Dear Frens,

The L2 space has been buzzing with remarkable developments, and it’s exciting to witness the growth and momentum of Layer 2 solutions. Base continues to be at the forefront with the latest announcement of Coinbase's Smart Wallet. Base's expansion coincides with the rollout of this self-custodial solution designed to bring over a billion users onto the blockchain.

Recent data shows that Base is surpassing both Optimism and Arbitrum in growth, with its total value locked (TVL) hitting an all-time high. This surge comes as investors eagerly await the launch of Coinbase’s new smart wallet, which aims to provide a seamless transition for users moving from centralized exchange accounts to decentralized applications (dApps).

Lately, we are seeing more projects hop onto the L2 train. ENS Labs has unveiled a significant proposal, ENSv2. This next-gen implementation is aimed at extending ENS to a selected Layer 2 network, promising reduced costs, faster transactions, and enhanced functionalities.

As the Layer 2 journey continues to unfold, we’re delighted to have you with us every step of the way. Stay on the cutting edge and keep exploring the dynamic and captivating L2 ecosystem.

Contributors: Ritaakubue, Melasin, anointingthompson1, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Share

🗞️ Ecosystem Updates

🔒 Layer 2 Base Achieves Record TVL Ahead of Coinbase’s Smart Wallet Launch

🆕 IOTA Launches Layer 2 Ethereum Virtual Machine Network Focused on Real-World Asset Usage

🔀 Coin98 Integrates ZKFair, Elevating Multi-Chain Efficiency for Users

⚡Layer 2s as cultural extensions of Ethereum

🔮 ENS Labs introduces the ENSv2

🔔 Push Protocol is now live on Arbitrum

🎮 Zypher Games forms an alliance with Manta network

🏦 OpenEx: BTC Layer2 Integration Strategy

🔥 Hot News

Fhenix Announces Fully Homomorphic Encryption Layer 2 for Ethereum

Fhenix, a blockchain startup, has just raised over $15M in Series A funding. This is a huge milestone for the project and has further advanced the plan to launch a Layer 2 rollup for Ethereum that incorporates fully homomorphic encryption (FHE). Their goal is to bring confidentiality and data privacy capabilities to Ethereum's smart contracts.

The Fhenix Layer 2 will be the first FHE EVM-compatible rollup, lowering the barriers for Solidity developers to build confidential smart contracts. By doing this, Fhenix unlocks novel applications that rely on data confidentiality. The startup plans to support developers with infrastructure, documentation, tooling, grants, and bounties to spur the adoption of confidential smart contracts. With confidentiality enabled, Fhenix believes Ethereum can fully realize its potential as a permissionless network that returns data sovereignty to its users.

Check out the thread below for more information regarding this project 🔥👇🏽

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Arbitrum Multi-sig Support Service (MSS) Nomination Thread

• Powerhouse: Operations and Transparency Research Proposal

• [Non-Constitutional] Pilot Stage: Treasury Backed Vaults research and development

Optimism

• Retro Funding 4: Impact Metrics, a Collective Experiment

• Upgrade Proposal #9: Fjord Network Upgrade

Celo

• Leadership changes at cLabs

Blockchain Sequencers

Author: Boluwatife

The concept of blockchain sequencers was introduced due to the blockchain trilemma on L1 networks which states that no blockchain perfectly achieves all three properties: security, decentralization, and scalability. To curb this, blockchain sequencers were developed to facilitate the smooth operation of Layer 2 scaling solutions, enabling blockchains to handle an ever-increasing volume of transactions while maintaining the desired level of security and trust.

Blockchain sequencers are specialized nodes or entities responsible for processing, ordering, and batching transactions before submitting them to the main blockchain (Layer 1). They act as intermediaries between users and the underlying blockchain, ensuring that transactions are efficiently and securely processed while reducing the burden on the main chain.

What Problem Do Blockchain Sequencers Solve?

The importance of sequencers lies in their ability to address the scalability challenges blockchains face. As the number of users and transactions on a blockchain network increases, the network can become congested, leading to slower transaction times and higher fees. Sequencers provide a solution by offloading a significant portion of the transaction processing and validation to a separate layer, thereby alleviating the load on the main chain.

Sequencers play a crucial role in enabling Layer 2 scaling solutions, such as rollups, which are designed to increase the throughput and reduce the costs associated with blockchain transactions. By efficiently processing and batching transactions, sequencers facilitate the submission of these batches to the main chain, allowing for significant improvements in scalability while inheriting the security guarantees of the underlying blockchain.

How Do Blockchain Sequencers Work?

1. Receiving and Ordering Transactions

Sequencers are designed to receive transactions from users or applications and order them according to specific criteria. This ordering process can be based on various factors, such as timestamps, transaction fees, or custom prioritization rules.

2. Creating Batches or Blocks

Once the transactions have been ordered, sequencers batch them together into larger units, often referred to as "batches" or "blocks." This batching process allows for more efficient processing and reduces the overhead associated with submitting individual transactions to the main chain.

