Interpreting the next generation Ethereum Layer2 solution: Based Rollups

Source: Denglian Community

Rollups have developed rapidly. Initially, classic rollups provided a short-term solution to Ethereum's scalability challenges. Now, as the technology advances, we are building the next generation of rollups that not only further scale Ethereum, but also retain decentralization, security, and economic sustainability.

In a four-part series called "Understanding the Next Generation of L2", we explore some new types of rollups - Based rollups, Booster rollups, gigagas rollups, native rollups - and aim to introduce these designs to a wide audience. These rollups represent the future of Ethereum scaling, and given @2077Research’s commitment to making Ethereum research and development (R&D) accessible, we thought it was important to educate the community on newer L2 designs.

Our goal is to quickly introduce these technologies and clarify the concepts involved. In this series, we will break down each rollup type, exploring their design, benefits, tradeoffs, and overall impact on the Ethereum roadmap. Whether you’re an Ethereum enthusiast, developer, or just curious about blockchain scalability, this series is for you.

The first post looks at Based Rollups — a proposed approach to building rollups that aims to mitigate issues with classic rollups, such as sorter centralization, lifecycle risk, and censorship resistance. We’ll explore how Based Rollups work, the benefits they provide, and the barriers to adoption of Based Rollups.

What is Based rollup?

If a rollup uses a sort-based approach to processing transactions, it is called a Based rollup. Sorting refers to how transactions are ordered in a rollup. Based sorting utilizes the validator set of the Layer 1 (L1) chain to sort transactions, rather than relying on a centralized entity (“sorter”) to sort transactions.

Today, traditional rollups have centralized sorters, which leads to several problems. These problems include censorship of user transactions, risk of single point of failure, and MEV monopoly (centralized sorters can extract MEV (maximum extractable value) from users due to private access to the memory pool).

Given the problems with centralized sorting, the Ethereum community has been looking for alternatives. Importantly, such alternative ordering designs must meet a key design goal: they must be as efficient and fast as their predecessors.

Based Ordering and Based Rollups are a positive step in this direction as they provide a new way to order transactions for rollups that inherits Ethereum’s censorship resistance, eliminates single points of failure, and avoids sacrificing speed for decentralization. We describe how Based Rollups work below.

How do Based rollups work?

The main difference between a Based rollup and any other type of rollup is the way transactions are ordered. In a Based rollup, transaction ordering is managed by the underlying L1 blockchain (in this case Ethereum). Specifically, in Based Rollup, “any next L1 proposer is free to include subsequent rollup blocks in the next L1 block, along with L1 finders and builders, without special permissions.” In a rollup-based architecture, a user’s transaction is directed to an L1 builder that has agreed to be the Ethereum and L2-based building blocks. The user indicates their maximum transaction fee, the L2 captures the base fee (set based on L2 network congestion) and forwards the priority fee (paid to incentivize transactions to include tips) to validators, who decide on transaction ordering. This arrangement allows Ethereum to not only secure all fees for its ecosystem, but also collect a portion of L2 tips, as well as fees for transaction settlement. Returning value to L1 makes Based Rollups a symbiotic relationship with Ethereum and dispels the notion that rollups are parasitic on Ethereum. Leveraging L1 proposers to provide L2 with a secure, reliable, and reliable blockchain for Ethereum users is a great way to make money. Another benefit of transaction ordering is that it eliminates intermediary steps in the transaction process. This can potentially lead to lower transaction costs by avoiding the need to verify signatures from centralized or decentralized orderers.

It is worth mentioning that this cost reduction is not unique to Based Rollups; any rollup that uses shared ordering may see similar benefits. Since proposed blocks on L1 are permissionless, this promotes a competitive environment among block builders, which may further reduce fees for users.

Description of taiko Based rollup architecture

Since Based Rollup submits its proofs directly to Ethereum, its settlement is essentially on Ethereum. This means that anyone on Ethereum can access the verified state of the L2 chain. Based Rollup cannot be verified on its underlying L1 Based Rollups publish the data needed to reconstruct its chain state on Ethereum, making Ethereum its Data Availability (DA) layer. This allows anyone to verify block hashes and retrieve transaction data from blocks. Based Rollups use Ethereum's consensus layer for transaction ordering, eliminating the need for its own consensus mechanism. Transaction execution in a Based Rollup occurs off-chain within its ecosystem, which means that the Based Rollup itself serves as its own execution layer. For example, existing Based Rollups, such as taiko and SpireLabs, although settled on Ethereum, run on the same L1 but maintain their own unique execution layer to execute transactions.

What are the pros and cons of a Based Rollup design?

The advantages of Based Rollups include inheriting Ethereum's security and liveness, potentially reducing transaction costs by eliminating additional ordering, enabling atomic composition of L2 transactions interacting with L1 state, simplifying the architecture without the need for separate consensus, ensuring data availability for all data on Ethereum, and providing strong censorship resistance.

However, like everything in crypto, Based Rollups have their concerns. Based Rollups rely on Ethereum's performance, which may limit scalability due to Ethereum's block space limitations. L2 operations are still associated with gas costs, which can be considerable. There is also the issue of MEV, where L1 validators may affect transaction ordering. The close connection with Ethereum's consensus and data layer may limit customization for specific use cases.

Based Rollups FAQ

In this section, we answer some common questions about Based Rollups. Our goal is to dispel specific misunderstandings about Based Rollups and provide clear information about various aspects of the based rollup architecture.

How is MEV managed in based rollups?

Most MEV benefits L1 validators because the incentive for L1 finders and block builders is to include rollup blocks in their L1 packages to capture this value, thereby encouraging L1 proposers to include these blocks. Currently, ~80% of Ethereum MEV comes from congestion and 20% from contention. If L2 MEV reflects this, a large portion may stay on L2.

Is using rollup cheaper for users compared to the alternatives?

Using L1 proposers as L2 sorters can save an intermediary step, potentially reducing costs by eliminating sorter signature verification. This cost savings applies not only to rollup-based, but also to shared sorting rollups, as permissionless block proposals promote competition, potentially reducing fees.

Are rollup-based speeds limited to Ethereum's block time?

Yes, rollup-based transaction confirmation times are tied to L1's block time, which is currently 12 seconds. However, rollup-based transactions can achieve instant pre-confirmation. This can be achieved through a mechanism similar to re-staking, where some L1 validators commit to including rollup-based blocks in their future L1 blocks. This is possible because validators know who will propose each block 32 blocks in advance.

How “live” is rollup-based liveness?

Order-based shares Ethereum’s liveness guarantees, fully inheriting its uptime. Even a slight drop in liveness (e.g., from 100% to 99%) can be exploited under adversarial conditions, leading to significant disruption and toxic MEV.

What is the difference between order-based and shared ordering?

Order-based can be viewed as a specialized version of shared ordering. Shared ordering, as a transaction ordering system across multiple rollups, aims to achieve economic efficiency, higher throughput, and faster confirmations than L1. It differs from rollup-based rollups in that it uses its own operators for consensus, making it more complex and not entirely dependent on Ethereum’s liveness.

Conclusion

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

As we continue in this series, we’ll dive deeper into enhanced rollups, native rollups, and hyperscale rollups — examining how these types of rollups address different aspects of Ethereum’s scalability.