In April 2026, a sophisticated attack on KelpDAO and LayerZero led to the exploitation of approximately $292 million in assets. The core issue was not a flaw in the smart contract code itself, but rather that the Decentralized Verifier Network (DVN), which verifies off-chain data, approved a manipulated "burn" message as valid. This fabricated message passed validation immediately, leading to the draining of 116,500 rsETH from the bridge vault.

The root cause of this incident lies in the "shared vault" architecture of traditional bridges, where assets are concentrated into a single pool. It exposed a structural vulnerability where the compromise of a single verification message can put the entire vault at risk. More concerning was the contagion of risk. The attacker deposited the stolen rsETH as collateral in lending protocols such as Aave, borrowing against it to extract additional liquidity. As a result, the bridge risk propagated into bad debt risk across lending markets.

The conversation that followed reached beyond this single incident into deeper architectural territory. Sergej Kunz, founder of 1inch, flagged the systemic risk inherent to pooled-asset designs across DeFi. In the context of a separate exploit, Zaki Manian, Cosmos architect and Sommelier co-founder, argued that intent-based architectures structurally limit exposure to this class of attack.

What exactly is an intent-based architecture?

2. What Is an Intent

An intent can be defined in one sentence as a way of specifying the desired outcome rather than the process.

While this concept may seem unfamiliar, we already use this pattern intuitively in our daily lives. For example, consider purchasing a $30 item from an overseas seller online. You select the product, enter your shipping and payment details, and place the order. A few days later, the item arrives at your doorstep. At no point do you manually choose the payment network (e.g., Visa or Mastercard), interbank settlement processes, or logistics routes. You simply specify the desired outcome, and the system handles the rest.

Now imagine having to make every decision yourself. If you had to compare payment security standards, choose payment networks, evaluate interbank settlement routes, and even select shipping providers, the user experience would be significantly degraded. Worse, a poor choice could lead to higher-than-expected costs.

Today, on-chain financial activity still operates under a similar structure. Users must explicitly define execution paths within a transaction-centric model, which requires a significant level of prior technical knowledge. This not only introduces inefficiencies but also exposes users to security risks. As a result, despite substantial capital inflows into crypto over time, retail users continue to favor centralized exchanges such as Coinbase, Binance, and Upbit over on-chain alternatives.

Let’s take a closer look at how intent-based architectures differ from the traditional transaction-centric model that underpins on-chain financial activity

Traditional Transactions (Imperative)

▎ "Swap 1 ETH on Uniswap V3's ETH/USDC 0.05% pool, with 0.5% slippage, at 25 gwei."

In the traditional transaction-centric model, users must explicitly define every element of the execution path. From chain selection to DEX, liquidity pools, slippage tolerance, and gas fees, every decision is the user’s responsibility. This requires prior knowledge of which DEXs exist, whether sufficient liquidity is available, and whether the trade will incur price impact due to slippage. In addition, users must account for potential losses from MEV (Maximum Extractable Value) and set an appropriate gas fee to ensure inclusion. The key issue is that all risks arising from this process are borne entirely by the user. This includes losses from price volatility, gas fee spikes, and failed execution.

The Intent (Declarative)

▎ "Convert my 1 ETH into at least 3,500 USDC."

In an intent-based architecture, users no longer need to manage complex execution parameters directly. Instead, they simply specify the desired outcome. Rather than submitting an on-chain transaction, the user signs an off-chain message—a commitment to settle if certain conditions are met.

The entity responsible for executing this commitment is the solver. Solvers design and execute one or more transactions to achieve the intended outcome. In doing so, they may employ multi-step, strategy-driven execution rather than a single transaction.

3. How Intents Actually Work

As discussed earlier, the key actors responsible for executing user intents are solvers. They take over the complex execution processes previously handled by users, assuming the associated risks in exchange for potential profit.

The system operates through the following steps:

• Intent Propagation: The user’s signed intent (specified conditions) is broadcast to the solver network.

• Competition and Bidding: Multiple solvers compete to fulfill the intent, submitting bids to offer the best execution terms.

• Execution and Settlement: The winning solver executes the transaction and settles the outcome.

The mechanism for guaranteeing outcomes to users and settling with solvers typically falls into two categories, depending on the network environment.

• Single-Chain Environments (Atomic Settlement): In networks such as UniswapX or CoW Swap, all actions are executed atomically within a single transaction. The settlement contract verifies whether the required condition (e.g., 3,500 USDC received) is satisfied at execution time. The user’s assets are transferred to the solver only if the condition is fully met, at which point the solver’s profit is locked in.

