L2 Sequencing: Where are we? Where are we heading?

## L2 Sequencing ### Where are we? Where are we heading? *Terence Tsao* Core Dev @ Offchain Labs ---  ## Agenda * Why do we sequence? * Sequencing vs. execution * Sequencer * Dos and Donts * Decentralized design goals * Today's landscape vs. tmw * Interaction with MEV ---  ## Why do we sequence? - Txs can be ordered by the parent chain - Not economical - Aggregate off-chain, batch, and commit on-chain under a single tx - Compression - Minimizes user cost - At the very least, users can still use parent chain - Censorship prevention - Worse UX and higher cost ---  ## Sequencing vs. execution - Separation of concern is a feature, not a bug! - Once tx is sequenced, (& posted on parent chain) it's final - Why separate? - Because they are! - Proposer requires the sequence - Sequencer doesn't require the state ---  ## Sequencing vs. execution ![](https://hackmd.io/_uploads/Hk5JDSidn.png) [ref](https://developer.arbitrum.io/inside-arbitrum-nitro/#sequencing-followed-by-deterministic-execution) ---  ## Sequencer main role - Receive txs from users - Emit ordered and timestamped sequence from users txs - Emit **soft** commit (ms) - Emit **hard** commit (parent chain finalization time) - Proposers take sequenced txs and propose L2 blocks ---  ## Sequencer cannot do - Change the result of the txs - Can not censor you forever - Invariants: - Collect execution fee - How much to charge for gas - Protocol only **trusts** sequencer for one thing, and that is order txs ---  ## Sequencer Design goals - Liveness - Minimize the following - Tx latency - Toxic MEV (front-running) - Reduce co-location incentive - Resolve latency by bidding - Censorship resistance ---  ## Sequencer designs - Centralized - Partial/full decentralized - Shared/outsourced ---  ## Outsourced designs - Your sequencer can be outsourced to another - Sequencer - L2 chain - L1 chain ---  ## Break down the problems Sequencer committee is just a set of computers[1] that implements some ordering policies[2] through some consensus algorithms[3] ---  ## Ordering policy - First come, first serve - MEVA (full block auction) - Time boost - Continuous time - Discrete time ---  ## Ordering policy: FCFS - Easy to understand - Minimize TX latency - Minimize Toxic MEV (front-running) - Can't resolve race by bidding ---  ## Ordering policy: MEVA - Anyone can become a sequencer by bidding - Highest bid wins to sequence at a future time - Rational profit-maxi actor will maximize value - Bid should be as close as the value extracted - Unknowns: timing & censorship ---  ## Ordering policy: Time boost - Allow bidder to buy time / bid up time for adjusted timestamp $t_\mathrm{adjusted}(T) = t_\mathrm{arrival}(T) - \frac{gB(T)}{B(T)+c}$ - No tx can be held for more than $g$ time - Resolve race by bidding, no front running if sequencer is honest - Dist time vs. cont time - Under analysis which is more efficient ---  ## Ordering policy comparisons | ordering policy | latency | reduce toxic MEV | resolve race by bidding | trusting sequencer to not reorder| | --- | --- | --------------- | -------- | -------- | | FCFC | ✅✅ | ✅ | ❌ | ❓| | MEVA | ❓ | ❌ | ✅ | ❓ | | Time-boost | ✅ | ✅ | ✅ | ❓ | ---  ## Sequencer consensus policy - Leader auction - Random leader election - Economic competition - Threshold cryptography ---  ## Consensus + ordering policy - Ordering policy can be applied to any design - Committee reaches consensus on ordering - Pre-determined safety assumption - Tradeoffs between latency & size ---  ## Decentralize via committee - No longer a single sequencer - Committee can be elected by gov - Ordering policy is voted through protocol - Front run can be detected and slashed out of band - Reserved sequencer for liveness - Requires manual intervention ---  ## Decentralize via BFT - Round-based single-leader selection - Txs are gossiped through p2p network - Better liveness - Likely slower - Manual intervention is no longer required ---  ## Decentralize via committee + threshold decryption - Leaderless, anyone can batch post - Encrypted tx goes to all parties - Parties work together to decrypt a tx - Parties reach a consensus on ordering - Require automatic broadcast protocol. Non-trivial latency ---  ## Comparisons | Consensus | Liveness | Latency | Reduce co-location incentive | Censorship resistance | Trustless | | -- | -- | -- | -- | -- | -- | | Centralized | ❌ | ✅✅✅ | ❌ | ❌ | | Committee | ✅ | ✅✅ | ✅| ✅ | | BFT | ✅ | ❓ | ✅ | ✅ | | Committee + Threshold | ✅ | ✅ | ✅✅ | ✅✅ | ---  ## Shared sequencing - Can achieve efficient data packing - Cross-domain value extraction - Automatic inclusion, not execution! - How to achieve cross-rollup composition? - Unless it runs every $STF$? - How to distribute value extraction back to individual rollup? ---  ## Finally. What's next❓ - Sequencer will be decentralized - Ordering policy will be adopted - Proposals will go through governence vote - May the best one win (multiple winners?) ---  ## Thank you! Enjoy rest of ethCc! Find me @terencechain ---