Taiko Labs explains the path to Rollup decentralization: the dilemma between shared sorting and Ethereum-based
Based Rollup provides a solution to liquidity fragmentation and is fully composable with L1 through its characteristics.
Original author: Taiko Labs
Original translation: TechFlow
Key points
Rollup-centric roadmaps have resulted in fragmentation and isolation of blockchains. This fragmentation has led to a lack of value transfer between Rollups. To address this problem, shared ordering mechanisms such as Espresso, Astria, and Radius have emerged. But this solution inherently requires new trust assumptions, as such a layer must have its own security set.
If we want to build a shared ordering layer for Rollup, Ethereum is the most trusted neutral layer we can build or use. Ethereum-based Rollup (i.e. Based Rollup) is inherently fully composable with Ethereum and other Based Rollups. However, as a Based Rollup, the solution also faces some challenges. The most important challenge is that the block time is the same as Ethereum, limited to 12 seconds. The solution is to provide a fast confirmation mechanism, such as a centralized sorter, or to speed up Ethereum's block time. In the testnet, the speed based on pre-confirmation is faster than the current centralized sorter.
Crossroads
Looking back at the beginning of the article, the direction chosen by Ethereum is important. Ethereum has embraced decentralization as a top priority since day one. This priority brings some limitations to the user experience. These limitations stem from the challenges of designing decentralized distributed systems (such as handling global state, sequential execution, etc.). This is exactly what distinguishes Ethereum from other L1s. They choose different paths. Other L1s choose to be fast and cheap by sacrificing some decentralization. They are fast and cheap because they have historical proofs, larger block sizes, and parallel processing. These concepts allow fast and cheap transactions, but also increase the burden on validators. This is why the hardware requirements of other L1 validators are higher than Ethereum.
Before Ethereum itself scales through upgrades such as history expiration, statelessness, Verkle trees, etc., we handed the task to Rollup.
Four years ago, Ethereum took a Rollup-centric roadmap, outsourcing execution to make it a more user-friendly environment until improvements arrived. Thanks to this, we reached a daily average of 250 TPS across all of Ethereum.
rollup.wtf
As mentioned above, it has been four years since Ethereum decided to adopt a Rollup-centric roadmap. During this period, a lot of experiments have been conducted on L2 about what Ethereum itself should be. AltVM (Fuel, Fluent), zkVM (Aztec, Starknet), zkEVM (Scroll, Linea, zkSync), Parallel EVM (MegaETH), etc. These all provide ideas for the future of Ethereum. But they also create many independent blockchains that don't even have any connection to each other. This is why shared sorting layers appear to solve the fragmentation problem.
Shared Sorting Layer
Currently, Rollup has a centralized sorter. This introduces huge risks of censorship, liveness, and MEV extraction. If Rollup wants to be decentralized, it can choose a shared sorter. By using a shared sorter, Rollup can take advantage of finality, decentralization, fast transactions, and cross-chain atomicity. As Vitalik said: "Decentralizing a Rollup requires 90% of the effort to develop a new L1." Therefore, by choosing a shared sorter, the engineering effort of decentralization can be avoided.
The shared sorting layer is basically a layer that connects the sorting rights of participating Rollups to a single sorter network. This layer runs a consensus protocol, such as BFT, and anyone can participate (within the design constraints of the consensus protocol). As a result, multiple Rollups have a common mechanism for determining the order of transactions. This mechanism also provides fast L2 finality and composability between all participating Rollups.
The shared sorting layer is a sorter market. In this market, Rollups can sell their block space (and proposal rights) to higher bidders on a slot-by-slot basis. This also creates a layer that redistributes MEV among all participating Rollups.
Focus
The shared sorting layer has a network effect that creates atomic composability and shared MEV among all participating Rollups. Rollups join the network to increase the value of their blocks (while decentralizing their sorters).
However, according to the system design of the shared sorter, the number of participating Rollups should be as large as possible. If a participating Rollup X leaves the chain, this MEV distribution will be disrupted, directly affecting the network effect. Therefore, shared sorting is an endless game, and participants must always stay in the game. As Rushi said, this is a purely B2B model.
The shared sorting layer runs a protocol like BFT next to the shared sorter market to achieve fast L2 finality and introduces an honesty assumption. It assumes that half of the validators are honest. If for some reason half of the validators are offline or dishonest, the chain may lose liveness (they can use a fallback based on ). If the BFT protocol loses liveness, participating Rollups will not be able to take advantage of fast finality because they must get finality certification from the BFT protocol. Withdrawals from this layer will also be suspended. But even if the BFT protocol collapses, MEV redistribution will continue because in Espresso, for example, MEV redistribution is separate from the BFT protocol. In contrast, Ethereum has always been the strongest BFT protocol in terms of cryptoeconomic security and liveness.
In addition, there is a risk of heavy staking if they use it. If the hardware requirements of the validators are high, this will lead to monopoly. There could also be massive slashing if the re-staking service goes awry; see Eigenlayer’s Risk FAQ for more information. For re-staking approaches in shared sorters, see the joint research by Nethermind and Fourpillar.
It is important to note that given that shared sorters use pre-confirmations, this process can be done on L1 (i.e. based on pre-confirmations), eliminating the need for a new layer. It should also be noted that shared sorters still have to go through the L1 pipeline. Therefore, “fast finality” does not make sense here.