• Cross-Chain Environments (Optimistic Settlement): In systems such as Across Protocol, atomic execution is not possible due to cross-chain constraints. Instead, solvers use their own capital to execute a “fill,” fronting funds to the user on the destination chain. Settlement and reimbursement occur later on the source chain once fulfillment is verified by the settlement contract.

The core principle remains the same: the signed target outcome becomes the binding constraint of the transaction. If the condition is not satisfied, settlement is not executed. As a result, execution risks such as price volatility or gas fee spikes are shifted entirely to the solver.

This dynamic transforms execution quality itself into a competitive moat. Solvers are incentivized to discover the most capital-efficient, lowest-latency, and most reliable execution paths. Users receive better pricing and faster execution by default, while solvers capture the resulting efficiency gains as surplus value.

Solver Competitiveness: Innovating Liquidity Sourcing

Because users do not specify how execution should be performed, solvers go far beyond simply routing through on-chain liquidity pools:

• Private Inventory: Solvers leverage pre-positioned capital to execute trades instantly without relying on external liquidity sources or incurring additional fees.

• Ring Trades: Solvers match opposing user intents in a peer-to-peer manner, leveraging Coincidence of Wants (CoW) to minimize or eliminate AMM and liquidity provider fees.

• Multi-Source On-Chain Routing: When necessary, solvers aggregate liquidity across multiple on-chain venues to achieve optimal execution, generating price improvement beyond the user’s specified limit.

4. Where Intents Win

1) On a Single Chain: The Execution-Structure Shift

The scale of the shift intents and solvers create is obvious even within a single chain — comparing a basic on-chain swap is enough. AMMs and aggregators automated parts of execution, but the core risks — gas costs, failed fills, MEV exposure — stayed squarely on the user. Intents restructure that. Every burden the user used to carry, the solver now carries.

A Trade With Nothing to Lose: Removing Gas and Slippage

The moment a user clicks "trade" in the legacy stack, two layers of uncertainty land on them: the gas they'll pay no matter what, and the slippage that turns the displayed quote into a smaller actual amount.

• Gas as Sunk Cost: To trade at all, you need a native token (ETH, SOL, etc.) sitting in the wallet. The catch: even if the trade reverts mid-execution, the gas you've already burned doesn't come back. The cost lands regardless of outcome.

• Slippage and an Unguaranteed Fill Price: What a DEX aggregator displays is the best quote right now — not a guaranteed fill price. While your transaction sits in the queue, the market can move or MEV bots can intervene, and you receive less than promised (slippage occurs). Tighten the slippage limit to defend against this and the trade reverts more often — and the gas you spent on the failed attempt still doesn't come back. Either way, the cost and the risk stay on the user's side.

Intents hand both risks (gas and slippage) to the solver. Instead of paying gas to fire an on-chain transaction, the user just leaves a single gasless off-chain signature (EIP-712) and walks. The on-chain settlement gas is borne entirely by the solver.

The desired outcome ("at least 3,500 USDC") is also nailed into the signature itself. If that floor isn't hit, the trade can't settle. So when the market moves or networks congest, only the solver's margin shrinks — the user's payout doesn't lose a cent.

CoW Swap, UniswapX, 1inch Fusion — every major intent-based protocol works this way. The user no longer needs to hold a gas token, and they receive the exact outcome they pre-agreed to.

Better-Than-Market Pricing: How Solver Competition Beat the On-Chain Limit

In the legacy model, structural differences between chains quietly leak value out of the user's pocket.

• Ethereum (L1) Public Mempool and MEV: Ethereum transactions go through a public mempool by default — anyone can see them. MEV bots see your trade in advance, raise their gas fee to overtake your slot in front-running, or sandwich your trade by inserting their own orders before and after. You can route around this by picking a wallet or dApp with MEV-protect built in, or by using a private RPC (Flashbots, Flashblocks). But the burden of actively defending your own assets still sits with the user — and that's not going away.

• L2 Sequencer Authority and the Execution Race: L2s without a public mempool (Arbitrum, Base, etc.) are relatively safe from outside bots. But the single sequencer (Solo Sequencer) holds a monopoly on transaction ordering — so in principle, it can reorder user trades or extract value if it wants to. Users still have to enter the priority-fee auction for a guaranteed fill, and they still absorb the price-movement risk in the gap between submission and execution.

• AMM Pool Limits: Common across all chains. AMMs settle prices based on a formula running over a shared liquidity pool. They earned their place by providing liquidity even when buy and sell orders didn't immediately match — that's the contribution that made DeFi possible. But forcing every trade through a pool is structurally inefficient. Even when opposite-direction trades (Coincidence of Wants, CoW) exist at the same moment, AMMs can't match them directly — both sides trade against the pool, paying fees twice and eating slippage twice. Capital efficiency takes the hit.

