Will Based Rollups change the Ethereum ecosystem? Taiko and Puffer are leading the way in promoting Rollups without sequencers.

Recently, Taiko issued tokens, and Ethereum researcher Justin Drake reiterated the Based Rollups concept he proposed a year ago on Twitter, emphasizing that Based Rollups will be the endgame. This has strengthened market interest in this technology. This article will introduce the recent developments of Based Rollups.

Justin Drake: Based Rollups to Reach Endgame

Justin believes that the ecosystem will be driven by two major technologies in the near future, namely Based Rollups and Pre-Confirmation, preconf. He will organize the two major technologies and related projects and infrastructure, and specifically points out that Based Rollups will bring about the Endgame, showing Justin's expectations for this technology.

Ethereum researcher Justin Drake becomes an EigenLayer consultant and receives a million dollars in Eigen tokens.

What Problems Based Rollups Aim to Solve: Sequencer

Most of the current Rollups innovations come from breakthroughs in verification modes, such as fraud proofs in OP Rollups or zero-knowledge proof systems in ZK Rollups. These technologies are indeed progressive and meaningful, and corresponding infrastructure is still developing vigorously, such as ZK co-processors or proof aggregation layers.

Introduction to ZK co-processors, how can blockchain products enhance user experience through data?

However, the centralization of the sequencer and the associated security issues seem to be increasingly valued by the market and lacking solutions.

Complexity of Rollups Design

However, the asset security of Rollups is also an issue that cannot be ignored. For example, when the sequencer of a Rollup exploits users' MEV by changing the order of specific transactions, or even excludes specific users' transactions due to regulations, technical issues, or other intentions, it may cause users to suffer losses or even be unable to retrieve their assets.

Therefore, to achieve a stage 2 Rollup in the industry, a complete escape mechanism needs to be established, including facilities such as Escape Hatch and Force Inclusion, to protect user asset security.

Centralization of Rollups Sequencer

On the other hand, the issue of centralization of the sequencer is still looming.

As mentioned above, the sequencer can determine the order of transactions, and with the huge MEV incentive factor behind it, coupled with the incomplete decentralization technology of the sequencer, currently, the sequencers of first-line Rollups are basically centralized architectures and not open source.

Recommended Reading: Interpretation of Rollups Strategies | Why don't mainstream Layer2 decentralize the sequencer? Why is introducing Stack a way out?
Reason for Recommendation: This article clearly explains why current first-line Rollups do not open source the sequencer, including Arbitrum, Optimism, zkSync, Starknet, all of which do not open source their important sequencers due to technical issues and more commercial considerations.

Introduction to Based Rollups: Removing Sequencer

Facing the design problems of Rollups mentioned above, Based Rollups have emerged, attempting to directly remove the role of the sequencer.

Since there is a fear of the sequencer acting maliciously, making mistakes, centralization, or exploiting MEV, instead of adding more preventive measures and compromised designs, it is better to simply discard the sequencer and think of other ways.

All this can be traced back to Justin's proposal of Based Rollups concept in the Ethereum community last March.

Architecture of Based Rollups

Based Rollups discard the sequencer's design and delegate the sorting work to the L1 nodes, specifically the Layer1 searchers or anyone, who can submit the transaction information of Based Rollups to the Layer1 proposers, making the process permissionless.

In the past, when transaction information was uploaded to Layer1 in general Rollups, the contract in Layer1 would confirm whether the transaction was uploaded by an eligible Sequencer, usually the sequencer of the Rollups project itself; while Based Rollup has no restrictions, anyone can upload transaction information at any time.

Layer1 searchers may be both Based Builders and builders incentivized by Base Rollups or third parties, including the transaction information of Rollups in the blocks and submitting them to the proposers.

By delegating the sorting work to Layer1 proposers, the overall design structure of Based Rollups can become very simple and inherit the decentralization properties of Layer1, and integrate with Layer1 in terms of economic models because the gas fees are directly paid to Ethereum nodes.

Advantages of Based Rollups

Justin points out that removing the sequencer from Based Rollups has the following advantages:

Firstly, the liveness of Layer2 will be the same as the mainnet: because sorting is handled by L1, assets can have the same liveness guarantee. In comparison, the liveness of Rollups with escape hatch designs is lower because transactions in the escape hatch must wait for a timeout period to settle and may be subject to scrutiny.

Based Rollups are more decentralized, inheriting the decentralization capabilities of L1 in sorting and utilizing the infrastructure of searchers, builders, and proposers in Layer1 architecture, thus achieving decentralization.

In addition, by removing the sequencer and related compromised designs, such as verification mechanisms that do not require generating zero-knowledge proofs or fraud proofs and escape hatch designs, the overall design of Rollups can be simplified, enhancing protocol security.

Economically, it is also very interesting because without its own sequencer, the cost based on sorting will be zero. However, Rollups can still maintain autonomy. Although sorting is entrusted to L1, Based Rollups can still have governance tokens, can charge basic fees, and can use the revenue from such basic fees as they see fit.

Disadvantages of Based Rollups

However, the disadvantages of Based Rollups are also clear, stemming from the design without a sequencer:

Based Rollups do not have MEV income. Based Rollups direct the potential earnings of MEV to Layer1, with their income limited to basic fees at most. Unless the network gains a significant market share, the sustainability of the project remains to be evaluated.

Moreover, entrusting sorting to Layer1 will reduce sorting flexibility. This makes the design of certain sequencing services more difficult, or even impossible. For example, pre-confirmation designs can confirm transactions for users on the Ethereum mainnet before reaching finality, improving user experience, which is easy to achieve with centralized sorting, but may require waiting for transactions to be confirmed on the mainnet in Based Rollups.

Introduction to Based Rollups Projects

Taiko

Taiko is the first Layer2 designed based on Based Rollups architecture, claiming to be the first type of ZK-EVM, which is equivalent to Ethereum's virtual machine. It is currently a proponent of Based Rollups, and the recent token issuance has attracted more attention to this concept in the market.

Taiko's architecture is actually a conventional prototype of Based Rollups mentioned above. For readers interested in Based Rollups, it is recommended to read their documentation for a more concrete understanding of this new concept.

Puffer Finance

Puffer Finance is an Ethereum re-staking project LRT, which, with its re-staking business, provides many ETH for external borrowing to become validators. Its protocol focuses on allowing anyone to run nodes on Ethereum as node operators, NoOps, lowering the threshold for becoming a validator from 32 ETH to 1 to 2 ETH.

But what does this have to do with Based Rollups? By running their own validator accounts, Puffer Finance can directly avoid the possibility of validators not sorting the transaction content of Based Rollups into blocks, reducing related incentive rewards, making transaction fees in Based Rollups more affordable, and even having the opportunity to integrate to create a pre-confirmation mechanism.

Recommended Reading: Introduction to LRT re-staking project Puffer Finance? Marketing activities ahead of the mainnet launch!
Reason for Recommendation: This article introduces the principles and design of Puffer Finance, providing a better understanding of how it can have its own validators and construct Based Rollups on top of it.

Based Rollups Innovations Drive New Opportunities for Ethereum

Rollups have essentially become an important foundation for Ethereum's development. However, most Rollups projects are very slow in innovating the sequencer. Although there are second-line competitors like Metis that have introduced a decentralized sequencer architecture, their impact is limited. Hence, the concept of Based Rollups has emerged, with the hope of making a significant breakthrough in sequencer issues.

Understanding the advantages and challenges of Metis' decentralized sequencer

It can be seen that the design of Based Rollups is fundamentally innovative. Compared to the many Layer2 solutions that have emerged recently, which only make minor modifications in proof mechanisms or integrations, such as Manta Pacific or even without modifications like Swell Layer2, Based Rollups overturns the existing foundation, directly removing the sequencer and aiming for disruptive innovation to create infrastructure that better meets user needs.

This innovative concept of Based Rollups may not even require zero-knowledge proofs in the future, nor proof aggregation layers or external data availability layers. The existing ecosystem and projects may all undergo a major transformation.

It is no wonder that the Ethereum community has had many discussions. Rather than hoping that Layer2 projects will solve the sequencer problem well or even give up their underlying interests, it is better to try a new architecture.