Why should we decentralize sequencers?

Why sequencers matter?

Sequencers play a fundamental role within rollup networks, handling critical tasks such as receiving, organizing, executing transactions, and submitting transaction data to be included in blocks.

Source: Starknet

When a network relies on a single sequencer, and that sequencer encounters a failure or becomes inaccessible, the entire network’s transaction processing grinds to a halt. Unfortunately, numerous existing rollup solutions have just one sequencer, making them notably less decentralized compared to certain centralized Layer 1 alternatives. Consequently, the significance of decentralized sequencers becomes quite apparent. The adoption of well-designed and effectively implemented decentralized sequencers can markedly enhance a network’s decentralization.

The role of sequencers in rollups

Existing rollup solutions encompass zero-knowledge proofs (ZKPs)-based zk-Rollups and optimism-driven Optimistic Rollups. These solutions offer superior scalability compared to monolithic Layer1 platforms, but they still harbor their respective challenges.

Challenges with zk-Rollups:

Computational Complexity: Employing ZKPs for verifying the correctness and legitimacy of transactions necessitates substantial computational resources and time. This may result in delays in transaction processing and increased computational expenses.

Dependency on Verifiability: Zk-Rollups rely on external verification, implying that external overseers are essential to validate ZK proofs. This introduces trust concerns and centralization risks.

Challenges with Optimistic Rollups:

Reversibility: Optimistic Rollups operate under the “optimistic” assumption that all submitted transactions are valid and conflict-free. Yet, in cases of conflicts or invalid transactions, the entire system may need to backtrack and re-execute, causing uncertainties and processing delays.

MEV: Optimistic Rollups may face MEV (Maximal Extractable Value) issues, such as manipulated and unfair transaction sequencing.

These issues negatively impact the performance and security of existing rollup solutions and can adversely affect usability and user experience. To tackle these challenges, the introduction of novel concepts like sequencers is pivotal. Sequencers can enhance transaction throughput and compress transaction data. Precisely, they organize transactions based on predetermined rules, thereby not only improving transaction processing efficiency and throughput but also reducing conflicts and competition among transactions.

Additionally, sequencers possess the capability to compress transactions by bundling multiple transactions into a single unit, effectively reducing the volume of transaction data. This compression contributes to lower costs for on-chain storage and transmission while enhancing overall system efficiency.

Nevertheless, it’s crucial to emphasize that the utilization of a sequencer in rollups is optional and primarily geared towards enhancing the user experience. As an illustration, while many rollup solutions leverage Ethereum’s L1 for data availability, they also have the option to employ it for sequencing purposes. Although L2 users have the possibility to submit their transactions directly to L1, bypassing the sequencer, this approach comes with the drawback of incurring L1 gas fees for transactions and potentially experiencing significantly longer transaction confirmation times. In essence, this undermines the core benefit of utilizing an L2 rollup for transaction execution.

Current situation of sequencing

As of the current moment, it’s important to note that prominent Ethereum Layer-2 (L2) rollup solutions are dependent on a centralized sequencer. This situation raises an interesting observation: although Ethereum’s validator set has achieved decentralization, a substantial portion of its transactions, specifically those conducted on L2s, seem to be subject to a centralizing influence in the form of a single sequencer.

A majority of existing rollup service providers maintain centralized sequencers due to their convenience and cost-effectiveness. However, the downsides are evident and include susceptibility to censorship, high fees, and opportunities for maliciously capturing MEV.

Decentralizing Sequencers

The move towards decentralizing sequencers is viewed as a critical step in the maturation of rollup technology, offering a promising alternative to overcome the drawbacks associated with centralized sequencers. Decentralized sequencers are seen as a means to enhance security, operational continuity, and resistance to censorship. However, designing and implementing decentralized sequencers is a complex task, requiring careful balancing of various factors, including performance, decentralization, and security.

Decentralized sequencers offer a range of compelling benefits stemming from their innovative approach to managing transactions. By fostering trust and transparency, these sequencers establish an immutable, publicly accessible ledger that allows for autonomous validation of transaction accuracy and order, eliminating the need for centralized oversight. Their resistance to tampering ensures data integrity, virtually eliminating the risk of fraud and imbuing recorded information with authenticity. Furthermore, decentralized sequencers uphold the principles of censorship resistance and decentralization, enabling transaction validation based on network consensus rather than central authority, thus promoting an ecosystem of openness and inclusivity.

Beyond their security features, the robustness of decentralized sequencers against both single points of failure and malicious intrusions strengthens their resilience. This resilience facilitates participation from individuals across diverse geographical locations, fostering global accessibility and financial inclusivity. As a result, this approach streamlines operations, automates transaction validation, and reduces reliance on intermediaries, ultimately leading to increased efficiency and significant cost savings. The adaptable nature of decentralized sequencers encourages innovation, supporting the development of applications like smart contracts and decentralized platforms that can revolutionize traditional business models and economic paradigms. These sequencers align seamlessly with the principles of decentralization, empowering data ownership and serving as a transformative catalyst capable of reshaping industries and redefining trust in the digital age.

Key Benefits of decentralizing sequencers

1. Trustless Environment: Decentralized sequencers eliminate the need for participants to place blind trust in a central authority. Transactions undergo validation and consensus across a distributed network of nodes, promoting transparency and reducing susceptibility to manipulation.
2. Immutability: Within decentralized sequencing, transactions are logged in an unchangeable and tamper-proof manner. Once integrated into the blockchain, they become resistant to modification or removal without collective agreement from the network, reinforcing data integrity.
3. Censorship Resistance: Traditional sequencers may be vulnerable to censorship or interference orchestrated by central authorities. Decentralized sequencers counteract this vulnerability by allowing transactions to be added to the blockchain, provided they adhere to the consensus rules defined by the network.
4. Resilience: Traditional sequencers are susceptible to vulnerabilities stemming from single points of failure. In contrast, decentralized systems with their widely distributed network architecture enhance resilience, guarding against attacks or the failure of individual nodes.
5. Reduced Intermediaries: Traditional sequencers often require intermediaries for transaction validation and authorization. Decentralized sequencers have the potential to reduce or eliminate the need for intermediaries, leading to cost efficiencies and improved operational effectiveness.

However, it’s important to note that despite the benefits offered by decentralized sequencers, each technical approach comes with its own set of trade-offs.

Solutions of decentralizing sequencers

Source: dba_crypto

The existing technology for decentralized sequencers is rudimentary and can be enhanced by discovering more efficient ordering algorithms, implementing stronger validation mechanisms, and devising more intelligent designs. The various sequencer designs and their tradeoffs can be observed in the above chart. With technological advancements, we anticipate that decentralized sequencers will achieve increased throughput, faster confirmation rates, reduced latency, heightened security, and improved composability. Outlined below some significant decentralization strategies that are currently under exploration.

Proof-of-Authority (PoA): In this method, a small number of entities are chosen to take turns operating sequencers within a PoA system. This approach enhances resistance to censorship and offers the quickest confirmation times. However, it remains vulnerable to the risk of a single point of failure.

Based Rollup: In this approach, there are no privileged sequencers, and anyone can submit batches to Layer 2 (L2). Transaction ordering and block proposals are delegated to the Data Availability (DA) layer. The advantage is that it inherits the liveliness and censorship resistance of the DA layer. However, the drawback is that proceeds may leak to the base layer, making it more susceptible to MEV attacks. Additionally, the confirmation time is extended.

Shared Sequencing: This solution enables multiple rollups to utilize a common decentralized network of sequencers. This shared sequencer network processes transactions simultaneously on various chains, ensuring cross-chain atomicity, real-time censorship resistance, and robust economic security at the sequencing layer. Shared sequencers benefit from the network effect by serving multiple chains, but they are still constrained by the data and transaction ordering throughput of Layer 1 (L1). Projects working on this include:

1. Espresso has developed a unique proof-of-stake system called HotShot, tailored to achieve an ideal blend of performance, decentralization, and resilience. The Espresso sequencer serves a dual purpose: firstly, it offers data availability as an optional feature, allowing rollups to incorporate it if desired. Secondly, it manages the consensus on transaction order. What’s noteworthy is that the Espresso sequencer can perform these functions across multiple rollups, opening up the possibility of cross-rollup MEV (Miner Extractable Value) as a potential revenue source for network participants.
2. Astria, a shared sequencer network under development by Settler Labs on Celestia (an L1), plays a crucial role in supporting the Astria EVM. The Astria EVM is the flagship rollup and serves as the inaugural EVM layer on Celestia. Astria operates as a sequencer, ensuring the atomic inclusion of transactions in the order they appear within a block, but it does not execute the state transition function specific to a particular rollup. Astria, therefore, offers provisional commitments for sequencing transactions on Celestia . To achieve finalization, the soft-committed blocks sequenced by Astria are cross-referenced by a rollup-specific “Conductor” against the blocks on Celestia. If the Conductor identifies a Celestia block previously confirmed by Astria, it informs the rollup that the blocks have been finalized. Rollup solutions developed using Astria’s convenient developer kit can decide whether to confirm transactions using robust Celestia-level confirmations with an 11-second block time or opt for quicker pre-confirmations utilizing Astria-level “soft” commitments with a 1-second block time.
3. Radius stands out with its innovative approach to trustless sequencing solutions by introducing a unique zero-knowledge technique called Practical Verifiable Delay Encryption (PVDE). PVDE is an integral component of Radius’ sequencing layer, which serves as a scaling layer for rollups. The architecture of this layer is depicted below. In this method, data related to rollup transactions awaiting sequencing in the mempool is encrypted, effectively preventing the identification of potentially exploitable maximum extractable value (MEV) opportunities and removing the necessity for trust in sequencers.
4. AltLayer is revolutionizing the rollup network by introducing a pioneering multi sequencer system. AltLayer operates a specialized network known as the Beacon Layer, which functions as the global sequencer pool. When AltLayer initiates a rollup, it chooses nodes from the Beacon Layer according to their stake. Users can request a rollup through AltLayer’s dashboard or SDK, and specify their requirements, such as the type of virtual machine (VM), the number of sequencers, the minimum stake, and the permitted token list. Upon receiving a rollup request, the Beacon Layer identifies validators who have committed at least the minimum amount of staked tokens based on their stake and a degree of randomness generated by a VRF (Verifiable Random Function). These selected nodes then have the opportunity to serve as sequencers for the designated rollup. Once a rollup is established, users can access network information like chainID and RPC endpoint. At this stage, the network is fully operational, and the sequencers are expected to commence transaction processing. Rollups built using AltLayer are incredibly versatile in stack design, and can currently choose from using AltLayer’s own shared sequencer network, run by sequencer nodes on an interlayer named the Beacon Layer, or from the Espresso or Radius shared sequencing solutions.

Other solutions on non-EVM chains

The most analogous concept to Ethereum’s rollups can be found in Cosmos’ appchain model, as well as Polkadot’s relay chain and parachain architecture. Both of these models come with their own distinct advantages and drawbacks.

In the case of Polkadot, it employs a central Relay Chain that places a strong emphasis on staking. This Relay Chain is supported by a network of customizable parachains, which provide the essential capabilities for smart contracts and appchains that form the foundation of the network. Polkadot’s parachains implement a unique verification and block production mechanism, which aligns them more closely with layer-2 blockchains. A subset of validators within the Polkadot network is tasked with the responsibility of validating and finalizing the blocks submitted by each individual parachain. However, the actual creation and assembly of these blocks are carried out by individuals known as Collators, who are recruited by the specific parachains themselves. For instance, Moonbeam alone boasts 72 active Collators. In terms of their role, Collators function in a manner very much akin to a rollup’s sequencer. What sets Polkadot apart from most other similar chains is the notable presence of community-run Collators and Validators.

Source: Polkadot

In a similar vein, within the Cosmos and appchain ecosystem, Dymension is actively developing The Dymension Hub, a Proof of Stake Layer 1 in the Cosmos ecosystem. The Dymension Hub’s Layer 2 solutions, known as “RollApps,” will employ it for settlement and consensus purposes while relying on Celestia for decentralized application execution.

According to their documents, the decentralized sequencing of RollApps will necessitate the staking of Dymension tokens on the Dymension Hub. The selection of leaders is then determined based on the relative amount of DYM tokens staked. These selected sequencers will receive revenue in the form of fees and MEV from their respective rollups. As a result of this mechanism, a significant portion of the value generated within this ecosystem directly benefits the DYM token.

When looking at the broader perspective, the overarching objective of both Polkadot and Cosmos’ models is fundamentally the same: to reduce the barriers to entry for launching application-specific blockchains while ensuring high levels of security, at the same time incorporating sequencer decentralization via various means. However, it’s worth noting that each of these models comes with its own set of tradeoffs and considerations.

It just get started…

Sequencers, which play a central role in determining transaction order, have been instrumental in enhancing the efficiency and effectiveness of these solutions. As the blockchain community continues to embrace the principles of decentralization, the use of decentralized sequencers is pivotal in improving a particular chain’s performance, scalability, and security. With the continuous evolution of technology, we anticipate witnessing further innovations in business models and advancements in areas such as multi-chain interoperability, prevention of MEV, and governance mechanisms.