Intents kill that user-side cost burden by running off-chain auctions and solver matching tuned to each chain's environment.

• Off-Chain Auction and Solver Matching: The user submits an order with a gasless signature. Solvers worldwide compete in an off-chain auction (Solver Auction) over a single question: who can return the most price surplus to the user?

• Ring Trades: Solvers don't stop at 1:1 matching. They identify ring trades that thread token flow through multiple users at once. Because tokens never go through a liquidity pool — value moves directly between users — there's no LP fee paid to AMMs, and price-impact slippage disappears.

• Uniform Clearing Price (UCP): All identical trades inside a single batch settle at one price. Because there's no ordering between trades, sandwich attacks that depend on jumping in front of a specific trade become structurally impossible.

• Chain-Tuned Auction Models: On gas-heavy Ethereum mainnet (L1), orders are signed off-chain to remove the cost burden. On gas-light L2s, on-chain Dutch orders start at a price favorable to the user and decay until a solver fills — auction mechanisms tuned to each chain's economics.

The mechanism varies, but the core is the same: multiple solvers (Fillers) shave their margin to fill the order at a price as close to mid-market as possible. The user no longer plays a chain-by-chain MEV-avoidance game or fights a gas-fee bidding war — they receive a better-than-market price competitively quoted by professional solvers and market makers (MMs). The "route discovery" and "defense" homework users used to carry — solvers do it now and return the savings to the user.

2) In Cross-Chain: The Structural Edge

Intents pay off across many areas, but the gap opens up the widest in cross-chain. Two chains can't share state directly, so moving an asset across and then swapping it on the destination has always been clumsy and inefficient under the legacy model. That's also where the worst UX problems and the worst security blow-ups have lived simultaneously.

The root cause is transaction atomicity. Within a single chain, every operation in a bundle either all succeeds or any failure reverts the whole thing into a no-op — that safety net is automatic. The moment two chains are involved, the guarantee evaporates. The two chains can't verify each other's state directly, so something on one side has to hold the asset and back the claim, and something on the other side has to verify what actually happened — through a separate trust mechanism.

Legacy bridges fill those two empty seats with massive shared vaults (custody) and external verifier networks (verification). Intents fill the same two seats with solver-owned capital (in place of custody) and post-execution result verification (verification, simplified). The structural divergence shows up in three places at once: security, speed, and price.

Eliminating the Single Point of Failure

This isn't just a difference in implementation. It's a difference in where the risk lives.

The KelpDAO incident is exactly what happens when the second and third rows of this table break simultaneously. The fat lockup pool was the single target. The verification network entrusted to vet messages let a forged one through — and the entire pool shook.

In the intent architecture, neither of those structures exists. There’s no pool to lock down, so no single attack target. There’s no upstream message-trust step either — settlement only fires after the asset has been demonstrably delivered on the target chain (Proof of Fill). So even if a specific node in off-chain infrastructure gets compromised, settlement can’t proceed without confirmed delivery — and the risk doesn’t migrate onto user assets.

From Minutes-to-Hours of Waiting to Instant Settlement

Legacy bridges stack the following steps in series:

Source-chain finality → external-verifier message relay → target-chain mint

Depending on the environment, this runs anywhere from a few minutes to tens of minutes — sometimes hours. On Ethereum mainnet, you wait for finality (2 epochs, roughly 12–15 minutes) to rule out reorg-driven invalidation. L2 <> L1 movements can stretch into hours or days because of the challenge window. Verifier-node message relay and cross-checks tack on additional infrastructure delay on top.

The lag isn’t a performance bug. It’s the structural waiting time required to trust state across chains.

Solver settles to user (sub-second to a few seconds)
→ Post-processing [Source-chain finality → external-verifier message relay → target-chain mint]

Intents flip the flow on its head. The solver settles on the destination chain from its own capital first, so the user receives assets in under a second to a few seconds depending on network conditions. The chain-by-chain finality wait and verification-infrastructure delay that legacy bridges shoved onto users are now absorbed by the solver — backed by its own capital and tech stack as the bond.

From Per-Chain Pricing to a Single Quote

In the legacy cross-chain stack, moving assets and swapping them are handled in separate steps. Sometimes you swap on the source chain first and then bridge. Sometimes you bridge first and swap on the target. Sometimes the loop runs more than once. The point is — these aren’t bundled into one trade. They run as discrete steps, each priced separately.