In summary, we believe that if shared sorter layers are not decentralized and robust, they are single points of failure. They will become the weakest link for all rollups that opt in.
Neutral composability is no longer a joke: To Based
As we mentioned, Ethereum is the most trusted neutral layer for building various applications. Rollup achieves this goal by sending its batches and proofs to Ethereum, leveraging it as a data availability layer. Currently, most Rollups are managed by centralized sequencers, and all transactions are sorted by the Rollup team. Some of these teams are still working on designing solutions to decentralize their networks, such as Aztec's Fernet. There is another way to achieve network decentralization without consuming a lot of engineering resources: a sorting-based approach.
Taiko is the first Based Rollup to use Ethereum as the sorting layer. Block construction is completely dependent on Ethereum. Anyone can propose a block, and the process is completely permissionless. Each Rollup can achieve composability by being based on Ethereum instead of adding a new layer. Since the slots of Ethereum and Based Rollup are moved synchronously, they are fully compatible with each other. This means that it is possible to do a flash loan on L1 and do certain activities on Based Rollup in the same slot (thanks to our BBR design, see here for details). But the Ethereum-based approach also comes with some costs.
Source: L2Beat
We mentioned this issue in the article "Pre-confirmed Rollup Central Considerations", but let's briefly summarize it. As we said, Based Rollup has the same block time as Ethereum, which is 12 seconds. This means that Based Rollup needs to send its data to L1 via blobs (or calldata) every 12 seconds. If you can't fill the blob with enough L2 transactions to cover the L1 fees, you will face losses. In order not to pass this on to our users, we initially absorbed this fee ourselves and spent a lot of money. Today, proposer block times are over 12 seconds (about 20 seconds) in order to be profitable.
These are examples of the difficulties that Based Rollup has experienced through the Taiko's example. In summary, the main problem is that block time and revenue constraints are based on fees, not centralized sorters. You sacrifice revenue because sorting is completely permissionless and your MEV flows entirely to Ethereum, unable to capture any value from transactions (Spire Labs is developing a framework based on this to improve Based Rollup's revenue model).
To address the UX and block time issues, we have two options:
· Preconfirmation Based
· Faster block times on L1
Based Preconfirmations
Based Preconfirmations simply use some L1 validators to provide preconfirmations for L2 users. Currently, based preconfirmations are running successfully on the Helder testnet, and lightning fast transactions are now possible on Taiko (20ms in Gattaca's demo and about 260ms on Arbitrum).
Preconfirmation Demo on Titan
In preconfirmation, you do not inherit all of Ethereum’s liveness and safety. You only trust a subset of Ethereum’s validator set. But it’s worth mentioning here that we are getting trusted commitments from current Ethereum proposers. Anyone can become a preconfirmation provider by staking a certain amount of ETH on the registry contract. We explained the details of preconfirmation in detail in a previous blog post, see here.
The preconfirmation space is still in its early and evolving stages. It faces some threats, just like the centralization of Ethereum blockchain construction, but with new approaches and research, a more reasonable architecture will be designed. We will share our pre-confirmation design soon.
Faster blocks?
No one will refuse to make Ethereum more user-friendly. Faster final confirmation, faster block time, and faster transaction processing are the most favorable scenarios for Based Rollup. As we mentioned, the block time of L1 is the only obstacle to becoming Based Rollup. Faster L1 blocks mean faster Based Rollup blocks.
The main idea behind a faster L1 is to adopt a consensus mechanism that can substantially reduce slot times. Single Slot Finality (SSF) is a consensus mechanism under consideration, specifically Orbit SSF, where each slot can be finalized in a few seconds. In the current Gasper protocol, finalization time is 2 cycles, or 13 minutes. However, the downside of SSF is that it is susceptible to 33% inactivity leaks.
The main question here is why if a faster L1 was always necessary, four years of engineering effort on Rollup was not spent on speeding up L1 itself. We have invested a lot of RD effort in Rollup, and achieved many different approaches. Even if a shorter block time is achieved today, development would take at most 2-3 years.
Ethereum has chosen a very clear path. This path means no compromise on decentralization and no touching of "single family stakers". Obviously, faster blocks require changes to Ethereum's consensus, and such changes will result in a smaller distribution of validators than today. This is an important decision that the Ethereum community needs to make.
Conclusion
As Rollup grows and becomes more popular, fragmentation and isolation become serious problems. Therefore, becoming Based Rollup and joining the shared sorter layer is an important distinction. Shared sorting layers can be used for fast finality and cross-chain composability, but they require new trust assumptions and may fail with a loss of network effects. Based Rollup leverages Ethereum's existing infrastructure for block construction, but faces challenges in block times and revenue models. Nonetheless, it does provide a solution to liquidity fragmentation and full composability with L1 through its features.
The way forward may lie in new solutions like pre-confirmation and faster L1 block times to overcome the shortcomings of Based Rollup. These aim to improve the user experience without compromising Ethereum alignment. Our goal is to create a scalable, decentralized, and user-friendly ecosystem that stays true to Ethereum's vision.
Choosing whether to build on Ethereum is not just a technical decision, it is about the direction of the decentralized Rollup "framework".
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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