Perspectives | Decentralized Rollup Aggregators Open Doors to Enhanced On-Chain Ecosystem Opportunities

Haotian, an encryption researcher, has expressed his views on the decentralization of sequencers, which are important for rollups. He believes that while the development of decentralized sequencers has stagnated for most mainstream projects, the Metis ecosystem has the opportunity to rapidly develop due to its successful decentralization of sequencers.

Background: Stagnation of Rollups’ Decentralized Sequencer Development
Potential Risks of Decentralized Sequencers
Technical Issues of Decentralized Sequencers
Decentralized Sequencers are the Beginning of Rollups’ Narrative
Decentralized Sequencer Drives the Utilization of Tokens
Token Liquidity Staking Promotes the Growth of Native DeFi
Decentralized Sequencers and the Value of Native Tokens are Key to Building the Ecosystem

Initially, decentralized sequencers were an important feature of almost all rollups. However, for various reasons, the development of decentralized sequencers has stagnated for most mainstream rollups such as Optimism and zkSync.

Take Optimism as an example. It already has the majority of the market share, and its strategic approach of promoting growth through the OP Stack has been successful. At this point, implementing decentralized sequencers hastily would bring potential crises and challenges to the overall Layer2 ecosystem, such as MEV (Miner Extractable Value) and malicious node issues. Therefore, it is reasonable to postpone the narrative of decentralization.

On the other hand, as a new competitor in the Layer2 space, Metis does not have the burden of Optimism and can more easily implement decentralized sequencers, making them the foundation for future ecosystem development.

Don’t think that implementing decentralized sequencers in Layer2 is easy. It brings about MEV issues. When the sequencer is centralized, the space for MEV is small. However, when the sequencer is decentralized, MEV becomes a challenge.

Effectively solving the MEV problem in a decentralized architecture is a big challenge. Looking at Ethereum’s roadmap, developing PBS (Priority-based Scheduling) has many technical difficulties. During the transition period, incentives such as MEV-Boost and MEV Router, introduced by the Flashbots team, are used to eliminate the negative impact of MEV on the Layer2 ecosystem.

To address the MEV problem in decentralized sequencers, Metis has introduced a verification mechanism. Validators have the authority to remove specific states from the virtual machine when abnormalities are detected. This is also a trade-off.

Many people think that Metis’ decentralized sequencer is just a “technical narrative” generated by the competition within rollups. However, Haotian believes that decentralized sequencers are the foundation and prerequisite for the future explosion of the Layer2 ecosystem. The reasons are as follows:

Decentralized sequencers are just the appetizer; the main course is the token economic model design after rollups. By giving Layer2 native tokens the use case of paying for network fees, the value of tokens can be increased, allowing them to play an incentive role in the process of decentralizing sequencers.

Although using ETH as the fuel fee for Layer2 networks is more in line with the orthodox development direction of Ethereum, this approach would make Layer2 tokens purely governance tokens, unable to generate value and continuous empowerment in the actual economic structure.

Native tokens need value capture to drive the development of native Layer2 DeFi. For example, if a new chain only circulates wrapped versions of the main chain’s tokens, it can only enjoy the overflow effect of the main chain’s liquidity, lacking the potential for the explosion of native Layer2 DeFi.

In contrast, two years ago, Metis used the METIS token as the fuel fee. This seemingly “unconventional” innovation actually had a long-term plan for Layer2’s economic model.

Once Layer2 tokens have use cases, such as paying for fuel fees, the challenge lies in the subsequent ecosystem adoption.

Ethereum’s DeFi has evolved from staking to restaking. The prerequisite for the skyrocketing of the DeFi tower is liquidity staking.

It is crucial to let incentivized sequencer nodes and projects see the incentivized tokens as the starting point for building a brand-new native DeFi ecosystem, rather than just thinking about mining and selling tokens. It is important for them to participate in ecosystem building to expand the pie.

If you carefully observe the Metis ecosystem, you will find that many similar infrastructures have emerged, such as TheHercules, a decentralized derivative exchange, and ENKI, a protocol for liquidity staking. Although they may appear as new faces, for a Layer2 token that has captured value, these infrastructures may be the key to unlocking the development of Layer2 native DeFi. And there will definitely be more potential projects emerging.

In conclusion, how to decentralize sequencers and let go of control is just the beginning. The real challenge lies in how to coordinate the interests of all parties in the ecosystem through decentralized sequencers:

How can participants be actively incentivized to construct the ecosystem instead of passively speculating and mining tokens?

To perfectly answer these questions, native tokens need to have full value. This requires coordination with the decentralized sequencer architecture to truly bring users and ecosystem to the Layer2 mainnet, rather than just being an option for speculators.

Layer2
Metis
Rollups
Sequencer