Because each step prices independently, the user doesn’t get the best price for the trade as a whole — they get a chain of fragmented prices stitched together in sequence. And once execution and pricing are split this way, cost stacks up the same way. Bridge fees on one side, DEX slippage on the destination chain on the other, both paid in full.

Intents collapse all of that into a single unified flow. Instead of relying solely on on-chain liquidity pools, solvers compete using their own private inventory, submitting bids in a competitive auction. This includes not only specialized solver teams but also major market makers such as Wintermute, B2C2, and Cumberland, all directly contributing liquidity to produce the best possible quote. Because execution no longer depends on the depth of on-chain AMM pools, slippage remains minimal even for large trades. In addition, a single solver handles settlement across both chains, eliminating the need for a separate bridging step and its associated fees. Instead, all costs are bundled into a single optimized exchange rate—an all-in quote.

As a result, users no longer go through multiple steps while paying fragmented fees. They simply receive the final outcome of a transaction executed under the most favorable terms available.

5. Are Intents and Cross-Chain Messaging Competitors?

A sharp question shows up here.

“Solvers still need to rebalance their own capital, and they still need to prove on the source chain that they paid the user on the target chain. Don’t they have to use cross-chain messaging infrastructure for that?”

Correct. Intents don’t displace messaging networks — they’re not a replacement technology. If anything, the architecture finally lets general-purpose Arbitrary Message Passing protocols do what they’re best at. In messaging-based models, users themselves had to navigate the messaging infrastructure, threading the needle between two competing goals: fast transfer and safe verification. Intents decouple those two goals and route each to the actor best suited to handle it.

• Execution Layer (Solver): The solver carries the part the user actually feels — immediate settlement and risk absorption. No long verification wait; the user receives the asset and is done.

• Settlement & Verification Layer (Messaging Infrastructure): Afterward, the settlement contract on the target chain produces a Proof of Fill — evidence that the solver delivered the assets correctly. Cross-chain messaging now does what it does best: securely relaying that proof back to the source chain. When solvers rebalance large amounts of capital to refill drained inventory, they lean on the same robust infrastructure.

The result: the intent paradigm reorganizes cross-chain traffic efficiently. Most ordinary users — those who simply want to move assets — no longer need to walk through the time-consuming and costly existing infrastructure (the retail rail); they get the smooth UX intents deliver. At the same time, that messaging infrastructure can finally focus on its core job: a robust wholesale data backbone where solvers and protocols clear trust and capital at scale. Solver execution and messaging-layer verification don’t compete. They form a symbiotic system that, taken together, finally addresses Web3 fragmentation end-to-end.

6. Honest Concerns About Solvers

In June 2023, Paradigm’s Quintus Kilbourn and Georgios Konstantopoulos co-authored “Intent-Based Architectures and Their Risks.” They welcomed the paradigm but called out structural risks across three dimensions: Trust, Order Flow, and Opacity. Here we look at the two most frequently raised in the intent debate.

The Intent Architecture’s Dilemma

Trust Becoming the Barrier (Trust)

DeFi was born under the banner of Trustless. The ideal: users interact directly with smart contracts, and no one slips in between. But intents explicitly require a middle actor — the solver. What Paradigm worried about is the scenario where this delegation of trust calcifies into a barrier. Order flow concentrates among a handful of large solvers who’ve earned the trust of users and protocols, and new entrants can’t compete until they’ve built that trust themselves. In the worst case, a small group of solvers takes a monopolist position and strips users of their bargaining power — the right to a better price.

Concentration Among Few Solvers (Order Flow)

The efficiency curve in solver competition is steeper than it looks. More capital, faster infrastructure, sharper algorithms — whoever has these has an overwhelming edge, and that edge widens with time. The data backs it up. On UniswapX, two solvers — SCP and Wintermute — capture more than 70% of volume. CoW Swap likewise sees its top 5 solvers handle most of the flow. If the intent stream calcifies into Exclusive Order Flow, Paradigm warns, “permissionless competition” can converge into an effective oligopoly held by a small cartel.

Are Solvers a New Kind of Bank?

“If permissionless competition converges into an effective oligopoly, what makes this any different from the big banks of Wall Street?” The honest question stays. The answer isn’t simple, but the difference is real.

• Conditions for Winning: Where the oligopoly in traditional finance is concentration manufactured by locking the door — through licensing and regulation — solver-market concentration is the result of scale competition inside a door left open.

• The Data Flywheel: Whether the environment is permissionless like UniswapX or vetted by tests and DAO checks like CoW Swap, the barrier to entry in this market is not power but economies of scale. A solver that sees more flow finds better routes (the data flywheel), wins more auctions, and reinvests the resulting capital efficiency — a Winner-take-most structure.

