Author: Jun, Bankless; Translated by: Deng Tong, Golden Finance
Scaling Ethereum has been one of the most discussed challenges in the cryptocurrency space. To solve this problem, the community has chosen a rollup-centric approach. The idea is simple: instead of hosting all applications on Ethereum, focus on rollups that provide faster and cheaper transactions while still returning Ethereum. So you get faster and cheaper transactions, but still keep the security of Ethereum.
We now have optimistic rollups like Arbitrum, OP Mainnet, and Base, as well as zk-rollups like ZKsync, which have all contributed to Ethereum’s growth. They have brought more users and value to Ethereum, however, there are still concerns about their reliance on centralized collators and the fragmentation of cross-chain liquidity.
This is where rollups come in. They are more tightly integrated with Ethereum’s infrastructure, helping to retain value in the ecosystem. This new way of building rollups can bring additional value to Ethereum and ETH.
What is rollup?
A rollup-based or L1-ordered rollup is a rollup in which the underlying L1 chain (such as Ethereum) directly manages transaction ordering.
Unlike traditional rollups that rely on their own sorters, rollup-based chains leverage L1’s security, liveness, and decentralization by outsourcing transaction ordering to L1’s infrastructure, which includes proposers, searchers, builders, and other participants who permissionlessly include rollup-based blocks in L1 blocks.
Initially, this approach seemed inefficient—Vitalik called it “complete anarchy” in his 2021 article on rollups. But today rollups have become more feasible. In 2023, Ethereum researcher Justin Drake brought the concept back into focus, arguing that rollups are not only more consistent with Ethereum, but also eliminate the need to make separate security assumptions for each new rollup.
How does rollup work?
Rollup-based L1 consensus, data availability, and settlement layers are used while independently handling execution. For example, when Ethereum is the base L1, the key layers based on rollup are as follows:
Execution layer — Managed by the rollup itself, transactions are executed off-chain.
Consensus layer — relies on Ethereum validators to order transactions.
Data Availability Layer — Using Ethereum as the DA layer ensures that anyone can verify transaction data.
Settlement Layer — also part of Ethereum, records the final transaction status of the rollup.
Rollup-based rollups use Ethereum to do everything from transaction ordering to settlement. While this approach may not seem much different from a traditional rollup, it fundamentally changes the way ordering is handled. Instead of relying entirely on a separate sorter, rollup-based rollups leverage Ethereum itself for transaction ordering.
In a traditional rollup, users send their transactions to a dedicated sorter — essentially a machine operated by the rollup team. The sorter is responsible for collecting user transactions, determining their order, and packaging them into blocks that are published on Ethereum.
In contrast, rollup-based rollups direct user transactions to block builders who manage both Ethereum and the rollup. This use of Ethereum infrastructure allows rollups to benefit from the same guarantees provided by Ethereum, allowing transactions to achieve finality more reliably than non-rollup-based rollups.
Top-level projects based on rollup
As a relatively new concept, rollup is still under development, with some key projects emerging:
Taiko — Ethereum equivalent (Type 1) ZK-EVM, maximally compatible with Ethereum and without introducing additional trust assumptions.
KeySpace — Coinbase’s zk-rollup, designed to create smart wallets that can be used on any chain.
Taiko Gwyneth — uses pre-confirmation based rollups and aims to sync with Ethereum.
UniFi — A rollup-based protocol developed by the PufferFi team that uses pre-confirmations to enhance the user experience.
Spire Labs — A framework on Ethereum that allows developers to build blockchain-based applications.
Why use rollup?
As Justin Drake outlined in his original post, rollups are worth your attention for the following reasons:
Inherited Liveness and Decentralization — One of the main advantages of rollup-based chains is that they inherit the liveness guarantees of the underlying L1 chain. As long as the L1 is operational, the rollup can also be operational.
Economic alignment with L1 — The economic model based on rollups establishes a mutually beneficial relationship with L1. The priority fees and MEV of these rollups will naturally flow to L1. This synergy not only adds value to the base layer, but also promotes the legitimacy and brand awareness of the rollups themselves, thanks to the Ethereum community.
Cost efficiency - Outsourcing ordering to Ethereum reduces rollup-based development costs, speeds up time to market, and reduces user costs (especially at scale).
However, rollup-based blockchains also have tradeoffs. They sacrifice some profitability by relying on Ethereum for sorting, missing out on priority fees and MEV. In addition, they face challenges inherent to Ethereum, such as slow block times, which can cause latency issues.
These challenges explain why existing rollup designs have their own sequencers — to provide a fast user experience. While solutions such as pre-confirmed inclusion and execution are being discussed as potential ways to enhance the rollup-based user experience, it remains uncertain whether such improvements can be achieved without introducing a trusted third party. What people are really arguing about is that these changes could compromise the fundamental simplicity and security that makes rollup-based blockchains attractive in the first place.
