Ethereum’s Based Rollups: A New Path to Efficient Scaling

Leveraging Layer 1 sequencing, based rollups offer enhanced security and economic alignment, but trade-offs in flexibility and revenue persist.

A new innovation in Ethereum's scaling solutions, known as "based rollups," is generating interest for its potential to improve transaction efficiency and security across the blockchain ecosystem. This fresh approach to Layer 2 (L2) scaling takes advantage of Ethereum’s Layer 1 (L1) infrastructure to handle transaction sequencing, resulting in a simplified and more cost-effective model compared to traditional rollups.

Unlike conventional optimistic and zero-knowledge (ZK) rollups, which rely on their own sequencers, based rollups outsource this responsibility to the L1 blockchain itself. By doing so, they inherit the full decentralization, security, and liveness of Ethereum’s base layer. This means L1 block proposers work directly with L2 builders to incorporate rollup blocks into the L1 block structure, creating a more seamless connection between the two layers.

One of the key benefits of based rollups is their ability to streamline operations. Without the need for external consensus mechanisms or complex escape hatches, this model significantly reduces both operational costs and complexity. This approach also allows for greater economic alignment between L2 networks and L1 validators, where increased rollup activity boosts demand for block space, thereby generating more fees for validators. Some experts believe this could revolutionize Ethereum’s long-term value proposition. Adam Cochran of Cinneamhain Ventures went as far as to predict that based rollups could "increase long-term demand for ETH by a hundred times."

However, based rollups are not without challenges. By depending on L1 sequencing, they sacrifice some degree of flexibility in transaction ordering, which could limit their ability to implement advanced sequencing features such as rapid pre-confirmations. Additionally, since these rollups forego maximal extractable value (MEV) income, there may be less direct revenue for L2 operators, making it less lucrative for some.

Despite these drawbacks, several projects are already exploring based rollup solutions. Taiko, a Layer 2 protocol utilizing the ZK-rollup framework, has launched a testnet that integrates components of this model. Initially introduced by Ethereum researcher Justin Drake in early 2023, the idea of based rollups is still in its infancy but has the potential to reshape Ethereum’s scaling landscape in the coming years.

As the blockchain industry continues to evolve, based rollups represent a promising step forward in ensuring Ethereum’s multi-layer ecosystem remains sustainable, secure, and efficient in the long term.

photo source / Blockonome