How Do Layer 2 Scaling Solutions (E.g. Rollups) Change the Block time/MEV Dynamic?
Layer 2 (L2) rollups change the dynamic by moving execution off the main chain (L1). The "block time" on the L2 is much faster, reducing traditional MEV.
However, a new form of MEV emerges at the level of the L2 sequencer (the entity that batches and orders L2 transactions). The sequencer has the power to front-run or reorder transactions before they are posted to L1.
This centralizes the MEV risk, requiring new L2-specific anti-MEV solutions.
Glossar
Block Time
Epoch ⎊ Within cryptocurrency and decentralized finance, epoch refers to a discrete time interval during which specific operations or consensus mechanisms are executed.
Rollups
Technology ⎊ These are Layer 2 scaling solutions designed to process numerous off-chain transactions and then submit a single, compressed proof of their validity back to the main chain for final settlement.
Layer 2 Scaling Solutions
Definition ⎊ Layer 2 scaling solutions are secondary protocols built on top of a base blockchain, or Layer 1, designed to enhance transaction throughput and reduce costs.
Scaling Solutions
Architecture ⎊ Scaling solutions within cryptocurrency, options trading, and financial derivatives frequently address systemic limitations in transaction throughput and computational capacity.