Recently, Taiko issued tokens, and Ethereum researcher Justin Drake reiterated the concept of Based Rollups that he proposed a year ago on Twitter, emphasizing that Based Rollups will be the endgame. This has increased market attention to this technology. This article will introduce the recent developments in Based Rollups.
Justin Drake: Based Rollups to Embrace the Endgame
What Problems Does Based Rollups Want to Solve: Sequencer
Complex Design of Rollups
Centralization in Rollups Sequencers
Introduction to Based Rollups: Removing Sequencers
Architecture of Based Rollups
Advantages of Based Rollups
Disadvantages of Based Rollups
Introduction to Based Rollups Projects
Taiko
Puffer Finance
Innovating Based Rollups to Bring New Opportunities to Ethereum
Justin believes that the ecosystem will be driven by two major technologies in the near future, namely Based Rollups and Pre-Confirmation (preconf). He has organized related projects and infrastructure for both technologies and specifically mentioned that Based Rollups will bring the endgame, showing his expectations for this technology.
Justin’s Ecosystem Organization for Based Rollups and Preconf
Most of the innovations in existing Rollups come from breakthroughs in verification models, such as fraud proofs in OP Rollups or zero-knowledge proof systems in ZK Rollups. These technologies have made significant progress and are meaningful, with corresponding infrastructure continuing to develop, such as ZK co-processors or proof aggregation layers.
However, the centralization of sequencers and the associated security issues are beginning to receive market attention without clear solutions. Asset security in Rollups is also an important issue, as manipulations by sequencers to extract Maximum Extractable Value (MEV) from users or exclude specific transactions due to regulations or technical issues can lead to losses for users and make asset retrieval impossible.
Therefore, achieving stage 2 of Rollups in the industry requires the establishment of comprehensive escape mechanisms, including escape hatches and force inclusions, to protect user asset security. However, any mechanism to make transaction sequencing fairer or protect asset security will increase the complexity and development difficulty of Rollups, making it impractical for ordinary users to operate these tools.
Furthermore, the centralization problem of sequencers remains imminent. Currently, most frontline Rollups are based on centralized sequencers due to the significant MEV incentives and the incomplete decentralization of sequencer technologies. Therefore, sequencers in current frontline Rollups are mostly centralized and not open-source.
Facing the design issues of existing Rollups, Based Rollups emerged, attempting to directly remove the role of sequencers. Rather than adding more preventive measures or compromising designs to prevent sequencers from acting maliciously, making mistakes, centralizing, or exploiting MEV, Based Rollups simply eliminates sequencers and explores other alternatives.
This brings us back to Justin’s initial proposal of the Based Rollups concept in the Ethereum community in March last year. Justin referred to it as Based Rollups or L1-sequenced Rollups.
Based Rollups discard the design of sequencers and delegate the sequencing work to L1 nodes, specifically Layer1 searchers or anyone who can submit transaction information to Layer1 proposers without permission.
Based Rollups Delegate Sorting Work Directly to Layer1 Validators and Block Producers
Layer1 searchers (possibly also Based Builders) and builders are incentivized by Based Rollups or third parties to include Rollups transaction information in blocks and submit them to block producers. By assigning the sequencing work to Layer1 block producers, the overall design architecture of Based Rollups can become very simple, inheriting the decentralization properties of Layer1 and integrating with Layer1 economically.
Advantages
Justin points out that Based Rollups removing sequencers has the following advantages:
Firstly, Layer2 activity will be the same as the mainnet because sequencing is handled by L1, ensuring that assets have the same activity guarantees. In contrast, Rollups with escape hatch designs in the past have lower activity levels because transactions in the escape hatch must wait for a timeout period for settlement and may undergo scrutiny.
Based Rollups are more decentralized, inheriting the decentralization capability of L1 sequencing and using the infrastructure of Layer1 searchers, builders, and block producers, enabling decentralization.
Additionally, by eliminating sequencers and related compromise designs such as verification mechanisms (no need to spend significant technical resources to generate zero-knowledge proofs) or fraud proofs and escape hatch designs, the overall design of Rollups can become simpler, increasing protocol security.
Economically, without proprietary sequencers, the cost based on sequencing will be zero. However, Rollups can still maintain autonomy. While sequencing is entrusted to L1, Based Rollups can still have governance tokens, collect basic fees, and use the revenue from such fees at their discretion.
However, the disadvantages of Based Rollups are clear and stem from the design without sequencers:
Based Rollups do not have MEV income. Based Rollups direct the potential MEV income flow to Layer1, with revenue limited to basic fees. Unless the network gains a significant market share, the project’s sustainability remains to be evaluated.
Furthermore, entrusting sequencing to Layer1 will reduce sequencing flexibility, making the design of certain sequencing services more challenging or even impossible. For example, pre-confirmation designs can confirm transactions for users on the Ethereum mainnet before achieving finality, improving user experience. This is easy for centralized sequencing but may require waiting for transactions to be confirmed on the mainnet in Based Rollups.
Taiko is the first Layer2 designed based on Based Rollups architecture, claiming to be the first ZK-EVM, which is equivalent to the Ethereum Virtual Machine. Currently, it is considered a promoter of Based Rollups, and the recent token issuance has garnered more market attention to this concept.
Taiko Operating Architecture
Puffer Finance is a re-staking project on Ethereum (LRT) that provides many ETH for external borrowing by validators due to its re-staking business. Its protocol focuses on allowing anyone to run nodes on Ethereum as node operators (NoOps), lowering the threshold for validators from 32 ETH to 1 to 2 ETH.
But what does this have to do with Based Rollups? By having their own running validator accounts, Puffer Finance can directly avoid the possibility of validators not sequencing Based Rollups transaction content into blocks, reducing related incentive rewards. This allows users to have cheaper transaction fees in Based Rollups and even the potential to integrate and create a pre-confirmation mechanism.
Rollups have become an important foundation for Ethereum development. However, most Rollups projects are progressing slowly in terms of sequencer innovation. While some second-line competitors like Metis have introduced decentralized sequencer structures, their impact is limited. This is why the concept of Based Rollups has emerged, hoping to make a significant breakthrough in the sequencer problem.
Based Rollups’ design is fundamentally innovative. Compared to the many Layer2 solutions that have recently emerged, which make minor adjustments in proof mechanisms or integration (such as Manta Pacific) or even make no changes (such as Swell Layer2), Based Rollups overturns existing foundations by eliminating sequencers directly, aiming to disruptively innovate and create infrastructure more in line with user needs.
Based Rollups’ innovative concept may not even require zero-knowledge proofs or proof aggregation layers in the future. The existing ecosystem and projects may undergo a significant transformation.
It is no wonder that the Ethereum community has many discussions. Instead of expecting Layer2 projects to solve the sequencer problem well or even giving up on the underlying interests, trying a completely new architecture might be a better approach.
Based Rollups
Justin Drake
Puffer Finance
Rollup
Rollups
Taiko
Further Reading
Vitalik’s Guide | Different Perspectives on Ethereum L2, What are the Trade-offs and Advantages? (Layer2 Standard)
ETHSeoul | Vitalik: In the Long Run, ZK-Rollup Will Beat Optimistic Rollup