The Bone-Deep Optimization Process

The current solver ecosystem is, undeniably, concentrated in a small number of capital-rich players. But the structure isn’t locked in by entrenched interests. It remains open to anyone who can show up with overwhelming technology or new efficiency and shake the board. The market is going through the bone-deep process of finding optimal efficiency on its own. That is the decisive difference from the old oligopolistic regime.

7. The Future of Intents

So where does the intent market actually stand today? In data. Intent-based architecture is no longer an early-stage experiment. Three signals point in the same direction: explosive volume growth, the formation of an ecosystem standard, and expansion across new domains.

Volume That Proves the Capital Migration (Market Adoption)

The data shows intent mode has already crossed into mainstream.

• 1inch Fusion: Roughly $214B processed across 2025. In Q4, 19% of 1inch’s internal routing volume ran through intent mode (Fusion). Over the same period, 1inch held a 25.2% share of the DEX aggregator market.

• CoW Swap: Averaged about $6B in monthly volume in 2025 — 200% growth year-over-year. Crossed $9B in monthly volume in July 2025, cementing its lead in the intent category.

A De Facto Standard Forming

The fragmented intent ecosystem is converging through major consensus-driven proposals.

• ERC-7683 (Standardizing the Language): Proposed jointly by Uniswap Labs and Across in May 2024. The standard unifies the previously protocol-specific intent (order) format into a single schema, letting an order created on Protocol A get filled by a solver on Protocol B. The standard isn’t a proposal anymore — it’s being adopted across the market. Across reports 88% of orders running through ERC-7683 (cumulative $35B), and the v2 standard is being co-authored with UniswapX. Even CoW Protocol — holding 34% of the DEX aggregator market — adopted the standard in February 2026. With more than 50 teams signed on, scattered solver networks are merging into a single competitive pool.

• OIF (Opening the Infrastructure): And in February 2025, the Ethereum Foundation (EF), Hyperlane, and Bootnode launched the Open Intents Framework (OIF). OIF, in plain terms, is the project to build a public shared order board (Mempool) that anyone can access. Even with ERC-7683 unifying the order format, if the orders themselves stay locked inside a specific protocol’s private servers, order flow ends up monopolized regardless. OIF’s mission: prevent any single company from locking up orders (Lock-in), and build a fully open-source routing infrastructure where anyone can post orders and anyone can step in as a solver to take on the work. More than 30 major teams have rallied around it to prevent cartel formation and reach genuine decentralization.

The result: intents are being promoted from the clever design of individual protocols to a core infrastructure layer shared across the entire ecosystem.

Expansion Beyond DEX Swaps

Intent–solver models no longer sit only in the layer that optimizes DEX swaps. The architecture is steadily expanding into a general-purpose backend that abstracts on-chain execution. Two axes show this most clearly.

• Stablecoin Payment Backend Expansion: Stablecoin markets have always struggled with one big problem — liquidity fragmented across chains and assets. Intent–solver structures are absorbing that fragmentation directly into the backend. At the deepest liquidity layer (the Clearing Layer), Aori × M0 stands out. Custom stablecoins issued on top of M0 settle 1:1 against USDT and USDC across chains via Aori’s solver network — fragmented stablecoins consolidated into a single wholesale clearing rail.
  At the payment-routing layer that connects users to merchants, players like Eco Protocol are stepping in. Whichever chain or stablecoin a user pays in, solvers convert it on the backend and front-pay the merchant immediately. Users and merchants stop worrying about the fragmented blockchain stack altogether and just experience smooth, consistent payment.

• AI Agent Channels: 1inch shipped Fusion intents and cross-chain swaps via MCP. deBridge MCP demonstrated an architecture that converts natural-language intents into cross-chain execution. Squid MCP, Uniswap MCP, Safe × CoW Agent Actions, NEAR AI Agent Market follow. AI agents are rapidly emerging as a new layer that calls intents directly and executes them.

The eyes naturally turn to the next question. In the middle of this paradigm shift, what is Radius preparing as its next step?

8. Radius’s Intent Journey

Earlier this year, Radius began running solvers in earnest. We took the executor’s seat — the position that turns user intent directly into outcome.

The essence of intent architecture is making sure the user no longer has to think about liquidity pools, gas limits, or bridge routes. Radius, as a solver, takes on every layer of complexity the user has stripped away and digests it on the backend. The user signs, and turning that signature into the most efficient and secure on-chain execution becomes Radius’s responsibility.

