Workshop on Rollup Sequencer Economics: Small Group Discussion, organized by Ben Fisch | a16z crypto

TL;DR

Shared sequencing layers must determine each participant’s marginal MEV contribution, preserve rollup profits, support different ordering policies, and charge fees without executing transactions. The workshop separates MEV measurement from rebate distribution, considers searcher bids on transaction bundles as a starting point, and explores data-size pricing when gas consumption is unavailable. Read on for the key design questions, possible mechanisms, and trade-offs discussed by the group.

Transcript

okay so welcome to uh day two um so just quick reminder of the agenda for today uh we're going to um have basically one hour for group discussions we're going to split into three groups um there were three questions that we introduced yesterday so each group is going to work on one of these questions and then we'll come together at the end of the h... Read More

Key Insights

• 💡 Determining each participant's marginal contribution to Mev in a shared sequencing layer is a challenging problem that requires auction mechanisms and bids on individual transactions and bundles.
• ⛓️ Comparing the profits of running a separate chain versus using a shared chain involves considering factors like order flow auctions, Mev distribution, and the impact on roll-up growth.
• 🎨 A shared sequencing layer should be designed to support different approaches to Mev by Roll-Ups and accommodate their preferences for ordering policies.
• 🫢 Transaction fee mechanisms in shared sequencing layers could be based on data size, considering that the sequencing layer doesn't execute transactions and might not have access to gas information.

Questions & Answers

Q: How can a shared sequencing layer determine each participant’s marginal contribution to MEV?

The discussion suggests using auctions in which searchers bid on bundles and potentially on each individual transaction within a bundle. Those bids could provide a starting point for estimating transaction value and each participant’s marginal contribution, although the workshop does not claim this fully solves the problem.

Q: Why is MEV revenue sharing difficult for shared sequencers?

The sequencer must first determine how much MEV exists when transactions from multiple rollups, users, or applications are combined. It must also estimate the counterfactual MEV each rollup would have generated alone, then decide how to distribute rebates based on those figures.

Q: What are the two separate problems in MEV revenue sharing?

The first is elicitation: discovering the MEV generated by the shared system and the counterfactual value for each standalone rollup. The second is distribution: deciding how to allocate revenue once those values are known, with Shapley value mentioned as a relevant approach discussed previously.

Q: How can rollups compare shared-sequencer profits with running their own chains?

They must compare the MEV profit from operating separate auctions with the profit from sending order flow to a shared sequencing layer. The shared layer would auction that order flow to searchers and return rebates, and rollups want confidence that this produces at least as much profit as operating independently.

Q: Can a shared sequencing layer support different rollup approaches to MEV?

The goal is for the layer to remain agnostic while rollups choose their own MEV and ordering policies. The workshop lists auctions, MEV prevention, first-come-first-served ordering, content-oblivious ordering, and random ordering as possible preferences.

Q: What trade-off can arise when rollups choose different ordering policies?

Allowing independent ordering policies may affect interoperability between rollups. The discussion frames this as a design caveat that must be examined rather than presenting a settled solution.

Q: How could a non-executing shared sequencer charge transaction fees?

Because the sequencing layer does not execute rollup transactions, it may be unable to calculate fees from gas consumption without executing them. Charging according to data size is presented as one possible alternative.

Q: How can a shared sequencer verify fees, and what user-experience issue could result?

Fee correctness could be verified through an independent rollup or minimal state used specifically for fees. That design could require users to pay in two different currencies, creating a user-experience challenge.

Summary & Key Takeaways

• The video discusses three key problems related to revenue sharing and Mev in shared sequencing layers: determining each participant's marginal contribution to Mev, comparing the profits of running a separate chain versus using a shared chain, and designing a sequencing layer that supports different approaches to Mev by Roll-Ups.

• The first problem focuses on how to discover each participant's marginal contribution to Mev in a shared sequencing layer and design a rebate system based on this information.

• The second problem compares the profits between running a separate chain and using a shared chain, considering factors like order flow auctions and the distribution of Mev.

• The third problem addresses how a shared sequencing layer can support Roll-Ups with different ordering policies without impacting interoperability and examines transaction fee mechanisms and verification.