Based Rollups: The Layer 2 Endgame?

It’s become clear that Etheruem’s path to scalability and mass adoption is through rollups. So far, siloed solutions like Optimism and Arbitrum have successfully allowed Ethereum to scale to thousands of transactions per second. However, there are several issues that they have yet to solve, including transaction liveness, censorship resistance, and interoperability. A new architecture called the based rollup may become the new approach for rollups to scale and stay Ethereum-aligned.

To understand the value of a based rollup, it is important first to understand how today’s rollups work. At their most basic level, rollups allow for Ethereum to scale by taking the transaction execution and computation, an extremely expensive process in a decentralized and distributed environment, and moving it off-chain where it can be cheaply computed. Then, the proof that the transactions were executed correctly, as well as the data used to make the computations, are stored on-chain so anyone can verify or even re-execute the transactions. A computing engine called the sequencer is responsible for the processing and ordering of these transactions. It is typically centralized and run by the foundation that created the rollup. 

Though centralized sequencers have been fine up to this point, there are several different risks they could pose. First, since they are associated with a legal entity, they could be subject to the laws and regulations of a specific country or region. In practice, this could mean that sequencers are forced to censor certain transactions, or may have to shut down entirely. Though rollups have a mechanism in place, called the exit hatch, to prevent a sequencer from having full control to act maliciously, this is a complex and costly process for a user to initiate and is not ideal. 

One solution is using shared, decentralized sequencers, like those that Espresso Systems are making. The thought is that by allowing rollups to share the same “air traffic control” engine, they can more easily interoperate with one another and have more safety against downtime or censorship. While this is certainly a better approach than centralization, it also provides another middleman in between transaction execution and validation on the main Ethereum chain. As with any service, this middleman will charge fees, likely in a native token that will not be directly related to Ethereum. In some sense, it creates more flexibility for a rollup to be more loyal to its sequencer than its L1 chain.

Based rollups solve this problem by having the L1 validators be the L2 sequencers. By having one validator set be responsible for both the L1 and any L2s that opt in, there is greater simplicity, inter-layer alignment, and efficiency. The key concept is to use a new type of confirmation, a based preconfirmation, to allow validators to make fast guarantees that they will include the much quicker L2 blocks on the L1 chain when it is their turn to propose a set of transactions. Currently, the Ethereum block time is around 12 seconds, whereas some rollups strive for sub-second times. By having validators opt into new slashing rules that require them to include L2 transactions they see into their block, we can get a preconfirmation that’s good enough to sustain liveness on the L2.

Though based preconfirmations would not have been possible in the past without an upgrade to the core Ethereum protocol, EigenLayer now makes this process much simpler. EigenLayer allows for new protocol and slashing rules to be created and made opt-in, meaning that only the validators who choose to re-stake on EigenLayer would be subject to these new rules and the associated rewards from transaction fees. If a high minority of validators, possibly around one-third, opt into this rule, then some estimates suggest that there will be sufficient support to state with a high probability that the pre-confirmed transactions will eventually enter the Ethereum L1 chain within a reasonable amount of time. 

Based rollups are an interesting and exciting new architectural development that could be adopted by any rollup to increase their alignment with Ethereum, simplify their design, and reduce censorship and liveness concerns. EigenLayer plays a key role in its rapid rollout and demonstrates the speed at which Ethereum’s value proposition can now fluctuate. Though it may be a year or so before all of the infrastructure is in place to support a based rollup, the prospect of bringing greater decentralization and scalability to blockchain is nothing but exciting.

By Lincoln Murr

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