What is Based Rollup, and How Does it Inherit Ethereum's Liveness?
Colin Wu . 2024-05-07 . Data

By 0XNATALIE, Researcher at @ChainFeedsxyz

Source: https://substack.chainfeeds.xyz/p/based-rollup

With the completion of the Cancun upgrade and the reduction of L2 gas fees, the market’s focus has once again shifted to L2. There are currently two main types of solutions for Rollup L2: Optimistic Rollup and ZK Rollup. Optimistic Rollup occupies the majority of the market share due to its mature market application. However, both Optimistic Rollup and ZK Rollup have their limitations. To address these limitations and further optimize efficiency and decentralization, Based Rollup has emerged. It not only simplifies technical complexity and reduces transaction latency but is also the only solution that fully inherits Ethereum’s liveness. Among all known projects, only the ZK Rollup team Taiko is currently developing a Based Rollup solution.

Existing Issues with Rollup

Optimistic Rollup requires a long challenge window, usually 7 days, to confirm transactions in order to correct potential fraudulent behavior. This design results in funds needing to wait for a long time before extraction, slowing down the overall transaction process. Additionally, during peak periods on the Ethereum network, Optimistic Rollup incurs high gas fees when processing fraud proofs. While ZK Rollup can provide faster transaction confirmation times and reduce on-chain data storage to save costs, generating zero-knowledge proofs consumes significant computational resources and time, impacting costs and transaction processing speed (TPS).

In summary, the technical complexity of Optimistic Rollup and ZK Rollup requires them to maintain a complex infrastructure and security mechanisms to handle and verify L2 transactions, negatively impacting transaction costs and network efficiency.

Based Rollup Solution

Justin Drake, a researcher at the Ethereum Foundation, proposed Based Rollup in March 2023 to effectively overcome these issues. Also known as L1-sequenced Rollup, Based Rollup is a Rollup whose sequencing is entirely driven by the underlying L1. This design allows L1 proposers to collaborate with L2 searchers and builders without permission, directly including Rollup blocks in L1 blocks, outsourcing sequencing rights to L1 validators. The consensus layer, data availability layer, and settlement layer of Based Rollup are all Ethereum, with only the execution layer built on top of the Rollup network, responsible for transaction execution and state updates. It’s worth noting that Based Rollup addresses efficiency issues from a sequencing perspective, differing from Optimistic Rollup and ZK Rollup, which classify from a verification perspective. Because of the different dimensions, the classification with OP and ZK is not conflicting, meaning if Optimistic Rollup or ZK Rollup outsources sequencing rights to L1 validators, it can be called Based Rollup.

Based Rollup inherits its security and liveness from L1 while optimizing the performance of L2 by transferring transaction sequencing responsibility to L1. It is the only Rollup solution that fully inherits Ethereum’s 100% liveness. This design brings the following advantages:

● Complete inheritance of liveness: Based Rollup’s security and decentralization are consistent with Ethereum, without the need for additional security mechanisms or consensus algorithms to ensure transaction validity and order. Compared to Rollups with escape hatch mechanisms, Based Rollup is safer, faster, and more convenient. In Rollups with escape hatch mechanisms, if the Rollup fails or is attacked, users can safely withdraw their funds back to L1 through the escape hatch but must wait for a period to ensure settlement.

● Simplified technical complexity: When L2 needs to handle transaction sequencing and data availability issues on its own, it introduces additional complexity and potential security risks. Transferring the sequencing responsibility to L1 can simplify the structure of L2, eliminating the need for sequencer signature verification, escape hatch, and external PoS consensus.

● Reduced latency: Using L1 to sequence transactions allows for quick confirmation of transaction validity and order, reducing confirmation time and improving the overall network’s responsiveness and efficiency.

● Lower operating costs: Since L1 has already handled transaction sequencing, L2 can more efficiently batch and confirm transactions based on this, reducing the verification complexity of L2 and the resources and costs required solely for sequencing. This cost efficiency is more pronounced with high transaction volumes.

● Economic incentive consistency: L1 miners can earn additional fees and incentives by participating in L2 transaction sequencing, increasing their motivation to maintain the overall health of the network. This design also helps maintain consistency in incentives between different layers of the network, enhancing the overall economic security of the entire ecosystem.

Challenges Facing Based Rollup

While Based Rollup can address some of the current shortcomings of Rollup solutions, this technology also faces some challenges:

● Income limitations: Relying on L1 sequencing limits the opportunity to obtain MEV, with most Based Rollup MEV flowing to L1 validators. Based Rollup itself cannot directly benefit from this.

● Sequencing flexibility: Delegating sequencing tasks to L1 may reduce sequencing flexibility, affecting specific transaction sequencing strategies and the implementation of rapid transaction confirmation. For example, L1’s sequencing decisions may be miners choosing to prioritize processing certain transactions to maximize their own profits. Therefore, achieving a FCFS (First-Come First-Served) sequencing mechanism similar to Arbitrum in Based Rollup would require additional technical support (such as EigenLayer).

Projects Building Based Rollup

Since the concept of Based Rollup was proposed just over a year ago, it is a relatively new concept, and its theories and implementation details are still being explored and refined. Therefore, there are few projects currently building Based Rollup, and the most well-known project is Taiko. Taiko is an L2 using ZK Rollup technology and has developed Type-1 zkEVM, which provides the same opcodes and functionality as Ethereum, ensuring high compatibility with the existing Ethereum ecosystem. Shortly after the Based Rollup concept was proposed, Taiko began building Based Rollup by outsourcing transaction sequencing to Ethereum validators and utilizing Ethereum as the settlement and data availability layer and consensus mechanism to simplify the structure of Rollup. On January 15, 2024, Taiko launched the Katla testnet, realizing Based Contestable Rollup (BCR), a Based Rollup that incorporates dispute resolution processes (similar to fraud proof systems) into transaction validation workflows.

Future Outlook

While the development of Based Rollup may require more time and resources, as well as dual verification from the market and technology, in the long run, Based Rollup will gain advantages in the market competition due to its enhanced security, decentralization, simplified structure, and consistency of objectives. Especially in the DeFi field, Based Rollup demonstrates faster transaction confirmation speeds and lower transaction costs, with significant potential advantages. It is believed that with the continuous improvement of technology and gradual market recognition, Based Rollup is expected to occupy a prominent position in the market for Rollup L2 solutions.

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