Sequencers: Blockchain’s Air Traffic Controllers
After exploring various scaling solutions such as plasma, sharding and side chains in recent years, Ethereum has settled on a “rollup centric roadmap” for scaling. Rollups are scaling solutions that improve throughput and latency on Ethereum’s base layer by moving computation and data storage off-chain. All rollups consist of at least three distinct components: a virtual machine (VM), a sequencer, a proving system, and a rollup contract on the L1 (e.g., Ethereum).
Sequencers are a key component of layer 2s scaling solutions such as optimistic rollups and zk (validity) rollups. They play a vital role in ordering transactions, and ensuring that they are correctly included in the underlying blockchain.
How sequencers work
When a user submits a transaction to a rollup network, it is first received by a sequencer. The sequencer verifies the transaction and then batches it together with other transactions from other users. The sequencer then compresses the batch of transactions into blocks and submits the batch as compressed ‘calldata’ to the ethereum blockchain.
In Optimistic Rollups (ORUs), such as Optimism, and Fuel v1, block production is primarily managed by a single party, called the “sequencer,” which helps the network by providing the following services:
- Providing transaction confirmations and state updates.
- Constructing and executing L2 blocks.
- Submitting user transactions to L1.
Similar to ORUs, in Validity Rollups (ZKRUs) such as Polygon zkEVM, the sequencer posts compressed transaction batches to the layer 1 blockchain as calldata for data availability purposes.
A different component of the rollup called the ‘prover’ posts a zero knowledge cryptographic proof that transactions have been correctly executed according to the rules of the blockchain and the resulting state transitions are all correct. The rollup contract on layer1 ultimately registers the state transition and verifies the proof.
Figure 1: In Arbitrum Nitro, an ORU, the sequencer establishes an ordering on transactions, and publishes the order as a real-time feed and as compressed data batches on the L1 chain. Sequenced transactions are processed one at a time by a deterministic state transition function, which updates the chain state and produces L2 blocks. These blocks are later settled to the L1 chain.
Sequencers and decentralization
Sequencers can be centralized or decentralized. In a centralized sequencer model, a single entity is responsible for processing and ordering transactions. This can lead to concerns about centralization, censorship and security.
In general, the sequencer is trusted only to order incoming transactions honestly, according to a first-come, first-serve policy. At present most rollups use centralized sequencers, which can in theory censor submitted transactions, but most of the rollups are making efforts to migrate to decentralized sequencers such as committee based sequencers.
In a decentralized sequencer model, multiple independent entities compete to process transactions. This can help to improve security and decentralization. However, it can also lead to higher transaction fees and latency, as sequencers compete for users.
Benefits of sequencers
Sequencers offer a number of benefits, including:
- Scalability: Sequencers can help to improve the scalability of blockchain networks by processing transactions off-chain. This can lead to lower transaction fees and faster transaction times.
- Security: Sequencers can help to improve the security of blockchain networks by offloading some of the processing burden to trusted entities. This can help to reduce the risk of attacks.
- Interoperability: Sequencers can help to improve the interoperability of blockchain networks by enabling transactions to be processed across multiple networks.
Challenges of sequencers
Sequencers also pose a number of challenges, including:
- Centralization: Centralized sequencers can lead to concerns about centralization and security.
- Cost: Decentralized sequencers can lead to higher transaction fees, as sequencers compete for users.
- MEV: Sequencers can be used to extract value from users by front-running user transactions.
Shared sequencers
One way to address the challenges of sequencers is to use shared sequencers. Shared sequencers typically use a proof-of-stake consensus mechanism to select which sequencers process transactions. This helps to prevent any single sequencer from gaining too much power.
Shared sequencers are still in their early stages of development, but they have the potential to revolutionize the way that blockchain scaling solutions are implemented. By making sequencers more decentralized and secure, shared sequencers can help to make blockchain networks more scalable and accessible to everyone.
To enable sequencer decentralization by design, the Fuel network is building its own shared sequencer that uses tendermint consensus.
Conclusion
Sequencers are integral components of layer 2 scaling solutions. By handling transaction batching and block production on rollups, sequencers help ethereum scale to much higher transaction throughput and reduce transaction costs for users. However, currently most rollups use centralized sequencers that can create concerns of censorship and centralisation. The ethereum community is evolving decentralized sequencer architectures to address these concerns.
Links and resources
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