Rollup, rollup, and more rollup. If you're in this ecosystem, you may hear this term every day. But how do these rollups actually collect these transactions and send them to Ethereum, the main-chain? When we ask these questions, one of the main concepts we come across is "sequencer". If you are ready, let's examine what sequencers are, how they work and more with examples.

What is "Sequencer"?

In blockchain, a sequencer is an important element that ensures that transactions are processed in an orderly and smooth manner. Within the blockchain protocol, the sequencer acts as the manager of transactions. It organises transactions to avoid conflicts and maintain the integrity of the blockchain. This is especially important when multiple transactions conflict, such as two different transactions trying to spend the same token at the same time. By deciding which transactions to process first, the sequencer avoids problems such as double spending and keeps the blockchain running smoothly.

Now, let's imagine we are in a busy coffee shop and there is a line of people waiting to order. The barista, like a sequencer on the blockchain, takes the orders one by one and ensures that each customer's request is noted and served in the order they arrive. This ensures that the service is efficient, smooth and fair. Similarly, in blockchain networks, especially in layers such as Layer-2 solutions, sequencers take batches of transactions and put them in an orderly sequence. This not only keeps the blockchain running smoothly, but also increases transaction speed and reduces costs by handling transactions in batches.

How Does a Sequencer Basically Work?

Let's examine how the Sequencer, the mechanism that organises and queues transactions in the blockchain, works with our Barista example above:

1. Receiving Transactions: Sequencer receives transactions made by users, this process can be likened to a barista taking orders in a coffee shop. The barista collects and records customer requests one by one, just as the sequencer receives and records user transactions.

2. Sequencing of Transactions: Sequencer sorts the operations it receives. This can be likened to our barista preparing orders in the order they are received; each order is prepared and served in an orderly and organised manner. In the same way, Sequencer processes each operation in a certain order and sequence.

3. Processing of Transactions: The sequencer processes transactions and adds them to blocks. This is like a barista serving coffee to customers; each order is prepared in a specific order and served to the customer. The sequencer also processes transactions and adds them to the blockchain.

   Sequencers perform these operations, making the blockchain both more efficient and more secure. Without a sequencer, many transactions can overlap, which can lead to security issues. A sequencer keeps the blockchain running smoothly by preventing conflicts and organising transactions.

Types of Sequencers

Centralized Sequencer

Centralized sequencers are systems controlled by a single authority or institution for managing and ordering blockchain transactions. Typically managed by a company or a developer team, these sequencers centralize all transaction sequencing and processing tasks at one point.

While centralized sequencers offer fast and efficient transaction processing advantages, they also come with disadvantages such as risk of single point of failure, potential for censorship, and inconsistency with principles of decentralization. All existing Layer-2s use Centralized Sequencer technology. This structure processes transactions quickly, enhancing network efficiency but also brings issues such as central control and single point of failure risk.

Decentralized Sequencers

Decentralized sequencers are blockchain systems where transaction ordering and management involve multiple authorities. They work across multiple control points, reducing risks associated with single points of failure and enhancing the reliability and fairness of the blockchain. They minimize central control and single point of failure issues while providing resistance to censorship and fair transaction ordering, thus increasing the network's decentralization and security.

Shared Sequencers

Shared sequencers are common sequencer systems used in various blockchain and Layer-2 networks. This structure accelerates development processes by providing better compatibility and interaction between different networks. Additionally, these systems enhance decentralization and security by distributing transaction sequencing and data verification among multiple participants. They particularly enable faster and more efficient transaction sequencing processes among rollups.

One of the first projects that comes to mind when it comes to Shared Sequencer, Astria is a shared sequencer network developed to increase the security and decentralisation of blockchain networks. The project is designed to help different Layer-2 networks work more efficiently and integrate with each other.

For more information about Astria, can check here.

Schnorr Sequencers

Schnorr Sequencer is a technology aimed at speeding up and enhancing the security of transactions on Ethereum. It uses a unique Schnorr signature for each transaction to ensure they are added to the blockchain securely and correctly. Both the transaction sender and the sequencer complete the Schnorr signature for each transaction in a specific sequence, ensuring each transaction is correctly added in the specified order. If the sequencer makes an incomplete or erroneous transaction, it can be penalized. This technology is designed to solve Ethereum's scaling issues and is particularly applicable and economical for systems with low transaction volumes. It also reduces potential MEV (Maximum Extractable Value) attacks using "timelock" cryptography. Fast state synchronization between multiple nodes makes it usable in highly efficient systems, offering an innovative solution to Ethereum's scaling and security challenges.

Let us go through an example to better understand the system and its functioning:

This time, let us liken the Schnorr Sequencer to our barista in our coffee shop. In this case, the customer (transaction sender) and the barista (sequencer) fill in and sign an order form (Schnorr signature) for each coffee order (transaction). The form specifies the details of the order and the order in which it is to be prepared. If the barista prepares the order incorrectly or incompletely, i.e. does not follow the order sequence correctly, he is penalised (slash). This system ensures that every order is made correctly and on time, so that customers are satisfied and business runs smoothly.

For more information on the Schnorr Sequencer, you can check out this.

Advantages of Sequencers

Order and Security of Transactions: Sequencers organize transactions in the blockchain, solving conflicting transactions and thus maintaining the security and integrity of the blockchain. They especially prevent double-spending by resolving conflicting transactions trying to spend the same token. This enhances both the accuracy and reliability of the blockchain.

Efficiency and Speed: Sequencers process transactions quickly and efficiently, especially in Layer-2s, improving the performance of the blockchain network. They ensure the fast operation of the blockchain network even during high traffic periods, improving user experience.

Reducing Costs and Fair Transaction Sequencing: Sequencers process transactions in batches, reducing the workload on the blockchain and thereby lowering transaction costs. They also process transactions in the order they are received, providing fair service to every user. Service is delivered equally and fairly to everyone.

Disadvantages of Sequencers

Centralization and Censorship Risks: Sequencers often operate in a centralized manner, which can increase the risk of transactions being censored or manipulated. If a centralized sequencer acts with bad intentions, it can slow down transactions or alter the order of transactions for MEV (Maximum Extractable Value) interests. This situation can jeopardize the reliability and transparency of the blockchain.

Single Point of Failure Risk: A centralized sequencer can act as a single point of failure. If the sequencer malfunctions or goes offline, the entire system's operation can be disrupted, and users may not be able to perform their transactions. This can cause serious problems, especially during high traffic periods.

Inadequate Security Measures: In some rollup networks, sequencers may lack sufficient security measures. For example, in some rollups, fraud proofs, which are "Provable" mechanisms in Layer-1 chains for the authenticity of Layer-2 transactions, may be missing. This lack can jeopardize the security of users' funds and prevent the full utilization of Ethereum's security mechanisms.

These disadvantages demonstrate that the use of a sequencer in blockchain should be carefully considered. Especially, many of the problems related to centralization and security stem from having a centralized sequencer.

Conclusion

In blockchain and Ethereum, sequencers play a crucial role in making transactions faster and more secure. As we've seen in this article, there are different types of sequencers, each with their own advantages and disadvantages. Some are ideal for speed, while others offer more security. In particular, innovative types such as the Schnorr Sequencer speed up transactions on Ethereum even more. With the development of these technologies, the impact that sequencers will have is very exciting.

Some of the sources I used in this article and others that I recommend for further information are: