Opinion | Decentralized rollup sequencers will bring more opportunities for on-chain ecosystem.

Cryptocurrency researcher Haotian has expressed opinions on the decentralization issue of the important sequencer for Rollups, pointing out that although the development of decentralization in most mainstream project sequencers has stalled, the Metis ecosystem has the opportunity to develop rapidly due to its successful decentralization of the sequencer.

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Background: Decentralized Rollup Sequencer Development Stalls

The decentralized sequencer was initially a key feature of almost all Rollups, but now, most mainstream general-purpose Rollups such as Optimism, zkSync, etc., have stagnated in the development of decentralized sequencers due to various considerations.

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Potential Risks and Benefits of Decentralized Sequencers

Take Optimism as an example, it has already captured the vast majority of the market share, and the strategy of driving growth through the OP Stack ecosystem has been very successful. At this point, rashly implementing a decentralized sequencer may bring potential crises and challenges to the overall Layer2 ecosystem, such as MEV, malicious node behavior, etc., so it is reasonable to temporarily delay the decentralization narrative.

However, on the other hand, Metis, as a new competitor in Layer2, does not have the burden of Optimism and can implement the decentralized sequencer more simply and efficiently, making it the foundation for future ecosystem development.

Detailed analysis of the advantages and challenges of Metis' decentralized sequencer

Technical Issues of Decentralized Sequencers

Don't think that implementing a decentralized sequencer in Layer2 is simple. It will bring about MEV issues. When the sequencer is centralized, the space for MEV is small; however, when the sequencer is designed to be decentralized, MEV will inevitably become a challenge.

Solving the MEV problem effectively in a decentralized architecture is a significant challenge. Looking at Ethereum's roadmap, developing PBS has many technical difficulties. During the transition period, incentives such as MEV-Boost and MEV Router based on the Flashbots team are used, while also eliminating the negative impact of MEV on the Layer2 ecosystem.

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To address the MEV problem in the decentralized sequencer, Metis has added a verification mechanism. Validators have the authority to delete specific states from the virtual machine when anomalies are detected, which is also a balancing measure.

Decentralized Sequencers Mark the Beginning of the Rollups Narrative

Many people believe that Metis' decentralized sequencer is just a "technical narrative" generated by the competition within Rollups. However, Haotian believes that decentralized sequencers are the foundation and prerequisite for the explosive growth of the Layer2 ecosystem in the future, for the following reasons:

Decentralized Sequencers Drive Token Utilization

Decentralizing the sequencer is just the beginning, and the real highlight is the design of the token economic model after Rollups. By endowing Layer2 native tokens with use cases such as paying network gas fees, increasing the value of tokens, the tokens can play an incentivizing role in the process of decentralizing the sequencer.

Although the original design of using ETH as gas fees for Layer2 networks aligns more with the orthodox development direction of Ethereum, this approach makes Layer2 tokens purely governance tokens, unable to generate value in the actual economic structure and continue to empower.

For example, the lack of native DeFi in Layer2 has been criticized. If a new chain circulates only wrapped versions of main chain tokens, it can only enjoy the overflow effect of main chain liquidity, lacking the potential for the emergence of native DeFi.

In contrast, two years ago, Metis used the METIS token as gas fees, which seemed like an "unconventional" innovation at the time but actually contained a long-term plan for the Layer2 economic model.

Token Liquidity Staking Will Drive Native DeFi Growth

When Layer2 tokens have use cases such as paying gas fees, the next challenge lies in the subsequent ecosystem adoption.

DeFi on the Ethereum mainnet has evolved from staking to restaking, and the premise for the DeFi building to soar is liquidity staking.

How to make sequencer nodes and projects that receive incentives treat the incentive token as the starting point to build a brand new native DeFi, as Lido did in the past, rather than just having nodes interested in mining and selling tokens, is crucial for ecosystem construction and growth.

If we carefully observe the Metis ecosystem, we will find many similar structures emerging, such as TheHercules, a decentralized derivative trading platform, and ENKI, which does liquidity staking protocol LSD, etc. Although they all look like new faces, for a Layer2 token with captured value, these foundational infrastructures may be the key to unleashing the development of native DeFi in Layer2, and there are still many potential projects yet to emerge.

Decentralized Sequencers and the Value of Native Tokens are Key to Building the Ecosystem

In summary, decentralizing the sequencer and relinquishing control are just the beginning. The real challenge lies in how to use decentralized sequencers to coordinate the interests of all parties in the ecosystem:

How can we incentivize participants to actively build the ecosystem rather than passively speculate and mine tokens?

To perfectly answer the above question, native tokens must have full value, and this requires coordination with a decentralized sequencer architecture to truly bring users and ecosystem to the mainnet, rather than just being an option for speculators.