Layer-2 sequencers have turn into dangerously centralized, introducing vital dangers that undermine the foundational rules of blockchain. To safeguard community integrity and forestall the erosion of belief, we should urgently transition to a mannequin that does a greater job at eliminating single factors of failure.
Failing to take action jeopardizes community safety and exposes whole ecosystems to critical threats together with transaction censorship, safety breaches and the potential compromise of buyer information and funds.
Since Q2 2024, layer-2 options constructed atop the Ethereum community have been processing a median of 12x extra transactions than the bottom layer. Equally, on June 6, the entire worth locked (TVL) of the layer-2 ecosystem rose to an all-time excessive of $49 billion, signaling the rising adoption of those “execution” networks. Nonetheless, as these options gained traction, an pressing challenge has surfaced: the centralization of their sequencer operations.
Sequencers are very important community parts answerable for ordering and batching transactions earlier than they attain the Ethereum mainnet. Nonetheless, they’ve turn into a double-edged sword, providing effectivity at the price of decentralization.
Learn extra from our opinion part: Web3’s greatest safety risk is a well-known monster — centralization
Sequencers handle information circulate in Ethereum’s layer-2 options by figuring out transaction order when a number of transactions happen concurrently. When two customers try and course of a transaction on the identical time, the sequencer decides who goes first.
Nonetheless, many of those instruments carry the potential dangers related to a single entity having management. Whereas centralized parts can allow quicker transaction processing, in addition they include vital drawbacks, similar to the chance of censorship.
Such considerations will not be unfounded. As we speak’s main layer-2s all depend on “centralized” sequencers, which usually means the corporate that constructed the rollup takes care of its sequencing operations all by itself.
For example, information exhibits that in March alone, Coinbase’s Base community generated $30 million in top-line income for the agency, simply based mostly on the sequencer charges — a determine that annualizes to roughly $360 million per yr.
Subsequently, in a quickly decentralizing panorama the place belief is supposed to be minimized, the notion of a single firm controlling a vital component of a blockchain’s operation naturally raises eyebrows.
Christine Kim, vice chairman of analysis at Galaxy Digital, contends that decentralization shouldn’t be considered as a binary state however reasonably a spectrum, with centralized affect saved at a naked minimal. She has emphasised:
“A decentralized sequencer could also be one of many hardest initiatives for a rollup to work in direction of…to enhance its decentralization and resiliency […]”
With reference to minimizing centralized reliance, customers of Consensys-backed zkEVM rollup Linea just lately suffered losses amounting to $2.6 million. Nonetheless, what was most surprising in regards to the incident was the undertaking dev crew’s unanimous resolution to pause the sequencer and “censor attacker addresses to guard the customers and builders.”
This incident highlights the essential significance of decentralization and the risks of centralization of the sequencer. By eradicating single factors of failure, decentralized sequencers make networks extra resilient to assaults and technical failures. Furthermore, they higher replicate the core values of blockchain know-how, particularly when it comes to transparency and effectivity.
On this regard, most layer-2 options are rapidly recognizing the advantages of distributing management. By leveraging a community of validators and block producers, layer-2 options can randomly choose and rotate sequencer nodes. These events share the duty of transaction ordering and batch submission, enhancing the community’s safety and resilience.
This methodology ensures a good and safe sequencing course of whereas sustaining excessive efficiency, considerably decreasing the chance of censorship or manipulation. That in flip encourages neighborhood participation and aligns incentives between the community and its customers, thus adhering extra carefully to the core rules of blockchain know-how.
Just lately, Vitalik Buterin proposed a classification system for rollup networks — starting from stage 0 to stage 2 — expressing his perception that the majority main rollups right now depend on some type of “coaching wheels.”
Learn extra from our opinion part: Ethereum is ‘far more centralized than of us notice’: Blocknative’s Matt Cutler
Transferring ahead, layer-2s should shed these provisional measures or threat stagnation. Whereas centralization undeniably affords profitable advantages and operational ease, it primarily serves the operator’s pursuits. Decentralization, although difficult, ushers in long-term benefits for each initiatives and their communities.
This “self-reinforcing mannequin” reduces safety prices and initiates a optimistic cycle. Increased neighborhood participation results in elevated staking and enhanced safety, attracting extra dapps and innovators.
Furthermore, the regular liquidity inflows to DEXs post-sequencer decentralization show that customers can settle for slight latency will increase when correctly incentivized. Past enhancing safety by way of mechanisms like liquid staking, sequencer decentralization aligns with worth distribution to business individuals and contributors.
Income sharing fashions like sequencer mining enhance consumer retention, making a direct correlation between neighborhood participation, community safety and ecosystem progress. With technical primitives and useful examples available, even Bitcoin layer-2s are getting ready to supply mining rewards by way of decentralized sequencers.
Going ahead, it’s merely not sufficient for the Ethereum layer-2 ecosystem to depend on only one community to have decentralized sequencers. Making the transition throughout a number of networks is paramount to safeguarding the integrity of blockchain know-how. Established layer-2s ought to act swiftly to keep away from obsolescence and make sure the security of their customers.
