Rollups are evolving quickly. Initially, classic rollups provided a short-term fix to Ethereum’s scalability challenges. Now, with advancements in technology, we are building next-generation rollups that not only scale Ethereum further but also preserve decentralization, security, and economic sustainability.

In a new four-part series aptly titled “Unpacking The Next Generation Of L2s”, we explore a new class of rollups—based rollups, booster rollups, gigagas rollups, native rollups—and aim to introduce these designs to a broad audience. These rollups represent the future of Ethereum scaling and given @2077Research‘s commitment to making Ethereum research and development (R&D) accessible, we see educating the community around newer L2 designs as important.

Our goal is to provide a quick introduction to these technologies and demystify related concepts. In this series, we’ll break down each rollup type, exploring their designs, strengths, trade-offs, and their overall impact on Ethereum’s roadmap. Whether you’re an Ethereum enthusiast, developer, or just curious about blockchain scalability, this series is for you.

This first article takes a look at based rollups—a proposed approach to building rollups that mitigates problems with classic rollups, such as sequencer centralization, liveness risks, and censorship resistance. We’ll explore how based rollups work, what benefits they offer, and where the roadblocks to adoption of based rollups lie.

What is a based rollup?

A rollup is based if it uses based sequencing to process transactions. Sequencing refers to how transactions are ordered for execution in rollups. Based sequencing leverages the validator set of the Layer 1 (L1) chain to order transactions instead of relying on a centralized entity (the “sequencer”) to sequence transactions.

Traditional rollups today have centralized sequencers, which leads to several issues. These include censorship of user transactions, risk of single points of failure, and MEV monopolies (centralized sequencers can extract MEV (maximal extractable value) from users due to private access to the mempool).

Given the problems of centralized sequencing, the Ethereum community has worked on finding an alternative. Importantly, such alternative sequencing designs must fulfill a key design goal: they must be as efficient and fast as their predecessors.

Based sequencing and based rollups are a positive step in this direction as they provide rollups with a new way of sequencing transactions that inherits Ethereum’s censorship resistance, removes single points of failure, and avoids trading off speed for decentralization. We describe how based rollups work below.

How do based rollups work?

A description of @Spire_Labs based rollup architecture

The main difference between a based rollup and any other type of rollup is how transactions are sequenced. Transaction sequencing in a based rollup is managed by the underlying L1 blockchain (Ethereum in this case). Specifically, in a based rollup, “any next proposer on L1 can work with L1 searchers and builders to freely include the subsequent rollup block within the next L1 block without needing special permissions.

In a based rollup’s architecture, transactions from users are directed to L1 builders who have agreed to build blocks for both Ethereum and the Based L2. Users indicate their maximum transaction fee, with the L2 capturing the base fee (which is set according to L2 network congestion) and forwards the priority fee (a tip paid to incentivize inclusion of transactions) to validators, who then decide the transaction order.

This arrangement allows Ethereum to not only secure all fees from its ecosystem but also to collect a share of the L2 tips, along with the costs for transaction settlement. Returning value to the L1 makes based rollups symbiotic with Ethereum and dispels the notion that rollups are parasitic to Ethereum.

An added benefit of leveraging an L1 proposer to sequence L2 transactions is that it eliminates an intermediary step in the transaction process. This can potentially lead to lower transaction costs by avoiding the need to verify signatures from either centralized or decentralized sequencers.

It’s worth mentioning that this cost reduction isn’t exclusive to based rollups; any rollup employing shared sequencing could see similar benefits. Since proposing blocks on L1 is permissionless, it fosters a competitive environment among block builders, which could further drive down fees for users.

A description of @taikoxyz based rollup architecture from an Ethresear.ch post

Since the based rollup submits its proofs directly to Ethereum, its settlement is inherently on Ethereum. This means anyone can access the verified state of the L2 chain on Ethereum. A based rollup can’t settle anywhere besides its underlying L1.

The based rollup publishes the necessary data for reconstructing its chain state on Ethereum, making Ethereum its Data Availability (DA) Layer. This allows anyone to verify the block hash and retrieve transaction data from the block. Based rollups use Ethereum’s Consensus Layer for transaction ordering, eliminating the need for their own consensus mechanism.

The execution of transactions in a based rollup happens off-chain within its ecosystem, meaning that the based rollup itself serves as its own Execution Layer. For example, existing based rollups like @taikoxyz and @Spire_Labs, which settle on Ethereum, operate on the same L1 but maintain their own distinct Execution Layers to execute transactions.

What are the pros and cons of based rollup designs?

The pros of based rollups include inheriting Ethereum’s security and liveness, potentially reducing transaction costs by eliminating extra sequencing, enabling atomic composability where L2 transactions can interact with L1 state, simplifying architecture by not needing a separate consensus, ensuring data availability with all data on Ethereum, and offering strong censorship resistance.

However, like everything in crypto, based design has its concerns. Based rollups are dependent on Ethereum’s performance, which can limit scalability due to Ethereum’s block space constraints. There are still gas costs associated with L2 operations which can be significant. There’s also the issue of MEV where L1 validators could influence transaction ordering. The close tie to Ethereum’s consensus and data layers might constrain customization for specific use cases.

Based Rollups FAQs

In this section we answer some common questions about based rollups. Our goal is to clear up specific misconceptions about based rollups and provide clarity on various aspects of based rollup architectures.

— How does a based rollup manage MEV?

Most MEV benefits L1 validators as L1 searchers and block builders are motivated to include rollup blocks in their L1 bundles to capture this value, encouraging L1 proposers to include these blocks. Currently, about 80% of Ethereum’s MEV is from congestion, with 20% from contention. If L2 MEV mirrors this, a significant portion could remain on L2.

— Is using a based rollup cheap for users compared to alternatives?

Using an L1 proposer as an L2 sequencer cuts out an intermediary step, potentially lowering costs by eliminating sequencer signature verification. This cost-saving applies not just to based rollups but also to rollups with shared sequencing, as permissionless block proposing fosters competition and could reduce fees.

— Is speed of based rollups limited to the block times of Ethereum?

Yes, the confirmation time for transactions in a based rollup is tied to the L1 block time, which is currently 12 seconds. However, instant pre-confirmations can be achieved in based rollups. This can be facilitated through a mechanism like restaking, where some L1 validators commit to including based rollup blocks in their future L1 blocks. This is feasible because validators know 32 blocks ahead who will be proposing each block.

— How “live” is the liveness of a based rollup?

Based sequencing shares Ethereum’s liveness guarantees, fully inheriting its uptime. Even a slight liveness degradation (e.g., from 100% to 99%) can be exploited in adversarial conditions, allowing significant disruption and toxic MEV.

— What’s the difference between based sequencing and shared sequencing?

Based Sequencing can be seen as a specialized version of Shared Sequencing. Shared Sequencing serves as a system for transaction sequencing across multiple rollups, aiming for economic efficiency, higher throughput, and faster confirmations than L1. It differs from based rollups by using its own operators for consensus, making it more complex and not fully reliant on Ethereum’s liveness.

Conclusion

In the first post of our “Rollups 2.0” series, we’ve explored based rollups, which leverage Ethereum’s validators for transaction sequencing, offering a path to decentralization, security, and cost efficiency.

As we continue this series, we will delve into booster rollups, native rollups, and gigagas rollups—examining how these types of rollups address different aspects of Ethereum’s scaling.

Disclaimer:

1. This article is reprinted from [2077 Research]. All copyrights belong to the original author [2077 Research]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.