Author: Paul Veradittakit, Managing Partner of Pantera Capital; Translation: Golden Finance 0xxz
In the ever-changing landscape of blockchain technology, the pursuit of scalability and enhanced transaction throughput has led to the emergence of so-called Layer-2 solutions, or L2. These innovative enhancements are designed to strategically mitigate the inherent limitations present in traditional blockchain designs. With the rise of L2 solutions, providing faster and more resource-efficient transaction processing, a new challenge has emerged, which is the necessity of efficient transaction ordering.
To address this efficiency challenge, centralized ordering mechanisms have been primarily used. These coordination mechanisms manage the arrangement of transactions in a distributed network. However, the sought-after harmony between the decentralized philosophy underlying blockchains and the centralization of these ordering mechanisms has led to a remarkable breakthrough: the birth of decentralized ordering mechanisms. This new approach aims to improve scalability, strengthen security, and establish true decentralization in the blockchain space.
What is centralized transaction sorting?
Centralized transaction ordering mechanisms are mechanisms employed by applications deployed on blockchains to ensure orderly and secure processing of transactions. Unlike the decentralized ordering inherent in blockchains, which relies on consensus algorithms and distributed networks, these orderers operate in a centralized environment overseen by a single authority. Here is an overview of their functionality:
Centralized Control: In a centralized system, a single entity or authority exercises control over a database or application. This entity oversees transaction ordering and instructs L2 in what order to execute them.
Ordered processing: Transactions are processed in order, occurring consecutively. Determining this order is often influenced by variables such as timestamps, commit times, MEV extraction, fees paid by users/block builders, or priorities assigned by a central controlling entity.
Trust: Users who rely on the system must trust that the central entity will process transactions fairly and accurately. However, there is the potential for manipulation or malicious behavior by such an authority, which could compromise the integrity of the transaction itself.
Advantages of a decentralized sorter
Decentralized sorters offer many compelling advantages that stem from their innovative approach to transaction management. By fostering trust and transparency, these sorters establish an immutable and publicly accessible ledger that enables transaction accuracy and order to be verified autonomously, eliminating the need for centralized oversight. They resist tampering, ensure data integrity, virtually eliminate the possibility of fraud, and give authenticity to recorded information. In addition, decentralized sorters promote the concept of censorship resistance and anti-monopoly, allowing transactions to be conducted based on network consensus rather than central authority, fostering an open and inclusive ecosystem.
In addition to their security features, decentralized sequencers are also able to resist single points of failure and malicious intrusions, thus strengthening their resilience. This resilience fosters participation from players across different geographies, creating an environment of global accessibility and financial inclusion. As a result, this approach simplifies operations, automates the verification of transactions, and reduces reliance on middlemen, thereby increasing efficiency and significantly reducing costs. The adaptability of decentralized sequencers drives innovation, facilitating the development of applications such as smart contracts and decentralized platforms that revolutionize traditional business models and economic paradigms. These sequencers are tightly aligned with decentralization principles, enhancing data ownership and solidifying their role as catalysts for change capable of reshaping industries and redefining trust in the digital age.
Key Benefits
Trustless environment: Decentralized sorters eliminate the need for participants to individually trust a central authority. Transactions are validated and agreed upon across a distributed network of nodes, promoting transparency and reducing the risk of manipulation.
Immutability: In decentralized ordering, transactions are recorded in an unchangeable and inviolable manner. Once integrated into the blockchain, they become impossible to modify or delete unless the network reaches a consensus, thus enhancing the integrity of the data.
Censorship resistance: Traditional collators can be vulnerable to censorship or interference by a central authority. Decentralized collators counteract this vulnerability by enabling transactions to be appended to the blockchain only if they comply with the consensus rules dictated by the network.
Resilience: Traditional orderers are vulnerable to threats from a single point of failure. In a decentralized system, on the contrary, the widely distributed network architecture enhances resilience and prevents attacks or failures of individual nodes.
Reducing middlemen: Traditional sorters often require middlemen to verify and authorize transactions. In contrast, decentralized sorters have the potential to reduce or eliminate the need for middlemen, thereby achieving cost benefits and improving operational efficiency.
Types of decentralized sorting
Let’s break down some of these exciting solutions, categorized according to the builder-proposer aspect of sorting mechanism design.
Builder
Schnorr sorting: Schnorr sorting introduces a novel approach to confirming transactions, moving away from the traditional method of grouping transactions. In this innovative system, individual transactions are assigned unique indexes, initiating a collaborative process between the sorter (or validator) and the sender. Together, they create a Schnorr signature associated with the transaction index, which is a proof of the sender's intent to include that specific index in the blockchain ledger. This technology may bring multiple benefits, including increased efficiency, enhanced privacy, and smoother transaction ordering. In addition, it has the potential to provide new solutions in handling transaction arrangement and ordering in blockchain networks.
Suave: Suave is an innovative initiative introduced by Flashbots as a response to the centralization challenges brought about by Miner-Extractor Value (MEV). At its core, Suave proposes a novel concept: the Single Unifying Auction for Value Expression. This innovative solution aims to reshape the landscape of block building, with a focus on maintaining the principle of decentralization. Suave's framework consists of three key components: the Universal Preference Environment, which gives users the ability to express preferences to guide execution; the Optimal Execution Market, a complex network of executors that compete to provide the best execution, including MEV capture; and Decentralized Block Building, a network that transforms aggregated preferences into blocks across multiple domains. In the Suave architecture, these components converge in a decentralized ecosystem where users, validators, builders, and searchers collaborate seamlessly on multiple chains. In doing so, Suave not only addresses centralization risks, but also drives the crypto space towards a more fair and decentralized trajectory, thereby reshaping the future of blockchain technology.
To propose
Espresso Sorting: Espresso Sorting is a decentralized network customized for Rollup, whose main goal is to provide security, fast throughput and minimal latency in scheduling and ensuring transaction availability. This sorting is envisioned as a valuable asset that is accessible to both optimistic and zk-Rollup, allowing Rollup to achieve decentralization while taking advantage of the benefits of interconnectivity enabled by a common sorter layer.
Based Ordering: Rollup-based ordering mechanisms leverage the ordering capabilities of the underlying Layer 1 (L1) blockchain. These Rollups synchronize their block ordering with L1, enabling seamless collaboration between L1 proposers and the Rollup ecosystem. The result is a set of advantages: strong liveness guarantees, efficient settlement processes, resistance to MEV-driven censorship, network effect protection, and compatibility with existing L1 infrastructure. The simplicity of their architecture, coupled with recent innovations such as Proposer-Builder Separation (PBS), yields gas efficiency and simplified development. Despite giving up some MEV revenue, economic alignment with the L1 ecosystem enhances security and economic scarcity. These Rollups retain sovereignty through governance tokens and base fees. The term "Base Rollup" interestingly responds to their reliance on the L1 foundation. This innovation enhances decentralized consensus while embodying the core ideas of blockchain.
in conclusion
The journey from scalability limitations to the emergence of Layer-2 solutions has been profoundly transformative. The central role of ordering mechanisms in managing the order of transactions is critical to achieving the efficiency and effectiveness of these solutions. As the blockchain community continues to embrace the principles of decentralization, the rise of decentralized ordering mechanisms offers a promising path forward. By striking a balance between increased scalability and true decentralization, decentralized ordering mechanisms symbolize the maturity of blockchain technology, ushering in an era of a more inclusive, secure, and resilient digital future.
