Recently, Taiko issued tokens, and Ethereum researcher Justin Drake reiterated the Based Rollups concept he proposed a year ago on Twitter, emphasizing that Based Rollups will be the endgame. This has increased market attention to this technology, and this article will introduce the recent developments in Based Rollups.
Justin Drake: Based Rollups to Reach Endgame
Based Rollups: What Problems Are They Trying 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
Innovation Driven by Based Rollups for Ethereum’s New Opportunities
Justin believes that the ecosystem will be driven by two major technologies in the near future: Based Rollups and Pre-Confirmation (preconf). He has organized related projects and infrastructure for these two technologies and specifically mentioned that Based Rollups will bring about the endgame, showing his expectations for this technology.
Justin’s Ecosystem Organization for Based Rollups and preconf
Most of the existing innovations in Rollups come from breakthroughs in verification modes, such as the fraud proofs of OP Rollups or the zero-knowledge proof systems of ZK Rollups. These technologies are indeed progressive and meaningful, and corresponding infrastructure is still flourishing, such as ZK co-processors or proof aggregation layers.
However, the centralization of sequencers and the associated security issues seem to be increasingly valued by the market and lack solutions.
Asset security in Rollups is also an issue that cannot be ignored. For example, when the sequencer of a Rollup extracts MEV from users by changing the order of specific transactions, or even excludes certain users’ transactions due to regulations, technical issues, or other intentions, it may result in users suffering losses or being unable to recover assets.
Therefore, for Rollups to reach stage 2 in the industry, a comprehensive escape mechanism needs to be established, including escape hatches and force inclusion facilities, to protect the security of user assets.
However, any mechanism designed to make transaction sequencing fairer or to protect asset security will increase the complexity and development difficulty of Rollups, and in reality, ordinary users are unable to operate these tools.
Furthermore, the centralization issue of sequencers is imminent.
As mentioned above, sequencers can determine the order of transactions, and the significant MEV profit factor, along with the incomplete decentralization of sequencer technology, means that current first-line Rollups are basically centralized in terms of sequencer architecture and are not open-source.
To address the design issues in Rollups, Based Rollups have emerged, attempting to directly remove the role of sequencers. If there is a fear of sequencers acting maliciously, making mistakes, being centralized, or extracting MEV, it may be more effective to discard the sequencers altogether and think of other solutions.
All of this can be traced back to Justin’s initial proposal of the Based Rollups concept in the Ethereum community in March of last year. Justin referred to it as Based Rollups or L1-sequenced Rollups.
Based Rollups remove the design of sequencers and delegate the sorting work to L1 nodes, specifically Layer1 searchers or anyone who can submit transaction information to Layer1 proposers, making the process permissionless.
Based Rollups delegate the sorting work directly to Layer1 validators and proposers.
Layer1 searchers (potentially also Based Builders) and builders are incentivized by Based Rollups or third parties to include transaction information from Rollups in blocks and submit them to proposers.
By entrusting the sorting work to Layer1 proposers, the overall design architecture of Based Rollups can become very simple, inheriting the decentralization properties of Layer1 and integrating with Layer1 economically (as fuel fees are paid directly to Ethereum nodes).
Advantages
Justin points out that Based Rollups removing sequencers have the following advantages:
Firstly, Layer2 liveliness will be the same as the mainnet because sorting is handled by L1, ensuring that assets have the same liveliness guarantee. In contrast, Rollups with escape hatch designs in the past had lower activity levels, as transactions in the escape channel had to wait for a timeout period for settlement and could be subject to review.
Based Rollups are more decentralized, inheriting the decentralization capabilities of L1 for sorting and using the infrastructure of searchers, builders, and proposers from Layer1, thus achieving decentralization.
Additionally, by removing the sequencer and related compromise designs, such as verification mechanisms (no need to spend a lot of technical effort to generate zero-knowledge proofs) or fraud proofs and escape hatch designs, the overall design of Rollups can become simpler, increasing protocol security.
Economically, it is also very interesting because without an in-house sequencer, the cost based on sorting becomes zero. However, Rollups can still maintain autonomy. Despite delegating sorting to L1, Based Rollups can still have governance tokens, charge basic fees, and use the revenue from such fees as they see fit.
However, the disadvantages of Based Rollups are also clear and stem from the design without sequencers:
Based Rollups do not have MEV income. Based Rollups direct the potential income from MEV flows to Layer1, with their income being limited to basic fees at most. The sustainability of the project is still to be evaluated unless the network gains a significant market share.
Additionally, delegating sorting to Layer1 will reduce sorting flexibility. This makes the design of certain sequencing services more difficult, or even impossible. For example, a pre-confirmation design can confirm transactions for users before achieving finality on the Ethereum mainnet, improving user experience. This is easy to achieve with centralized sequencing but may require a wait for transactions to be confirmed on the mainnet in Based Rollups.
Taiko is the first Layer2 project designed based on the Based Rollups architecture, claiming to be the first type of ZK-EVM, equivalent to the Ethereum Virtual Machine. It is currently considered a proponent of Based Rollups, and the recent token issuance has brought more market attention to this concept.
Taiko’s Operating Architecture
Taiko’s architecture is essentially the prototype of Based Rollups as described above. For readers interested in Based Rollups, it is recommended to read their documentation for a more concrete understanding of this new concept.
Puffer Finance is an Ethereum re-staking project (LRT) that, due to its re-staking business, has many ETH provided for external borrowing to become validators. Its protocol focuses on allowing anyone to run a node on Ethereum as a node operator, reducing the threshold for validators from 32 ETH to 1 to 2 ETH.
However, what does this have to do with Based Rollups? By having their own running validators, they can directly avoid the possibility of validators not sorting the transactions of Based Rollups into blocks, thereby reducing related incentive rewards. This allows users to have cheaper transaction fees in Based Rollups, and there is even an opportunity to integrate and create a pre-confirmation mechanism.
In summary, Rollups have become an important foundation for Ethereum’s development, but most Rollup projects are progressing very slowly in terms of sequencer innovation. While there are second-line competitors like Metis that have introduced decentralized sequencer architectures, their impact is limited. This is why the concept of Based Rollups has emerged, with the hope of making significant breakthroughs in sequencer issues.
Based Rollups’ design is fundamentally innovative. Unlike many recent Layer2 projects that make minor adjustments in proof mechanisms or integration (such as Manta Pacific) or even no changes (such as Swell Layer2), Based Rollups overturn existing foundations and directly eliminate sequencers, aiming to disruptively innovate and create infrastructure that better meets user needs.
The innovative concept of Based Rollups may not require zero-knowledge proofs, proof aggregation layers, or external data availability layers (DA) in the future. The existing ecosystem and projects may face a major transformation.
It is understandable why there is much discussion in the Ethereum community. Rather than expecting Layer2 projects to solve sequencer issues well or even giving up underlying interests, it may be worth trying a completely new architecture like Based Rollups.