Core Components of Layer 2 Networks: Principles, Current Status, and Future Development of Sequencers

The main source of income for layer two networks comes from the gas fees paid by users during transactions, and after deducting the costs of submitting data to the Ethereum mainnet, it is essentially pure profit. Data shows that in the second half of 2023, the profits of OP Mainnet, Arbitrum, and zkSync Era were approximately $5.23 million, $16.5 million, and $22.24 million, respectively.

Behind these massive profits is closely related to the sorters operating in Layer 2 networks. So, what are sorters? How do they work in Layer 2 networks? What challenges are currently faced? How will they develop in the future? Let's delve into these questions.

Principle of the Sorter

The sorter plays a key role in layer two networks, primarily functioning to receive user transactions and execute them, then submitting the sorted and compressed batch to the Ethereum mainnet.

We can liken the sequencer to a bus driver. In the past, when users traded on Ethereum, it was like driving into the city themselves, and when encountering congestion, they could only wait or pay extra fees. The layer two network is like a public transportation system, and the sequencer is the bus driver. Users only need to pay a lower service fee to have their transactions delivered to the destination by the sequencer, saving both money and effort. At the same time, the sequencer will try to fill the "bus" as much as possible and rearrange the passengers to maximize the use of space.

Who can run the sorter?

Common solutions include:

1. Centralized Sorter: Uniquely operated by a Layer 2 team or designated organization, high efficiency and low cost.

2. Completely permissionless sorter: Anyone can participate in sorting and submit to the mainnet, but it may cause resource wastage.

What is the sorting standard for ###?

There are mainly two ways:

1. First come, first served: similar to taking a seat on the bus first.

2. Sort by fuel fees: Transactions that need urgent processing can pay extra fees for priority.

Currently, mainstream Layer 2 networks mostly adopt the first method, but there are no strict regulations on the sorting method.

How to prevent the sorter from being malicious?

In theory, a sorter could act maliciously, such as revoking transactions or inserting malicious transactions. To prevent this, different layer two networks have adopted various constraints:

• Optimistic Rollup uses a fraud proof mechanism, allowing validators to raise disputes during the dispute period.
• ZK Rollup uses validity proofs to instantly verify each batch.

The Problem of Centralized Sorters

Currently, mainstream layer two networks mostly adopt centralized sequencer solutions. Although they are efficient and profitable, they have also raised some concerns:

1. Weak censorship resistance: A single entity operation is easily influenced by regulations or other factors.

2. Low Activity: Single points of failure can easily occur, such as system overloads leading to crashes.

3. Potentially improper MEV gains: The sequencer has the power to manipulate the order of transactions, which may be abused.

Future Development Direction

To address the issues of centralized sorters, multiple layer two networks have proposed decentralized sorter solutions:

1. Geographic Decentralization: Deploying multiple sorters in different locations around the world.

2. Sorter Auction: Bid for the operating rights of the sorter through a smart contract.

3. Leader election: Randomly select a validator from the stakers.

4. Based Rollup: Transaction sorting on the second layer led by Ethereum validators.

In addition, shared sorters are also an emerging solution, where multiple layer two networks share a third-party sorting network, which can enhance atomic composability and prevent MEV extraction.

Although decentralization is the core concept of blockchain, it still faces many challenges in practical applications. For example, completely open sorting rights may lead to chaotic situations similar to the Ethereum MEV market. On the other hand, excessive reliance on shared sorters may create new centralization issues.

Sorters play a crucial role in Layer 2 networks, and their development and decentralization is a long and arduous process. It is believed that with continuous exploration and effort, the current issues will ultimately find suitable solutions.