Will Based Rollups Change the Ethereum Ecosystem Landscape Taiko and Puffer Leading the Way in Orderless Rollups

Recently, Taiko issued tokens based on the concept of Based Rollups proposed by Ethereum researcher Justin Drake a year ago. Justin Drake reiterated this concept on Twitter, emphasizing that Based Rollups will be the endgame, strengthening market attention to this technology. This article will introduce the recent developments of Based Rollups.

Justin Drake: Based Rollups will usher in the endgame
What problems does Based Rollups aim to solve: Sequencer
Complex design of Rollups
Centralization of 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 create new opportunities for 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 will organize related projects and infrastructure for these two technologies and specifically pointed out that Based Rollups will bring about the endgame, demonstrating his expectations for this technology.

Justin organizes the ecosystem for Based Rollups and preconf
Most of the innovations in existing Rollups come from breakthroughs in verification methods, such as fraud proofs in OP Rollups or zero-knowledge proof systems in ZK Rollups. These technologies are indeed progressive and meaningful, with corresponding infrastructure still developing vigorously, such as ZK co-processors or proof aggregation layers.
However, the centralization of sequencers and the associated security issues seem to be increasingly important and lack solutions in the market.

However, the security of Rollups assets is also a significant issue that cannot be ignored. For example, when the sequencer of a Rollup changes the order of specific transactions to exploit the MEV of users, or even intentionally excludes specific transactions due to regulations, technical issues, or other reasons, users may suffer losses or be unable to retrieve their assets.
Therefore, in order for Rollups to achieve stage 2 regulation, they need to establish comprehensive escape mechanisms, including escape hatches and force inclusion facilities to protect the security of user assets.
However, any mechanism 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.
On the other hand, the centralization issue of sequencers is still imminent.
The sequencer can determine the order of transactions, and given the significant MEV profit factor and the incomplete decentralization of sequencers, the sequencers of current frontline Rollups are basically centralized structures and are not open source.

Facing the design issues of the above Rollups, Based Rollups emerged, attempting to directly remove the role of sequencers.
If one fears that sequencers may act maliciously, make mistakes, centralize, or exploit MEV, it might be better to discard sequencers altogether and think of other solutions.
Everything can go back to when Justin first proposed the Based Rollups concept in the Ethereum community last March.
Justin calls it Based Rollups or L1-sequenced Rollups.
Based Rollups design removes sequencers and delegates the sorting work to L1 nodes, specifically Layer1 searchers or anyone who can submit transaction information to Layer1 proposers, designed to be permissionless.
In the past, when transaction information was uploaded to Layer1 in general Rollups, the contract in Layer1 would confirm whether the transaction was uploaded by a qualified sequencer (usually the sequencer of the Rollups project itself); Based Rollups, however, have no restrictions, and anyone can submit transaction information at any time.

Based Rollups directly delegate sorting work to Layer1 validators and proposers
Layer1 searchers (possibly 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 delegating the sorting work to Layer1 validators, the overall design and structure of Based Rollups can become very simple, inheriting the decentralization properties of Layer1, integrating with Layer1 economically (because gas fees are paid directly to Ethereum nodes).

Advantages
Justin points out that Based Rollups, by removing sequencers, have the following advantages:
Firstly, Layer2 liveness will be the same as the mainnet because sorting is handled by L1, ensuring that assets have the same liveness guarantee. In comparison, Rollups with escape hatch designs in the past had lower activity levels because 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, using the infrastructure of Layer1 searchers, builders, and proposers, thus achieving decentralization.
Additionally, by eliminating sequencers and related compromise designs, such as verification mechanisms (no need to spend a lot of technical ability to generate zero-knowledge proofs) or fraud proofs and escape hatch designs, the design of the entire Rollups can be made simpler, increasing protocol security.
Economically, it is very interesting because without their own sequencers, the cost based on sorting becomes zero. However, Rollups can still maintain autonomy. Even though sorting is delegated 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, stemming from the design without sequencers:
Based Rollups do not have MEV income. Based Rollups direct the potential earnings of MEV to Layer1, with income limited to basic fees at most. Unless the project gains a significant share in the market, the sustainability of the project remains to be evaluated.
Additionally, delegating sorting to Layer1 will reduce sorting flexibility. This makes the design of certain sequencing services more difficult or even impossible. For example, the pre-confirmation design can confirm transactions for users before achieving finality on the Ethereum mainnet, improving user experience. This is easily achievable with centralized sequencing but may require a wait for transactions to be confirmed on the mainnet with Based Rollups.

Taiko is the first Layer2 designed based on the Based Rollups architecture, claiming to be the first ZK-EVM of its kind, equivalent to the Ethereum Virtual Machine. It is currently a proponent of Based Rollups, and the recent token issuance has brought more attention to this concept.

Taiko’s operational 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 to gain a more concrete understanding of this new concept.

Puffer Finance is a re-staking project (LRT) on Ethereum that provides many ETH for external borrowing to become validators due to its re-staking business. The 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 using their own running validator accounts, it can directly avoid the possibility of validators not sorting the content of Baesd Rollups transactions into blocks, thereby reducing related incentives and making transaction fees in Based Rollups cheaper, and even integrating to create a pre-confirmation mechanism.

Rollups have become an important foundation for Ethereum development, but most Rollups projects are currently progressing slowly in terms of sequencer innovation. Although there are second-tier competitors like Metis who have introduced a decentralized sequencer structure, their influence is limited. This is why the concept of Based Rollups has emerged, hoping to make significant breakthroughs in sequencer issues.

Based Rollups’ innovative concept is fundamentally groundbreaking. Compared to the many Layer2 projects that have recently emerged, which only make small adjustments in terms of proof mechanisms or integrations (such as Manta Pacific) or even make no changes (such as Swell Layer2), Based Rollups overturns existing foundations, directly removing sequencers, aiming for disruptive innovation to create infrastructure more suited to user needs.

Based Rollups’ innovative concept may not even require zero-knowledge proofs in the future, nor proof aggregation layers, and certainly not external data availability layers (DA). The existing ecosystem and projects may face a significant transformation.

It is not surprising that 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 might be worth trying a completely new architecture.

Based Rollups
Justin Drake
Puffer Finance
Rollup
Rollups
Taiko