In this post, we delve into the concept of the sequencer node, a crucial element within the Ethereum rollup ecosystem.
This pivotal entity plays a vital role in orchestrating a series of processes that facilitate the transfer of transaction data from L2 to the main L1, serving as the linchpin that connects the two layers.
The performance and level of decentralization of the sequencer node directly impact the security, reliability, and resistance to censorship of these innovative solutions.
Let’s explore these aspects in greater detail below.
Understanding the sequencer and its significance in the EVM ecosystem
Within the realm of Ethereum’s scalability solutions, the sequencer node acts as an entity responsible for sequencing, executing, and bundling off-chain transactions before broadcasting them onto the layer-1 blockchain. Its primary objective is to enhance the scalability and efficiency of layer 2 solutions, such as rollups, by reducing gas fees and expediting transaction finalization.
Technically classified as a node, the sequencer processes transactions conducted on rollups and encapsulates them within a compressed “batch” before transmitting this data to Ethereum, where it is officially recorded and integrated into the primary chain for security purposes.
Depending on the architecture of the layer-2 solution, the sequencer can either be centralized or decentralized, influencing crucial aspects like transaction order, data accessibility, and resistance to censorship.
In Optimistic rollups like Arbitrum and Optimism, the sequencer arranges transactions and publishes them on Ethereum under the assumption that they are valid unless contested. Conversely, in zk-rollups such as Starknet and ZkSync, the sequencer not only processes transactions but also generates cryptographic proofs that are subsequently verified on Ethereum. Lastly, in Validium-type rollups like ZkFair and Rhino.fi, a hybrid process occurs as data is partially verified off-chain.
It’s worth noting that while this concept is utilized by other blockchains and scalability solutions, for the sake of clarity, this article focuses solely on the EVM ecosystem. For reference, components analogous to sequencers can be found in ecosystems like Cosmos, Avalanche Subnets, and Celestia.
Exploring the workflow of sequencers in various Ethereum rollups
Delving deeper into the functionalities of sequencers, we observe how they oversee the lifecycle of a transaction within a rollup.
Their workflow can be categorized into 3 primary stages: transaction collection and sorting, execution, and publication on Ethereum.
1) Transaction collection and sorting
Instead of sending transactions directly to L1, users submit transactions to the sequencer, which organizes them into a specific block based on a predetermined ordering strategy. Typically, rollups employ an “Auction-Based” strategy where transactions are prioritized based on the fees paid (higher fees receive precedence).
Other strategies include “First Come First Served,” where transactions are processed in the order of submission.
2) Execution and state computation
Following transaction ordering, the sequencer executes transactions locally, updating the off-chain state of the rollup.
This deterministic execution adheres to the rules outlined by the rollup’s smart contract on L1, ensuring operational integrity.
3) Batch generation and Ethereum publication
At this juncture, transactions are grouped into batches and forwarded to L1 Ethereum.
The sequencer only publishes essential data (calldata) for Data Availability (DA), guaranteeing that Ethereum can reconstruct the on-chain state whenever necessary. This step minimizes computational efforts to maintain low network fees on L2.
These 3 steps may vary in significance depending on the type of rollup, as illustrated in the subsequent table.
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Addressing the challenges of centralized sequencers
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Presently, the majority of sequencers on Ethereum are centralized, as most rollups rely on a single node to handle the connection between L2 and L1. This configuration is crucial during the initial “Stage 0” phases of rollups, where a balance between decentralization and scalability is essential to establish functional and efficient infrastructure.
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As rollups progress, the goal is to decentralize sequencers by introducing new node-sharing and federation solutions, transitioning to “Stage 1” and “Stage 2.” However, prolonged centralization of sequencers, even temporarily, could pose significant structural challenges for the second-layer network.
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Centralizing control in a single node introduces a “single point of failure”: any attack, technical malfunction, or manipulation targeting the sequencer could compromise the entire infrastructure, resulting in transaction delays or service interruptions. Moreover, this concentration of power heightens the risk of transaction censorship, enabling the operator to arbitrarily exclude or reorder transactions, potentially leveraging MEV strategies.
Another critical concern revolves around trust: the absence of a distributed validation mechanism makes it challenging for users to independently verify the accuracy of transaction processing. This undermines Ethereum’s foundational principle of decentralization.
The dual nature of node centralization: a case study of the Layer-2 Linea
The excessive centralization of sequencers represents a double-edged sword, capable of salvaging an ecosystem from collapse while also exposing it to arbitrary network censorship.
The events surrounding the hack and exploit of the Velocore protocol within the Layer-2 Linea ecosystem in June of the previous year serve as a poignant illustration of this dynamic.
During the cyber attack on the DEX, Consensys—the team overseeing Linea rollup—opted to halt block production, effectively “shutting down” the sequencer. By taking this action and freezing the chain, Consensys managed to address the code vulnerability encountered during the attack. Concurrently, the team censored the attacker’s address, precluding communication with the sequencer responsible for validating and transmitting transactions to L1.
If the sequencer had remained operational, the consequences could have been severe, with potential economic repercussions not only for Linea but also for the broader Ethereum ecosystem.
The hackers could have exploited vulnerable smart contracts to siphon funds, depleting the value of assets reliant on Linea. Additionally, they could have manipulated the network state, complicating detection and resolution of the issue.
This scenario would have reverberated across other DeFi protocols connected to Linea, subjecting numerous users to liquidation and irreversible losses.
The Velocore hack incident prompted introspection within the Ethereum community regarding the delicate interplay between security and decentralization. While Consensys’ swift intervention averted a financial crisis, shielding users and protocols from significant losses, the sequencer shutdown and censorship underscored concerns regarding the concentrated power wielded by Layer-2 operators.