Our destination is simple. To deliver an environment so smooth that users never need to be aware of the word solver — they simply receive the result they wanted. To prove our value through results alone. That is how Radius contributes to the decentralized ecosystem as a solver.

• The RWA market has grown primarily as a means for DeFi investors to gain on-chain exposure to stable, real-world yields, such as U.S. Treasuries and money market funds.

• The recent surge in the RWA market reflects expansion concentrated in primary issuance, rather than an increase in actual on-chain trading activity or liquidity, which remains highly limited.

• While tokenization can standardize the operational, settlement, and ownership-transfer processes of securities, it does not eliminate the underlying asset risks or regulatory constraints. As a result, today’s RWA market remains largely institutional, with trading confined to a restricted set of participants.

• Historically, growth in primary markets has inevitably driven the need for secondary markets to enable price discovery and liquidity.

• Likewise, the next phase of RWA market growth is unlikely to be driven by retail exchanges, but rather by secondary liquidity infrastructure that enhances capital efficiency and risk management for institutional capital.

2. Has RWA Brought Capital into DeFi?

2.1 Explosive Growth of the RWA Market

The year 2025 marked a critical turning point in government approaches to crypto regulation and institutional participation. In the United States, the GENIUS Act, which established a legal framework for stablecoins, came into effect in July following its signing by President Donald Trump. The legislation introduced clear requirements for stablecoin issuers, including 1:1 reserve backing, auditing, and transparency standards, thereby creating a foundation for more secure institutional participation.

At the same time, competition across the industry to attract institutional capital intensified, triggering rapid expansion in the RWA market. As a result, the total market capitalization of RWAs grew dramatically—from approximately $15.2 billion in December 2024 to around $426.7 billion by December 2025, representing nearly a 28-fold increase within a single year.

While this rapid growth may initially appear to reflect significant capital inflows into DeFi via RWAs, a more granular, asset-level analysis reveals a different reality. Across much of the RWA market, blockchains continue to play a narrowly defined and limited role.

The RWA data platform RWA.xyz classifies RWA assets into two categories—Distributed Assets and Represented Assets—based on two criteria:

1. whether the asset can be transferred to wallets outside the issuance platform, and

2. whether peer-to-peer (P2P) trading is possible.

According to this framework, repurchase agreement (repo) assets, which account for the majority of the current RWA market capitalization, are classified as Represented Assets. These assets do not tokenize actual ownership of the underlying instruments. Instead, they serve as digital representations of repo contract states and settlement processes. As a result, they are not usable within DeFi protocols, nor can they be transferred to external wallets outside the issuance platform.

Repo RWAs represent approximately $388.4 billion in outstanding value—an order of magnitude larger than the combined market capitalization of all other RWA asset classes. Given their structural and regulatory constraints, the vast majority of these repo assets are currently managed on the Canton blockchain.

That said, this does not mean that Distributed Assets have failed to gain traction. On the contrary, the market capitalization of Distributed RWA assets grew from approximately $5 billion in December 2024 to over $18 billion by December 2025, representing more than a threefold increase within a year.

At the same time, RWA issuance infrastructure has attracted growing attention and expanded rapidly. Among the most prominent platforms, Securitize has played a central role in driving market expansion. Following the issuance of the BUIDL token in March 2024, Securitize partnered with multiple global asset managers in 2025 to launch RWAs such as ACRED (Apollo) and VBILL (VanEck), contributing meaningfully to the growth of the RWA market.

In recognition of this momentum, Securitize is preparing for a public listing on Nasdaq via a SPAC transaction, at a reported valuation of approximately $1.25 billion.

Another major RWA platform, Ondo Finance, launched Ondo Global Markets, enabling investors to gain exposure to tokenized U.S. equities. Meanwhile, Centrifuge partnered with Janus Henderson to tokenize an AAA-rated CLO fund, JAAA, making institutional-grade credit products accessible for on-chain investment.

2.2 Structural Barriers for Core Participants

As previously discussed, RWAs have not yet emerged as a meaningful driver of DeFi growth. The majority of today’s RWA infrastructure remains heavily focused on primary issuance, rather than on enabling active secondary trading.

Figure 4 summarizes the trading volumes of major RWA tokens and highlights a stark imbalance: despite the rapid growth in issuance, secondary market activity remains extremely limited. This disparity supports the view that most RWA investors enter the market primarily through issuance channels and, rather than engaging in active trading, tend to hold their positions.

This disparity is fundamentally driven by differences in the underlying business models of issuance infrastructure and trading infrastructure. In RWA issuance, key parameters—such as who is eligible to invest, redemption terms, pricing methodology, and the structure of investor rights—can be predefined and offered to a limited set of counterparties at the point of issuance.

