Shared Sequencing (SS)

It is now widely recognized that rollups and modular blockchains offer a more efficient and scalable design than traditional Layer 1 solutions. However, some argue that the current rollup implementations, whether based on ZK (Zero-Knowledge) or optimistic execution, are less decentralized than even the least decentralized Layer 1 alternatives.

The central issue with these rollups stems from their reliance on a single sequencer, a crucial network node vital for their smooth operation. While this setup offers fast transaction speeds and cost-effectiveness, it can make certain rollups feel more centralized due to this single point of control. To address this concern and enhance decentralization, efforts are being made to "decentralize" the sequencer. One promising solution that has emerged is the concept of a "Shared Sequencer."

But what exactly is a Shared Sequencer, and how does it work? In this article, we will delve into the details to gain a deeper understanding of these critical aspects and explore how Shared Sequencers can contribute to a more decentralized and robust blockchain ecosystem.

What is a Sequencer?

A sequencer, also known as a transaction sequencer or a block sequencer, is a critical component in Layer 2 (L2) solutions. It is responsible for executing and grouping L2 transactions by batching multiple transactions into a single one (1). By doing so, the sequencer maintains the chronological order and ensures the validity of these transactions within the blockchain.

It aggregates and processes off-chain transactions that occur within L2, allowing users to interact with L2 protocols without immediately recording the transactions on the main blockchain (Layer 1, L1). Instead, these transactions are bundled together into a single batch. The sequencer ensures the correct execution of these off-chain transactions and submits them as a single batch to the L1 blockchain for final settlement. This batching process enhances the scalability and efficiency of the overall blockchain network through L2 solutions (2).

Sequencers are undeniably crucial in L2 roll-ups, but the reliance on a single sequencer creates centralization concerns. If such a sequencer becomes unavailable, the entire network's transaction processing would come to a halt. While some argue that users could still submit L2 transactions directly to L1, the lengthy processing time (up to 24 hours) and high fees would lead to a poor user experience. Moreover, centralized sequencers can censor, create bottlenecks, charge excessive fees, and negatively affect users through front-running and bad Miner Extractable Value (MEV) (3).

Figure 1. How Single Sequencer Works
Source: BingX

Shared Sequencers as a Solution

A shared sequencing network is a collection of sequencers that are not tied to any specific rollup. As the name suggests, these sequencers can be used by multiple different rollups. In this setup, multiple participants work together to collectively order and include transactions into blocks. Rather than relying on a single central entity or specific node, the responsibility for sequencing is spread out among several nodes in a decentralized way (4).

Figure 2. How Shared Sequencers Work
*Source: Maven11

Benefits of Shared Sequencers

In the current system, having just one Sequencer creates a vulnerability. If it goes down or behaves unfairly, it can affect the entire rollup. Shared Sequencers solve this problem by electing a new leader for each round of sequencing. This way, no single entity has full control, reducing the risk of failures or censorship. Thus, rollups can easily join or leave these Shared Sequencing networks, promoting healthy competition among them. If one Shared Sequencing network isn't treating users well or is charging too much, rollup projects can switch to other networks that offer better services (5).

Instead of each roll-up building its own sequencers, Shared Sequencing networks offer a "Decentralization as a Service" model. They make it easier for rollups like zkSync or Starknet to connect to an existing network of Sequencers, avoiding the need to start from scratch. A great advantage of multiple rollups using a common Shared Sequencing network is the possibility of atomic transactions. With the Shared Sequencer managing transactions from different rollups at the same time, cross-rollup operations become smoother. For example, users could easily arbitrage ETH between Arbitrum and Optimism, ensuring that their transactions succeed on both platforms to complete the trade. This could potentially solve the liquidity fragmentation issue commonly seen in DeFi today (5).

In addition, Shared Sequencers can facilitate interoperability between different rollups by pooling transactions across them. This enables smooth communication and interaction between rollup networks (6).

The Hurdle

On the other hand, Shared Sequencers do not have the resistance against MEV strategies as modularizing data flow away from the well-defined Ethereum value stream introduces MEV risks, like the Shared Sequencer taking value from L1 or aggregating MEV to the dominant SS network. A single Sequencer can prevent MEV by keeping all transactions accessible only to itself, but with multiple Sequencers, similar to validators, they can see the mempool, potentially leading to MEV occurrences (5).

Teams like Espresso, Aztec, and Radius are pioneering the development of a decentralized future for rollups. With such importance, this topic will be explored in greater detail at KBW 2023.

Conclusion

Overall, shared sequencing is a promising approach to enhance the decentralization of blockchain networks, and offers a compelling solution to address the vulnerabilities of single sequencers in rollups by distributing the sequencing responsibility among multiple nodes in a decentralized manner. This decentralized approach promotes fair competition, facilitates interoperability between rollups, and enhances resistance against harmful practices, contributing to a more secure and decentralized future for the blockchain ecosystem.

Reference

1. The Starknet Community, Starknet Book: Sequencers in Starknet
2. Darren Kleine on Blockworks, Shared Sequencers: The Quest for Decentralization Continues, April 20, 2023
3. AltLayer on Medium, The Importance of Decentralized Sequencing, May 02, 2023
4. Maven11 on Substack, The Shared Sequencer, May 05, 2023
5. Bankless, Will Rollups Ever Decentralize?, May 11, 2023
6. Richard Chen on Medium, Intro to Shared Sequencing, May 15, 2023

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