How Does a Decentralized Sequencer in a Layer 2 Rollup Affect MEV Opportunities?
A decentralized sequencer, which is responsible for ordering and batching transactions on a Layer 2 rollup, aims to distribute the power to extract MEV. By rotating or randomizing the sequencer role, the ability for a single entity to consistently front-run or sandwich transactions is mitigated, preventing the concentration of MEV profits and increasing transaction fairness.
Glossar
Sequencer
Function ⎊ A sequencer performs the critical function of ordering transactions on a Layer 2 network before submitting them to the Layer 1 blockchain for final settlement.
Batching Transactions
Aggregation ⎊ Batching transactions, within cryptocurrency and derivatives markets, represents the consolidation of multiple individual orders or operations into a single, larger unit for execution.
Centralized Sequencer
Component ⎊ In certain Layer Two scaling architectures, this centralized entity is responsible for ordering and sequencing transactions before submitting a compressed batch proof back to the main chain.
Data Availability Layer
Layer Function ⎊ The Data Availability Layer is a crucial component within modular blockchain designs responsible for ensuring that the data required to verify the correctness of off-chain computations, such as rollup transactions, is published and accessible to all network participants.
Decentralized Sequencer
Architecture ⎊ A Decentralized Sequencer fundamentally alters order flow management within cryptocurrency derivatives, moving from centralized exchange control to a network-based consensus mechanism.