Ethereum Layer 2 Solutions: Introducing the ‘Based Rollup’ Approach

Layer 2 (L2) solutions are playing a pivotal role in enhancing Ethereum’s scalability and transaction speed. Among these, the ‘based rollup’ is garnering attention for its unique approach compared to traditional optimistic rollups or zero-knowledge rollups.

Unlike existing solutions, based rollups closely integrate with the Ethereum mainnet, offering distinct advantages. This article delves into what based rollups are and their unique features.

# Key Terms: Sequencer and Block Builder

Before understanding based rollups, it’s essential to grasp a few critical terms.

Sequencer: Operated by the L2 team, the sequencer collects user transactions, orders them into L2 blocks, and submits them to the Ethereum mainnet.

Block Builders: Similar to sequencers, block builders organize and validate user transactions on the Ethereum mainnet, ensuring they are included in blocks.

Base Fee: The minimum fee required for a transaction to be included in a block, determined by network congestion. Ethereum and some L2 solutions burn this fee.

Priority Fee (Tip): An additional fee paid by users to prioritize their transactions, collected by block builders or sequencers.

# Traditional Ethereum and Rollup Structures

Using the aforementioned terms, we can explore how Ethereum blocks are formed and how traditional rollups function. On Ethereum, user transactions are collected by block builders and ordered according to priority fees. Validators then form blocks and include them in the Ethereum network. Some of the user fees are burned as a base fee, while the remaining priority fees go to the block builders.

Traditional layer 2 rollups, such as Optimism or Arbitrum, process transactions similarly to Ethereum. The main difference is that, unlike Ethereum which uses multiple block builders, layer 2 rollups utilize a single sequencer operated by the rollup team. In this arrangement, L2 teams handle all the fees, while Ethereum only receives a portion for data posting costs.

# Based Rollups: Utilizing Ethereum Block Builders as Sequencers

Based rollups introduce a new approach where Ethereum’s block builders take over the sequencer role. This means Ethereum block builders handle both Ethereum and L2 transactions. Consequently, Ethereum gains a portion of the priority fees generated on L2, fostering a tighter economic relationship between Ethereum and L2.

This method preserves Ethereum’s security and ensures the continuous operation of based rollups as long as the Ethereum network is active. Additionally, it allows seamless interaction between L2 and Ethereum, enabling L2 transactions to directly connect with Ethereum’s liquidity pools.

# Advantages and Disadvantages of Based Rollups

The primary advantage of based rollups is leveraging Ethereum’s stability and security. Traditional rollups depend on a single sequencer (centralized), posing a risk of chain stoppage if the sequencer fails or encounters issues. Based rollups mitigate this risk by utilizing Ethereum block builders as sequencers.

Vitalik Buterin highlighted the based rollup platform ‘Taiko,’ describing it as a “decentralized layer 2 with low fees,” which underscores this approach’s significance.

The downside is that L2 teams may see reduced profitability as priority fees go to Ethereum block builders.

# Future Outlook

The future of based rollups as a dominant L2 solution will hinge on their business viability. Nonetheless, their strong connection with and security akin to Ethereum is likely to maintain developer interest. The industry will watch closely to see if based rollups set a new standard in L2 technology.