By contrast, trading infrastructure only becomes viable when multiple independent actors simultaneously agree on regulatory compliance, risk management, and settlement processes. In practice, this means that a fragmented, jurisdiction-by-jurisdiction regulatory framework must be satisfied by all relevant stakeholders before a trading venue can function.

Moreover, most RWAs today remain closely tied to securities classifications. As a result, intermediating RWA transactions is highly likely to be treated as securities brokerage activity. In major jurisdictions such as the United States and Europe, securities intermediation requires appropriate licensing. This requirement applies not only to trading infrastructure providers themselves, but also to market makers that supply orders and liquidity to ensure orderly trading. Consequently, both groups face significant regulatory and licensing barriers to entry.

The current asset composition of the RWA market—largely centered on money market funds (MMFs) and private credit—also represents a meaningful barrier to entry from a market maker’s perspective. Even in traditional finance, these asset classes are not actively traded in secondary markets. Instead, transfers typically occur through limited channels such as bilateral assignments, institutional OTC transactions, or, where exchange trading is required, via ETF wrappers.

Market maker revenues, however, are primarily driven by two components:

1. bid–ask spreads, and

2. inventory risk premiums.

Assets such as T-bills, MMFs, and private credit instruments exhibit minimal price volatility and rely heavily on NAV-based valuation, making price discovery inherently difficult. As a result, they offer limited opportunities for market makers to monetize risk-taking or inventory management.

RWAs are, at their core, tokens issued against securities that originate from traditional financial structures. Consequently, the final redemption process must still follow off-chain legal, contractual, and settlement frameworks. In practice, this means that simply tokenizing MMFs or private credit instruments does not, by itself, improve liquidity. The structural constraints of the underlying assets remain largely unchanged.

In summary, the underdevelopment of RWA secondary markets can be attributed to three primary factors:

1. the multilateral regulatory and compliance requirements inherent in trading infrastructure business models;

2. fragmented, jurisdiction-specific licensing regimes and regulatory frameworks; and

3. the underlying characteristics of currently issued RWA assets, which are not naturally conducive to active secondary trading.

Addressing these constraints is essential for the RWA market to mature and to expand participation beyond its current, highly constrained investor base.

3. Structural Bottlenecks Created by the Absence of Secondary Market Liquidity

3.1 Structural Misalignment Between RWA Redemption Mechanisms and DeFi Liquidity

RWAs backed by assets such as money market funds (MMFs), private credit, active funds, and private equity generally do not provide immediately usable liquidity for DeFi when redemption is requested. This is largely because the final cash conversion of the underlying assets still relies on traditional custodial and banking infrastructure.

Figure 6 illustrates, in simplified form, the purchase and redemption flow of the BUIDL product. Since BUIDL is primarily backed by short-term U.S. Treasuries, its underlying assets can be considered relatively liquid. In addition, Securitize ****is working in collaboration with Circle to provide near-instant redemption liquidity via USDC.

However, RWAs backed by assets such as private equity funds and private credit are structurally illiquid. Even when stablecoin-based redemption services are supported, offering continuous or on-demand redemptions remains difficult due to the nature of the underlying assets. A clear example is ACRED, which is currently used as collateral in DeFi lending protocols such as Morpho and Loopscale, and operates on a quarterly redemption cycle.

As a result, if a looping position collateralized by ACRED were to face a liquidation event, a liquidator would be required to immediately absorb the asset, repay the outstanding debt, and bear the risk of holding an illiquid position until redemption. If no liquidator is willing or able to assume this risk, the protocol itself may ultimately be forced to absorb the loss.

Another structural factor that hinders effective price formation in RWA markets is the fact that most RWAs are valued on a NAV basis. Net Asset Value (NAV) represents the fair value of a fund’s assets minus its liabilities, divided by the number of outstanding shares or units.

For assets such as public equities or government bonds, which trade frequently and have observable market prices, valuation can be anchored directly to market prices. In contrast, private credit and fund-based assets trade infrequently and are therefore typically valued using mark-to-model approaches. These models incorporate inputs such as discount rates and expected loss assumptions, which are not updated in real time. Instead, they are typically revised on a monthly or quarterly basis, resulting in slow and discontinuous NAV updates.

This delay makes continuous price discovery difficult and materially weakens incentives for key secondary-market participants to enter the market. In particular, it reduces the attractiveness of RWAs for market makers, who rely on dynamic pricing and volatility, as well as for liquidators, who play a critical role in risk mitigation for lending protocols.

