Hasu, serves as Flashbots' strategic director and has extensive influence in the blockchain field, including serving as a strategic advisor for the Lido liquidity staking protocol and a research collaborator for Paradigm investment firm. Hasu is dedicated to advancing industry development and education through writing, social media, and podcasts.
SUAVE is a unique decentralized builder and sequencer, distinct from the design of other shared layers or sequencing layers. It aims to provide transaction sequencing services for Ethereum and other blockchains but is not directly embedded in any chain's protocol. Users can send transactions to SUAVE's encrypted memory pool, and SUAVE's executor network is responsible for outputting blocks or partial blocks for the chain. These blocks will compete with blocks generated by traditional centralized Ethereum builders, selected by Ethereum proposers.
Source: https://foresightnews.pro/article/detail/28930
SUAVE does not replace the mechanism for Rollup selection of blocks or change the chain's fork selection rules. It focuses on providing the most profitable sequencing for any chain, typically having a complete state to simulate the outcomes of different transactions and create the best sequencing. This design allows SUAVE to collaborate with shared sequencers or other MEV-aware builders to provide services such as atomic cross-chain arbitrage, ensuring that several transactions are executed atomically or canceled simultaneously.
Source: https://foresightnews.pro/article/detail/28930
In the long run, Rollup may be a better choice. Rollup ensures its security, censorship resistance, and liveliness through L1, while SUAVE, as a chain focused on transaction sequencing, is not suitable for ordinary user use. Its goal is to limit the demand for bridging funds to SUAVE and focus on providing an operating platform for searchers/builders. SUAVE focuses on providing the most favorable sequencing for transactions rather than completely replacing existing sequencing mechanisms. It can handle transactions with complete states to create the best transaction sequencing.
Source: https://foresightnews.pro/article/detail/28930
Regarding MEV handling, there are various mechanisms to reduce potential competition and negative externalities associated with transaction sequencing and inclusion. For example, Arbitrum's time bandit mechanism and Flashbots' proposed FBA-FCFS model attempt to reduce the incentive for front-running by allowing users to express their preference for quickly included transactions through fees.
Arbitrum's Time Bandit Mechanism
The time bandit mechanism is a security measure designed to prevent a specific type of attack called a "time bandit attack." In this attack, an attacker may attempt to reorganize confirmed blocks to exploit previously unknown information (e.g., knowledge of a transaction after the fact) for profit.
Arbitrum defends against this attack through a unique mechanism that allows anyone to submit a "challenge" when they discover someone attempting a time bandit attack, proving the attacker's behavior. This mechanism is based on economic incentives to ensure that the potential gains of the attacker are offset, thereby protecting the network's security and fairness.
Flashbots' FBA-FCFS Model
The FBA-FCFS (First Bid Auction - First Come, First Served) model is a transaction sequencing mechanism proposed by Flashbots. The model aims to address traditional transaction selection and sequencing issues, especially in the context of MEV extraction.
The First Bid Auction (FBA) part means that traders can prioritize their transactions by bidding (usually paying additional fees to miners). This is similar to an auction, where the highest bidder gets priority.
First Come, First Served (FCFS) means that under certain conditions, transactions will be processed in the order they are submitted, ensuring fairness and transparency.
The FBA-FCFS model attempts to balance fairness and efficiency by allowing bidding on transactions to optimize network resources usage while ensuring that some users are not completely excluded due to insufficient payment.
These mechanisms have their own advantages and disadvantages, but their common goal is to improve the efficiency and fairness of transaction processing.
By collaborating with Rollup and other MEV-aware builders, SUAVE aims to provide higher economic security and efficiency for cross-chain operations, while exploring new economic security models and MEV mitigation mechanisms to improve the decentralization of blockchain transaction sequencing and execution.
In summary and outlook
Although projects such as Metis, Astria, Espresso, Radius, and SUAVE have different focuses, they all aim to improve the scalability and transaction efficiency of blockchains, address the MEV problem, and enhance the decentralization and interoperability of systems.
Metis, through its Layer 2 solution, focuses on optimizing Ethereum's transaction processing capacity to reduce costs and improve efficiency, aiming to provide a more convenient development platform for developers and enterprises. Astria and Espresso propose the concept of a decentralized shared sequencer network, supporting the transaction data processing of multiple Layer 2 solutions, simplifying the development and operation processes, and enhancing the composability and interoperability between systems. The Radius project, through the introduction of encrypted memory pools and block space division, aims to create a trustless, censorship-resistant network, reducing the harmful impact of MEV while enhancing transaction privacy and security. SUAVE focuses on addressing the impact of MEV on transaction fairness and transparency through a decentralized sequencer network, demonstrating a commitment to improving the fairness of the transaction environment.
In exploring the development direction of decentralized sequencers, Metis and Espresso offer two completely different models, namely the "self-operated store" model and the "outsourced module" approach. These two models reflect the community's different thoughts and strategies on how to build and maintain decentralized sequencers.
The "self-operated store" model adopted by Metis emphasizes the internal management and operation of its decentralized sequencer network to ensure network security and stability. This approach allows Metis to directly control the nodes within its network, maintaining a healthy network environment through staking and incentive mechanisms. While this model can enhance network security and reliability, it also requires Metis to take on greater operational responsibilities and resource investment, potentially limiting the flexibility and scalability of the network to some extent.
In contrast, the "outsourced module" approach adopted by Espresso provides a more flexible and open solution. By allowing any blockchain project to access its sequencing services, Espresso promotes technological universality and diversity, while also reducing the operational burden on individual projects. The challenge of this model is that it may introduce additional trust issues, as projects need to rely on Espresso to fairly and securely process transactions. Additionally, any issues or attacks targeting Espresso's services could potentially impact a wide range of client projects.
The "self-operated store" model of Metis and the "outsourced module" approach of Espresso represent two main development paths in the decentralized sequencer field. Each model has its unique advantages and challenges, and the choice between them depends on the specific needs, resource conditions, and the importance placed on decentralization and security by the project.
The future prospects of decentralized sequencers indicate the enormous potential of blockchain technology in enhancing network security, strengthening censorship resistance, improving transaction efficiency, reducing costs, and promoting ecosystem diversity and interoperability. With the continuous advancement of decentralized sequencer technology, we can anticipate a more secure and efficient blockchain network, where decentralized sequencing mechanisms can effectively defend against single points of failure and malicious attacks, protecting the security of user assets and data. Furthermore, the optimization and innovation of decentralized sequencers, such as batch processing and state channels, will further enhance the transaction processing capacity of L2 platforms, reduce user transaction costs, achieve high throughput, and low-latency transaction confirmations, while enhancing user experience without sacrificing security and decentralization.
Simultaneously, the widespread adoption of decentralized sequencers is expected to drive the formation of a more diverse and interoperable blockchain ecosystem. Shared sequencer networks, such as Espresso and Astria, will not only provide services for multiple L2 platforms but also facilitate the flow of data and assets between different platforms, creating a more open and interconnected decentralized world. Additionally, the innovation of incentive mechanisms and token economic models will provide reasonable incentives for participants in decentralized sequencer networks, while achieving network governance and revenue distribution through token economic models, attracting more participants and stimulating community vitality.
Although the future of decentralized sequencers is promising, they still face challenges in technical implementation, network performance optimization, governance model design, and other aspects. Therefore, future development directions may focus on researching more efficient consensus mechanisms, exploring scalable network architectures, and developing user-friendly interfaces and tools to meet the growing market demand and user expectations. In conclusion, as a key factor driving the development of blockchain technology and applications, the future evolution of decentralized sequencers will play a crucial role in building a more efficient, secure, and open decentralized world.
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