‘Sequencers’ — Blockchain’s air traffic control; and why they’re misunderstood

Cheap and speedy “roll-up” networks like Arbitrum, Optimism and Coinbase’s Base are quickly becoming attractive alternatives to conducting transactions on the oft-congested Ethereum network. Transactions are completed on these “layer 2” networks and then recorded for posterity on Ethereum, writes Coindesk. But much has been made recently of these layer 2 networks’ reliance on a crucial piece of infrastructure known as the “sequencer,” which is responsible for bundling up transactions from users and shepherding them down to Ethereum. The sequencer is like “the air traffic controller for the specific L2 ecosystem that it serves,” Sandy Peng, co-founder of the Scroll roll-up, explained this week in an interview. “So, when Alice and Bob attempt to make a transaction at the same time, who comes first? That’s decided by the sequencer.” When people make transactions on a “layer 2” roll-up network, a sequencer is responsible for verifying, ordering and compressing those transactions into a package that can be shipped down to the layer 1 chain, such as Ethereum. In return for its efforts, the sequencer is paid a small portion of the fees collected from users. A criticism of the set-up is that today’s roll-up sequencers are typically run by “centralised” entities, and thus represent single points of failure, potential vectors for transaction censorship, or possibly a choke point if authorities ever chose to shut it all down. Coinbase, for example, runs the sequencer for its new Base blockchain, a role that could produce an estimated $30 million of net revenue annually, based on estimates by the analysis firm FundStrat. It’s not just Base. Today’s leading roll-ups all rely on “centralised” sequencers, meaning a single party – generally, the company that built the roll-up – takes care of sequencing all by itself. Options for “decentralising” this system are on the way, but Ethereum’s biggest layer 2s have yet to embrace it – or simply haven’t gotten around to it. In the world of blockchains, where trust is supposed to be minimised, people tend to bristle at the idea of a single company controlling a pivotal element of how a chain operates. Talk to experts, though, and one comes away with the impression that bigger risks to layer 2 decentralisation and security lie elsewhere. Read more.