3. Submitting to the Main Chain

After creating the batches, sequencers submit them to the main blockchain for validation and inclusion in the next block. Depending on the Layer 2 solution being used, this submission process may involve generating and submitting validity proofs (e.g., in the case of ZK-Rollups) or simply publishing the batch data (e.g., in the case of Optimistic Rollups).

Types Of Blockchain Sequencers

1. Centralized Sequencers

Centralized sequencers are operated by a single entity or organization, which has complete control over the sequencing process. Most of the time the entity controlling it is the team behind the L2 blockchain itself. This centralization approach offers several advantages, including simplicity and efficiency. With a centralized sequencer, transaction processing, and batching can be optimized for speed and throughput, as there is no need for complex coordination among multiple parties.

However, centralized sequencers also come with significant drawbacks. They introduce a single point of failure, as the entire system relies on the availability and integrity of the centralized entity. Additionally, users must place their trust in the centralized sequencer, which can potentially lead to censorship or other malicious behaviors.

2. Decentralized Sequencers

In contrast to centralized sequencers, decentralized sequencers distribute the sequencing responsibilities across a network of nodes or validators. This approach offers several advantages, including enhanced security, censorship resistance, and reduced trust assumptions. With a decentralized sequencer, no single entity has control over the system, mitigating the risk of a single point of failure or malicious behavior.

These “pros” do not negate the fact that decentralized sequencers also come with their own set of challenges. They are typically more complex to implement and maintain, as they require coordination among multiple parties and consensus mechanisms. Additionally, there may be potential performance trade-offs, as decentralized systems can be slower and less efficient than their centralized counterparts.

3. Shared Sequencer Models

In addition to centralized and decentralized sequencers, there are also shared sequencer models, where a single sequencing service is shared among multiple Layer 2 solutions. This approach aims to strike a balance between the efficiency of centralized sequencers and the security and trust advantages of decentralized sequencers. Shared sequencer models can potentially leverage economies of scale and reduce the overhead associated with maintaining dedicated sequencers for individual Layer 2 solutions.

Prominent Blockchain Sequencer Implementations In Layer 2

When you talk about blockchain sequencers in the web3 ecosystem, Ethereum and rollups come to mind. Let us explore the sequencer implementations we have in the space.

Ethereum's Rollup-centric Roadmap

1. Optimistic Rollups (e.g., Arbitrum, Optimism)

Optimistic Rollups are a type of Layer 2 scaling solution that leverages sequencers to process and batch transactions before submitting them to the Ethereum mainnet. Projects like Arbitrum and Optimism have implemented centralized sequencers to achieve high throughput and low latency while inheriting the security guarantees of the Ethereum blockchain.

2. ZK Rollups (e.g., Starknet, zkSync)

ZK Rollups, on the other hand, utilize zero-knowledge proofs to validate transactions off-chain, reducing the computational burden on the Ethereum mainnet. Platforms like Starknet and zkSync employ sequencers to process and batch transactions, generate validity proofs, and submit these proofs to the Ethereum blockchain.

Other blockchain ecosystems (e.g., Solana, Avalanche, Polygon)

While the Ethereum ecosystem has been at the forefront of Layer 2 scaling solutions and sequencer implementations, other blockchain ecosystems are also exploring and adopting sequencers. For example, the Solana blockchain utilizes a form of sequencing through its leader rotation mechanism (an example being Rome protocol), while Avalanche and Polygon have implemented various Layer 2 solutions that employ sequencers to enhance scalability.

Challenges and Future Developments

1. Scalability vs. decentralization trade-offs

One of the ongoing challenges with blockchain sequencers is navigating the trade-offs between scalability and decentralization. While centralized sequencers offer superior performance and efficiency, they come at the cost of reduced decentralization and increased trust assumptions. Conversely, decentralized sequencers prioritize security and censorship resistance but may sacrifice performance and throughput.

2. Data availability challenges

Another significant challenge faced by sequencers is data availability. As transactions are processed off-chain and batched together, ensuring the necessary data is available for validation and finality on the main chain becomes crucial. Various solutions, such as data availability sampling techniques, are being explored to address this challenge.

3. Composability and interoperability considerations

As the blockchain ecosystem continues to evolve, the need for composability and interoperability between different Layer 2 solutions and sequencers becomes increasingly important. Developers and researchers in the space are exploring ways to enable seamless communication and value transfer between different sequencer implementations, adopting a more interconnected and efficient ecosystem.

4. Emerging technologies and research (e.g., data availability sampling, validium)

The field of blockchain sequencers is rapidly evolving, with ongoing research and development efforts aimed at improving scalability, security, and efficiency. Emerging technologies, such as data availability sampling and validium, are being explored as potential solutions to address data availability challenges and strike a balance between scalability and decentralization.

Conclusion

The advancement of blockchain sequencers would greatly improve the way users interact with protocols onchain. As we dig deeper we are sure to uncover a plethora of ideas and solutions that would lead to increased ease in building, interaction, and onboarding.

📈 Data

Total Value Locked on L2s Approaches $50 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL