Based Rollups: A new solution to decentralize Rollups sequencers

Recently, a liquidity re-staking protocol active in the EigenLayer ecosystem launched a solution called Based Rollups, aiming to introduce Ethereum mainnet validators to provide a more secure and efficient Decentralization solution for Rollups, especially in terms of the decentralization of sequencers.

As a classic LST protocol, being able to provide new technical solutions by combining its own characteristics is a nice narrative expansion. The decentralization of the sorter is a core concern of the community, which is almost the weakest point of the Rollups system and can directly affect the user experience. Based Rollups attempt to outsource sorting to Layer 1 to achieve decentralized sorting, which not only reduces the risk of current Rollups sorters being overly centralized but also significantly lowers transaction costs and enhances system activity.

Developers can easily deploy and manage their own Rollups chains based on the Based Rollups architecture, just like deploying smart contracts, and enjoy the security and Decentralization features of Ethereum.

Current Issues with Rollups

Currently, ZK or OP Rollups rely on centralized sequencers to determine the order of transactions. This centralization brings risks, including sequencer failures and reduced user trust, as well as the derivative MEV issues.

To mitigate these risks, many Rollups provide a "lifeboat" mechanism that allows users to exit Rollups in the event of a sequencer failure. However, this increases latency and gas fees and may be exploited by malicious sequencers to extract MEV.

The industry urgently needs a Rollups solution with a Decentralization sorter.

Introduction of Based Rollups

Rollups whose transaction order is determined by L1 are called Based Rollups. This concept was proposed by a researcher from the Ethereum Foundation in March 2023.

Base Rollups achieve ordered decentralization by leveraging L1 proposers to determine transaction order. This approach not only inherits the liveness and decentralization of L1 but also eliminates the need for escape hatches, thus enhancing the security and efficiency of Rollups.

How Based Rollups Work

In Base Rollups, L1 proposers can collaborate with L1 seekers and L1 builders to include Rollup blocks in the next L1 block without permission. The order of the included L2 blocks and the final ordering of transactions are determined by the L1 proposer. However, L1 proposers typically do not build L2 blocks themselves; instead, this task is completed by L2 builders, which does not increase the workload of the L1 proposers.

Certain projects are an example of Based Rollups, where the VM and Rollups execution agents act as the execution layer to execute transactions off-chain, while the transaction order is determined by the Ethereum consensus layer starting from the consensus layer, and the transaction data is also published on Ethereum, ultimately allowing for transaction status verification on Ethereum.

Advantages of Based Rollups

1. Inherit L1 censorship resistance and enhance transaction activity: Based Rollups are operated by Ethereum L1 proposers and validator nodes, inheriting Ethereum's censorship resistance, thus eliminating the need for escape hatches. This ensures transaction activity and avoids the transaction delays and unfairness caused by escape hatches.

2. Reduce Transaction Costs: Transactions based on Rollups do not require additional Gas fees and do not need to verify the signatures of centralized sorters, nor do they require escape hatches or external PoS consensus, further reducing costs.

3. Inherit L1 Decentralization, the system is simpler and more secure: Based Rollups only execute the transaction layer off-chain, while the consensus layer for ordering transactions, the data visibility layer, and the verification layer are all on L1. This reuses L1's seeker-builder-proposer architecture, making the Based Rollups system very simple. L1 seekers and block builders are incentivized to include Rollups blocks in their L1 bundles and L1 blocks to extract Rollups MEV, further enhancing L1's security.

4. Flexible Token Governance: Although the ordering is delegated to L1, Based Rollups can still have governance tokens to collect base fees. Of course, tokenless implementation is also possible, as its correctness and fairness are guaranteed by Ethereum.

Challenges Faced by Based Rollups

MEV income forced to decrease

MEV is a major component of traditional Rollup revenue, but most of the MEV from Based Rollups flows to L1 proposers, sacrificing the MEV income of Based Rollups while still retaining the option to earn revenue from L2 congestion fees.

Based Rollups hoping to capture their own MEV may have some bribery mechanisms, such as including an auction mechanism in the L1 contract that forces batch submitters to pay some ETH to the contract.

Limited sorting flexibility, unable to achieve pre-confirmation.

Based Rollups delegate sorting to L1, which reduces sorting flexibility, making it impossible to achieve pre-confirmation and first-come, first-served (FCFS) sorting.

Researchers proposed using restaking to address the pre-confirmation issue in the summer of 2023. The design involves restaking, where a portion of L1 proposers submit (via restaking) to include Based Rollups blocks in the L1 blocks they will propose in the future. Since L1 proposers know at least 32 blocks in advance, it is possible to designate who is the proposer for which block.

Improvements of Certain Protocols on Based Rollups

The protocol aims to integrate pre-confirmation with Base Rollups through its architecture, providing fast (100 milliseconds) confirmation times while retaining all the advantages of Base Rollups.

The pre-confirmation mechanism ensures that transactions are submitted to L1.

Pre-confirmation ensures that the decentralized sequencer can effectively submit transactions to L1. Ethereum validators queue to propose blocks. If pre-confirmers fail to fulfill their commitments, they will face penalties such as margin reductions to ensure higher reliability.

Quick confirmation in 100ms

For applications like GameFi, soft confirmation is crucial for ensuring a fast response time (e.g., around 100 milliseconds). However, the sorters of Based Rollups follow a block generation time of 12 seconds due to Decentralization, which results in a minimum confirmation time of 12 seconds, making soft confirmation unable to respond quickly.

The architecture of the protocol integrates pre-confirmation with Based Rollups, enabling Based Rollups to provide a user experience comparable to centralized sequencers, offering a confirmation time of 100 milliseconds while ensuring its liveness.

Conclusion

By collaborating with the Ethereum Foundation, the protocol is providing safer and more efficient solutions for Rollups. This Decentralization sorting method not only reduces the risks of current centralized sorters but also significantly lowers transaction costs and enhances system activity.

With the integration of the pre-confirmation mechanism and a rapid confirmation time of 100 milliseconds, Base Rollups will become the ideal choice for various applications, including GameFi, ensuring user experience while guaranteeing the finality of transactions. Additionally, developers can easily deploy and manage their own Rollups chains on the Based dApp chain based on this protocol, without worrying about the operational issues of centralized sequencers, and enjoy the security and decentralization features of Ethereum.