Original author: Donovan Choy
Original compilation: Deep Tide TechFlow
Ethereum loves Rollups. Recently, ‘based’ Rollups have garnered much attention.
What makes based Rollups special? The core lies in its sequencer.
Traditional Layer-2s use centralized sequencers to process user transactions and submit them to Layer-1 for settlement, while based Rollups delegate the sequencing task to the validators of Ethereum Layer-1. This mechanism is referred to as ‘based sequencing.’
This design has two major advantages: censorship resistance and enhanced interoperability.
By allowing Layer-1 to act as a sequencer, based Rollups can provide the same liveliness guarantees as the Ethereum mainnet while avoiding censorship issues that may arise from centralized sequencers.
Read more: MagicBlock open-sources ‘brief Rollup’ technology supported by a16z
Another significant advantage is the substantial enhancement of interoperability. Supporters of based Rollup (like Justin Drake) refer to this as ‘synchronous composability’, meaning that transactions on Ethereum can be synchronized and sorted or bridged across different Layer-2s.
In simple terms, smart contracts on based Rollups can almost instantaneously call other contracts on Layer-1 within the same block, as if they were all on the same chain.
This synchronicity and the concept of ‘money legos’ are not new; they have always been an important part of Ethereum's original vision.
Read more: Rethinking Ethereum consensus through Beam Chain
However, the current decentralized state of Rollups leads to asynchronous transactions between Arbitrum and Optimism, resulting in fee uncertainty. This uncertainty is exacerbated by calculating gas fees at different points in time rather than uniformly calculating them within the 12-second time slot of Ethereum blocks.
Besides allowing Ethereum to achieve better interoperability, this mechanism also brings significant cost savings. Nethermind's technology lead Ahmad Mazen Bitar explained:
「Users can initiate a transaction on Layer-1, utilize the deep liquidity pool of Layer-2 for execution, and then return to Layer-1. This synchronous composability makes the whole process more efficient.」
Currently, the largest based Rollup is Taiko, which has seen significant growth in its TVL and daily transaction volume this month.
Source: DefiLlama
Other early based Rollup projects are also in development, such as Surge by the Nethermind team and UniFi by the Puffer Finance team. These projects are based on Taiko forks.
Nevertheless, based Rollups also face some challenges. Since the sequencing task is completed by Layer-1 validators, their performance is constrained by Layer-1's 12-second block time.
Therefore, the advantages of based Rollups (such as synchronous composability) may be difficult to fully realize in practice. It requires completing real-time zero-knowledge proofs within a 12-second time slot; otherwise, it cannot quickly execute composable transactions.
To this end, Taiko has introduced various technologies, including zk proofs from Risc Zero and Succinct Labs, as well as a trusted execution environment (TEE) based on Intel SGX. This makes Taiko the first based Rollup to implement multiple proofs in a production environment without relying on a single trusted party.
「The performance of provers is rapidly improving. We are seeing more trusted execution environments (TEE), more efficient and cost-effective zero-knowledge virtual machines (zkVM), and verifiable state machines (AVS) being introduced. We believe that the progress in zk technology is going very smoothly, and the goal of generating proofs within sub-time slot delays is not far off,」 said Brecht Devos, co-founder of Taiko, in an interview with Blockworks.
However, based Rollups also face some challenges. For example, the lack of a centralized sequencer may lead to the loss of MEV (Maximum Extractable Value), an important source of revenue. However, Devos stated that this issue can be addressed through some innovative methods.
In the Taiko network, ‘MEV can be captured by auctioning ‘execution tickets’ to Layer-1 block proposers,’ Devos explained to Blockworks.
Therefore, while based Rollups default to giving sequencing rights to Layer-1 validators, this is not the only solution.
Matthew Edelen is the co-founder of Spire Labs, a company focused on Rollup infrastructure. He shared similar views in a recent Bell Curve podcast: ‘Auctions are not the only way to allocate sequencing rights. We can auction off 99% of the sequencing rights while allocating the remaining 1% to friends or independent stakers to showcase a better image on L2Beat.’
In the long run, MEV (Maximum Extractable Value) may not be a major issue. This viewpoint stems from a simple cost-benefit analysis: currently, most of the revenue on the blockchain comes from congestion fees, which far exceed MEV revenue. Moreover, as more efficient MEV solutions continue to emerge, the proportion of MEV revenue is gradually decreasing.
Therefore, for Rollups, a better revenue model is to rely on the network effects brought by synchronous composability, benefiting from congestion fees rather than depending on MEV charges.
As Justin Drake mentioned on The Rollup podcast:
「Currently, the ratio of congestion fees to contention fees is about 80:20. In the revenue of Ethereum mainnet (Layer-1), 80% comes from congestion fees — approximately 3200 ETH daily since the implementation of EIP-1559. And since the merge, MEV revenue has been around 800 ETH daily. I believe this ratio will become even more skewed, possibly evolving from 80:20 to 99:1.」
In summary, the advantages of Based Rollup bring the user experience of Ethereum back to its original state.
Interestingly, this return actually evokes the characteristics that have been inherent in blockchain since its inception. Synchronous composability and transaction sorting functions on Layer-1 have been core characteristics of blockchain since the birth of the Bitcoin network.
The differentiation of responsibilities on the execution layer is primarily due to the recent centralized development trajectory of Rollups (as well as the multi-chain architectures of Polkadot, Cosmos, and Avalanche). Today, Rollup-based solutions are ready to reclaim this original intent.
「 Original source」
