MEV-Resistant L2 Sequencers
This RFP seeks proposals for hardening and decentralizing sequencing of general-purpose programmable L2s, with a focus on preventing, detecting, or measuring MEV extraction by L2 sequencers.
Problem Statement
Many L2s currently use centralized sequencers, who are responsible for ordering transactions and submitting them to the chain. The power of a sequencer is limited—L2s have separate mechanisms that are meant to prevent invalid state transitions and long-term censorship of transactions. However, the sequencer does still have some capabilities that it could use to harm the protocol. In particular, the sequencer may be able to extract MEV from the protocol by violating certain MEV-resistance properties of the L2 that are discussed below.
A successful project should advance the industry’s understanding of how to build a MEV-resistant sequencer. This could mean a paper that:
- formalizes the problem of MEV-resistant sequencing, or summarizes the state of knowledge around it
- proposes a novel mechanism that hardens one or more MEV-resistance properties of a sequencer
- suggests a methodology to detect or measure violations of these properties or other forms of MEV extraction by the L2, and/or
- explains how to implement a known mechanism for hardening a sequencer, in significantly more detail than in existing work
The ideal proposal:
- should be suitable for general-purpose programmable L2s, such as OP Stack chains on Ethereum, rather than being specific to a particular application
- should be tailored to the L2 use case, rather than L1
- should provide a clear improvement on the status quo of centralized sequencers, rather than making significant compromises (such as by degrading user experience, significantly increasing transaction costs, or widening the set of parties that could undetectably extract MEV) that would make it unlikely to be adopted in practice
- does not need to be a complete solution, but should provide some improved protection if implemented on its own
Background
MEV-Resistance Properties
Byzantine sequencers have the ability to disrupt or extract value from a rollup, including by violating one of the below properties:
- Liveness: If a sequencer halts, it can cause new block production on the L2 to halt, at least temporarily.
- Delay resistance: If a sequencer fails to include a transaction on the L2 when it receives it, the transaction may be able to have the transaction “force included” through the L1, but only with a delay. This temporary censorship could sometimes allow the sequencer to extract MEV, such as by delaying others’ bids in a Dutch auction.
- Timestamp integrity: If a sequencer can control the timestamp of blocks, it could use that to violate the timestamping guarantees of a blockchain, such as by backdating a block so that transactions created time T appear to have been timestamped at time T-1.
- Mempool privacy: If a sequencer is able to see the content of unconfirmed transactions, they may be able to create transactions that harm the user, such as by stealing MEV opportunities. (This is separate from whether a transaction is public or obfuscated once it is confirmed.)
- Timing fairness: If a sequencer is able to create transactions for a given block later than anyone else, this could give them a timing advantage over other transactors, which could undermine some onchain mechanisms.
A MEV-hardening mechanism could prevent the sequencer from violating one or more of these properties.
Detection and Measurement
One thing that makes MEV extraction by sequencers a particularly pernicious vulnerability is that in some cases, it could happen undetectably. A mechanism that can detect or measure violations of these properties is therefore valuable, particularly if it can measure an upper bound on the amount of MEV that could be extracted from such a violation.
Weakening Assumptions
Today, L2s with centralized sequencers usually depend on the honesty of that sequencer. A mechanism that could weaken those assumptions (such as by incentivizing the sequencer so that a rational sequencer would behave correctly) would be valuable.
Some mechanisms for MEV resistance may depend on the existence of some validator set (such as a permissioned set of parties, or holders of a token). A proposal that includes such a validator set should explain what assumptions it relies on about those validators (such as honest or rational majority), why those assumptions might be reasonable, and what could happen if those assumptions are violated.
Places to Start
