Centralization of L2 Rollup Sequencers: Challenges and Possibilities

Author: DARREN KLEINE

Compiled by: Shenchao TechFlow

Centralization is the detestable enemy of freedom and progress in the field of distributed ledger technology. Once developers encounter scaling challenges, the blame is often directed at it.

Ironically, in decentralized protocols, the fastest way from point A to point B often involves some form of centralization. Developers may abandon ideals like censorship resistance and independence just to make things fast and cheap.

Stephane Gosselin says that the exploration for further decentralization in the blockchain space is ongoing, but for certain elements, centralization may not be a bad thing after all.

Gosselin, co-founder and chief architect of Flashbots and founder of Frontier Research, discussed Layer 2 Rollups and how centralized sequencers may not be a concern for many on the Bell Curve podcast.

All Rollup Sequencers Are Centralized

First, let’s clarify a fact: All Layer 2 Rollups on Ethereum—every single one—uses centralized sequencers.

The job of a sequencer is to process and order transactions for inclusion in blocks added to the blockchain. Maintaining their own proprietary centralized sequencer system is cheaper, faster, and easier for Rollup providers compared to outsourcing the work.

Gosselin stated, "I still don’t believe this is a bad thing, and I think using FIFO sequencers on Layer 2 is not a foregone conclusion."

Gosselin mentioned that the typical argument against centralization in Rollups is that it creates a "game of delay," leading centralization to specific areas. He noted that clustering in specific locations makes Rollups susceptible to censorship and oppressive regulation, regardless of where the Rollup is deployed.

"But the question remains, is this really a bad thing?"

Gosselin believes that Ethereum is designed to have a maximally decentralized Layer 1, with relatively little economic activity at the base layer. Its goal is to settle data without the "contention" he describes—requiring settlement at specific locations—which occurs within Layer 2.

"If you have an architecture where the Layer 1 only resolves data blocks and all activity happens within Layer 2, this would significantly alleviate centralization pressure on Layer 1."

Cross-Chain Messaging

Gosselin stated that cross-chain messaging could save the day by providing censorship resistance when needed between layers. "You have some way to push messages from Layer 2 back to Layer 1."

With messaging mechanisms like IBC, Gosselin said that Layer 2 will maintain censorship resistance and non-custodial status, as individual Rollup participants can "exit their state and bridge it to some other Rollup in a different jurisdiction."

Host Mike Ippolito pointed out that users would encounter significant "market disruptions" in this scenario.

"For a period of time, we have to migrate assets and everything to the main chain and then back up to another Rollup."

Ippolito noted that the potential threat of disruption could "prevent TVL and activity from migrating to Rollups."

Gosselin agreed, noting, "Another argument is that if you have some way to allow states to exit back to Layer 1," he said, "then you will have a lot of contention on Layer 1."

"So, you face the exact same centralization pressure on Layer 1," he said.

Gosselin acknowledged, "Ultimately, you will be making trade-offs in these different execution environments, but in the end, application developers just want an interface to connect and automatically deploy their services."

"These shared sequencers or decentralized block builders, cross-chain bridges are all trying to build and provide these services," he said. "There are many different ways to build, but it’s still unclear where it will go from here."