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Summary

  • Rollups are in the process of decentralizing their sequencer
  • Duality of Roles: L2 sequencer = L1 proposer + L1 builder
  • We need to start separating the two roles on L2, just like we did on L1
  • PBS on L2 faces novel challenges: Privacy, Cross-domain MEV, Low latency => PBS is essential but not enough
  • We also need to decentralize the builder role itself

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Decentralizing rollup sequencers

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What is a sequencer?

  1. users send txns to sequencer
  2. sequencer orders them according to some policy
  3. sequencer gives some kind of receipt to the user (”pre-conf”)
  4. sequencer sends ordered batch to DA layer

Source: StarkNet

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Why is decentralizing L2 sequencers important?

  • More and more liquidity + trading volume moving to rollups/L2s (* not the same but we’ll leave the distinction to others)
  • Today, sequencers are centralized
  • Problems with centralized sequencers:
    • Censorship
    • Liveness/availability
    • Rent extraction
    • Centralized chokepoint
    • Unattributable Frontrunning

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How to decentralize?

  • Centralized sequencer (← we are here)
  • L1 or “other chain”-sequenced
  • Sequencer/block auction
  • Random selection from PoS set
  • FCFS (committee) sequenced

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In L2, sequencer = L1 proposer + L1 builder

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L2 sequencer = L1 proposer + L1 builder

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If we look more closely, we can see that there are at least two components to the sequencer

  1. leader election mechanism (proposing)
  2. ordering mechanism (building)

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How to decentralize (revisited)

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L2s w/o PBS

Right now, these two roles are bundled together in rollup roadmaps, and this is problematic

You recreate the dynamics of pre-PBS days on Ethereum L1, leading to

  • PGAs
  • Rampant frontrunning
  • Failed txns
  • Clogged up p2p layer
  • Lower proposer revenue -> threat of vertical integration

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We need to start separating the two roles on L2,

just like we did on L1.

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Refresher: What PBS does

  • Shield proposers from the centralizing effects of MEV / make most valuable block available to all
  • Unlock competition on features from builders
  • privacy for bidders
  • more expressive for bidders (decouple position from price)
  • remove negative externalities on the chain (filter out reverts, reduce p2p load)
  • maximize revenue for the seller (of blockspace)

⇒ We need PBS + explicit MEV auctions to maximize protocol revenue and minimize negative externalities on the network + users.

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But PBS on L2 faces novel challenges.

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Privacy

Centralized sequencers make privacy feel easy, but decentralizing it is hard af,

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How do we recreate privacy?

Option 1: Send to many centralized builders w centralized trust, but this is massive cognitive overhead + you enshrine some builders over others (centralizing)

Option 2: Committee-based solutions (e.g. threshold decryption, FCFS)

Option 3: Homomorphic privacy zone: super hard (what we’re working on)

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Cross-domain MEV

Even with competition between centralized builders, you still have the problem of cross-domain MEV:

  • The builder market is naturally centralizing
  • L2s make the problem worse: the more fragmentation of domains, the more cross-domain mev. The more centralizing pressure on the builder through demand for atomicity

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Latency

  • Rollups love their blocks to be as fast as possible but this is in natural friction with decentralization
  • We need geographical decentralization for neutrality, decentralization, robustness to regulation, fairness & more → for that, we need our systems to be insensitive to latency
  • If you lower block time too much, you encourage vertical + geographical integration between proposers + builders

https://collective.flashbots.net/t/decentralized-crypto-needs-you-to-be-a-geographical-decentralization-maxi

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PBS is essential but not enough:

we also need to decentralize the builder role itself

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SUAVE

Trying to do the heavy lifting on ordering for other chains:

  • Build the best MEV auction, and make it decentralized
  • Removing all elements of Flashbots/searcher/builder trust in the system
  • Privacy for freedom of expression + collaboration
  • Scalable to many domains; allow for cross-domain preferences

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Source: https://twitter.com/jon_charb/status/1637488611745492997?s=61

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In the rollup endgame, we’re gonna need all three:

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Conclusion

Dear Rollups: Please make MEV a more central element of your decentralization roadmaps. Sequencer = Proposer + builder. We need to decentralize both.

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  • Reach out to us to learn more about SUAVE
  • Come to our forum: collective.flashbots.net