dWallet Explores Mechanism For Outsourcing L2 Rollup Sequencing Rights On Espresso

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Blockchain infrastructure startups dWallet Network and Espresso are collaborating on an initiative that could improve trust in, and expand the economy of Zk-rollups, which are used to scale decentralized networks like Ethereum. 

The companies said they’re partnering to create a kind of marketplace for rollup sequencing, which will allow rollup operators to auction off sequencing rights via time slots, or outsource them entirely, to third parties, in order to boost decentralization. 

Speedy rollup networks such as Arbitrum, Base and Optimism have emerged as some of the most viable scaling solutions for Ethereum’s ultra-congested network. They bundle multiple transactions processed off-chain into a single, rolled up transaction that’s posted onto Ethereum’s main chain at regular intervals. 

To do this, rollups rely on “sequencers”, which are responsible for batching those transactions together and sending them to Ethereum where they’re validated. Sequencers get to decide the order in which transactions are posted onto the blockchain. They verify, order and then compress those transactions into a package that’s sent to Ethereum, earning rewards from the transaction fees paid by the L2 network’s users. 

The main criticism is that these sequencers are centralized, performed by a single entity, often the rollup operator itself. The concern is that they represent a single point of failure in L2 networks. They also increase the risk of transactions being censored, and there is a risk they could even be shut down by government authorities, if ever they dedicated they wanted to take a network offline. 

For instance, Coinbase, the developer of the Base L2 network, operates the sequencer itself, and FundStrat estimates it earns around $30 million in revenue per year from this role. It’s an extremely lucrative business, and that makes it ripe for outsourcing. 

That’s why dWallet’s partnership with Espresso could be interesting. For now, the companies are only “proposing” a solution, wherein dWallet will use Zero Trust Protocols that leverage cryptographic signatures to securely transfer the address of the smart contract that controls the rights over rollup sequencing to third-parties.  

It’s an entirely novel approach to creating a decentralized marketplace for rollup sequencing, where sequencing rights will be auctioned off to the highest bidder. It will be flexible too, with rollup operators given the option to auction sequencing time slots to multiple bidders, or else sell the entire sequencing rights forever. 

“Espresso’s marketplace enables rollups to sell their sequencing rights,” said Espresso Chief Scientist Benedikt Bünz. “dWallet’s ZTP could enable an even broader vision wherein an entire rollup can be priced and transferred. We are excited to collaborate with dWallet to explore our shared  vision of creating a better and more secure modular blockchain ecosystem.”

Espresso’s role will be to connect the buyers, who want to sequence rollup transactions and earn revenue for doing so, with the sellers, which are the rollup operators. It’s confident there will be demand for this, because rollup operators know they’ll boost confidence in their networks by outsourcing this element of transaction processing. And because it can be potentially lucrative, there are sure to be many investors – such as institutions, DAOs and so on – willing to pay for the honor of sequencing on their behalf. 

The proposed marketplace will ultimately enable market forces to dictate the value of the rollup economy, “paving the way for a more efficient markt in the modular blockchain space,” said dWallet’s co-founder Omer Sadika. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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