(1/20) Rollup Essentials: Pre-Confirmations
Pre-confirmations are a reality of all rollups, although they are well hidden with today's centralized sequencers. But to understand the future of @ethereum, you need to understand this key dynamic.
A beginners guide to pre-confs.
(2/20) Ethereum is the World Computer, a single, globally shared computing platform that exists in the space between a network of 1,000s of computers (nodes).
These nodes are real computers in the real world, communicating directly from peer to peer.
x.com/LogarithmicRex/status/1592309373732151296
(3/20) Ethereum is still young and evolving, but the rollup-centric roadmap provides a north star to the endgame.
Rollups - independent, high performance blockchains - settle to Ethereum, borrowing Ethereum's sense of property rights and economic security.
x.com/LogarithmicRex/status/1591614638138875905
(4/20) As always with such young tech, there is a lot of exciting developments in the world of rollups. One particularly exciting field is the world of sequencers.
Sequencers refers to the group responsible for order that transactions are executed on a blockchain.
x.com/LogarithmicRex/status/1867594181071556827
(5/20) Today, the most sequencers are centralized, controlled by the company that created/operate the rollup. For example, @base's sequencer is controlled by @coinbase.
Think of this phase as training-wheels; centralized sequencers allow us to defer a lot of hard problems.
(6/20) For example, centralized sequencers allows us to ignore Ethereum's time problem.
Like all blockchains, time passes one block at a time. For Ethereum, this means that actions can only be taken once every 12 seconds. For rollups, 12 seconds is an eternity.
x.com/LogarithmicRex/status/1577863907976220672
(7/20) Block times have a huge impact on performance - the faster the blocks, the more transactions per second. Rollups use block times much faster than Ethereum.
The problem: until a rollup's history is posted on-chain, it's not final. What about the time between each block?
(8/20) Once a rollup sends a copy of its history, it settled to Ethereum. At this point whatever happened on the rollup is final; it cannot change without sacrificing billions of dollars of $ETH.
Before settlement, a transaction on an L2 is just a promise from the sequencer.
(9/20) Below are just a few rollups that are live today (all with centralized sequencers).
Between Ethereum blocks, you are explicitly trusting the rollups operator to maintain whatever sequence they promised you.
(10/20) We call this promise a pre-confirmation (pre-conf). With most sequencers today, things are simple. The sequencer just issues them, and the users just trust them.
And, so far, that’s worked great! @OffchainLabs, @coinbase, etc have proven to be trustworthy!
(11/20) But let’s sketch a scenario that would test the promise of a pre-conf.
Imagine a sequencer pre-confed a trade then ended up going sour 3 blocks later. Maybe the trader offers them $1B to undo it before it settles to Ethereum.
Do you still trust your sequencer?
(12/20) The whole point of blockchain is to replace trust with cryptography and economic guarantees - especially for the World Computer.
By deploying crypto-economic principles, we can remove the trusted aspects of the rollup-centric roadmap.
Our first stop: Proof of Stake!
(13/20) In order to participate in Proof of Stake (PoS) everyone must place something with economic value into escrow. Cheating is punished by destroying more value in escrow than it’s possible to extract from the system.
No trust needed when cheating results in losing money.
(14/20) PoS originally came to prominence as a method of coordinating blockchain networks, but the idea has been extended (particularly by @sreeramkannan).
The insight behind @eigenlayer is that PoS is generalizable to any centralized problem.
x.com/logarithmicrex/status/1572094840619532288?s=46&t=a-_27ks-01Qh0N76AOoudw
(15/20) Here’s how we can apply PoS to pre-confs: in order to become a sequencer, and operator must put capital into escrow.
If the operator issues a pre-conf but does not settle that transaction to Ethereum, code will automatically destroy some/all of the escrowed capital.
(16/20) Let’s say an operator places $1B into escrow and it’s all destroyed for even a single instance of breaking the pre-conf promise.
PoS tells us that pre-confs for transactions worth less than $1B are as good as settled. The promise is backed by very real consequence.
(17/20) The big questions behind any pre-conf are “is this pre-conf backed by an economic penalty” and, if so, “how much?”
If the answer to the first is “no,” then the system isn’t credibly neutral and inherently requires you to trust it.
(18/20) Today, no rollups secure their pre-confs with crypto-economic security; we are still early, and our current solutions serve today’s needs perfectly fine.
But Ethereum is ever going to engulf global finance, we will need to move passed trusted pre-confs.