Ethereum’s slow transaction speed and high cost were two of its weak spots. To remedy this, Ethereum relied on scaling solutions. These are technologies that help improve Ethereum’s speed.
Although these solutions differ, they generally settle transactions on a cheaper and faster network. Then, they provide Ethereum with details about the transaction. However, there is one thing that is centralized.
The Problem with Sequencers
Rollups are one such scaling solution. Rollups conduct transactions on a layer 2 blockchain and then move the transaction data back to the layer 1 or mainnet blockchain. Rollups enable users to enjoy cheaper and faster transactions, as well as the security of the bigger chain. Other scaling solutions include sidechains and state channels.
To learn more about what is next in the world of L2 rollups and decentralized sequencers, check out our latest report!https://t.co/LSpaYFSR0k
— Binance Research (@BinanceResearch) August 28, 2023
However, despite the popularity of Ethereum rollups, their lack of decentralization is being pointed out as a huge challenge. A new Binance report claims that all Ethereum rollups are, in fact, centralized. The sequencer for these chains is frequently the single point of failure.
Sequencers are the structures that process and order transactions off-chain before being sent to the parent Layer 1 (L1) for finality. Faster transaction confirmations and reduced fees are some of their benefits. But they also bring about a level of centralization that some people find unsettling.
So, sequencers are essential to the operation of L2 rollups. They take user-submitted unordered transactions, combine them for off-chain processing, and then produce a compressed batch of ordered transactions. The Ethereum L1 receives these ordered transactions after that, completing the transaction.
Rollups are a tricky subject.
They make the #Ethereum Ecosystem faster but can mess up the seamless interaction between apps.
• Do some reading on what rollups are
• Compare the benefits and drawbacks
Be cautious—rollups aren't a one-size-fits-all solution. pic.twitter.com/YVi19VT3AE
— Laura 🚢 (@DiMoneymindset) September 2, 2023
Although sequencers are not necessary for rollups to work, they have grown into a design decision to enhance the user experience by providing faster and more affordable transactions.
The centralization of sequencers is a challenge for proponents of decentralization. For starters, there is the problem of delay. Sequencers can put off or even omit some transactions. Despite not being able to fully censor, sequencers still wield some form of control which is against the ideals of decentralization.
Furthermore, problems like Miner Extractable Value (MEV) extraction and liveness turn into major problems. A single malfunctioning sequencer might have an impact on the entire rollup, causing services and transactions to stop working.
Is there a Solution for Centralized Sequencers?
Many within the crypto ecosystem think decentralized, shared sequencers are the answer to the problems posed by the centralized ones. These decentralized shared sequencers would serve numerous rollups together and function as a middleware blockchain. With this method, L2 rollups can benefit from “decentralization-as-a-service” as well as cross-rollup composability.
If you’ve looked into blockchains you’ve probably heard of “rollup’s,” but what is a rollup? Lets take a look
What:
Rollups are L2 systems aimed at reducing tx costs and improving scalability. Rollups process transactions on another, faster blockchain (known as a layer 2), then… pic.twitter.com/pBqxnmlorU
— SterlingMalloryArcher.🟧 (@codenameduch) August 30, 2023
Shared sequencers essentially provide what centralized sequencers are unable to: protection from the dangers of MEV extraction, censorship, and assurance of uninterrupted service.
So, decentralized sequencer solutions are already being developed by several influential firms in the market. Leading this innovation are businesses like Espresso and Astria.
Conclusion
The debate surrounding the centralization of Ethereum’s L2 rollups is likely to get heated as Ethereum continues to expand. Sequencers provide clear advantages in terms of transaction speed and cost, but some people find the risks associated with their centralized structure to be intolerable. Decentralized, shared sequencers may hold the key to achieving the right balance between effectiveness and the values of decentralization.
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