3.2 How Exit Uncertainty Constrains Demand for RWA Investments

In the absence of functional secondary markets, issuers, investors, and DeFi protocols encounter increased friction in their ability to engage with RWA assets.

From the issuer’s perspective, the absence of secondary markets concentrates all liquidity demand into redemption requests directed at the issuer itself. This significantly increases the issuer’s short-term cash management burden. As assets under management (AUM) grow, pressure from redemption demand intensifies, ultimately imposing a structural ceiling on AUM growth.

For investors, the lack of secondary liquidity heightens exit uncertainty, which in turn raises the cost of portfolio rebalancing. Quarterly redemption cycles and non-instant liquidity are fundamentally misaligned with the behavioral patterns of DeFi investors, reducing the attractiveness of RWAs as investable assets and increasing the likelihood that demand for RWA products remains limited.

Finally, from the perspective of lending protocols such as Aave and Morpho, the absence of secondary markets complicates risk management during liquidation events. Without reliable exit liquidity, protocols face greater uncertainty around collateral recovery, which in turn discourages the adoption of RWAs as acceptable collateral.

4. Price Discovery and Liquidity: The Invisible Engine Behind Primary Market Growth

4.1 The Price Discovery Function of Secondary Markets and Its Impact on Primary Issuance

Traditionally, the primary market refers to the market in which corporations or governments issue stocks or bonds to raise capital and sell them to investors for the first time. The secondary market, by contrast, is where already-issued securities are traded among investors.

While the depth and structure of secondary markets vary across different types of securities, history consistently shows that the development of secondary markets has played a critical role in driving the growth of primary markets.

The core function of secondary markets is price discovery. While prices in the primary market are largely designed prices—set by issuers, underwriters, and valuation models—prices in the secondary market emerge as a collective consensus, reflecting the aggregated information, risk perceptions, and liquidity demands of numerous buyers and sellers.

In this sense, the absence of price discovery means that the market lacks a clear signal of how an asset is truly valued. When price discovery fails to function effectively, investors are unable to assess critical factors such as when they can exit, at what price, and with what potential loss. As a result, investors demand higher returns to compensate for uncertainty, which in turn drives more conservative investors out of the market.

Empirical evidence supports this relationship. In Secondary Market Trading and Cost of New Debt Issuance (2017), Ryan L. Davis and Wayne E. Ferson show that lower secondary-market liquidity for existing bonds leads to higher issuance costs for newly issued debt by the same issuer. Conversely, more efficient price discovery and deeper liquidity in secondary markets are associated with lower costs of capital in primary markets.

Our results indicate that the illiquidity of outstanding bonds is priced into new debt issues by the same firm, where firms with current illiquid debt pay higher prices for subsequent debt issues. We also find that greater illiquidity reduces the likelihood that firms return to the debt market during periods of market turmoil. (Secondary Market Trading and Cost of New Debt Issuance)

The equity market exhibits a similar dynamic. In IPO Underpricing and After-Market Liquidity (2006), Andrew Ellul and Marco Pagano analyze 337 IPO cases in the United Kingdom. Their findings reveal a strong relationship between post-IPO secondary market trading costs and the degree of IPO underpricing.

Specifically, the study shows that the lower the liquidity investors expect in the secondary market, the greater the extent of IPO underpricing. In other words, when investors anticipate higher trading frictions after listing, issuers are forced to offer shares at a larger discount during the primary issuance to compensate for expected illiquidity.

Investors participating in IPOs want to be compensated not only for the firm’s fundamental risk and adverse selection costs in the IPO process, but also for the expected liquidity of the shares they are buying and for the risk of an illiquid secondary market. (IPO Underpricing and After-Market Liquidity)

4.2 The Role of Secondary Liquidity Illustrated by the TBA Market

Even mortgage-backed securities (MBS)—whose cash flows are inherently uncertain—have developed a specialized form of secondary market trading to address liquidity constraints. In the U.S. MBS market, this takes the form of the To-Be-Announced (TBA) forward trading market.

MBS allow for borrower prepayments, meaning that their average maturity and duration are not fixed. The TBA market transforms these otherwise non-fungible MBS pools into fungible instruments by trading them under standardized contract terms. In a TBA transaction, counterparties agree in advance on a limited set of key parameters—such as the issuer, maturity, and coupon—and commit to deliver an eligible MBS pool on a predetermined settlement date.

This standardization converts what were once highly customized and illiquid instruments into tradable, fungible assets, enabling active secondary trading. In doing so, the TBA market has not only improved liquidity but has also had a profound impact on the growth and efficiency of the primary MBS issuance market.

This mechanism is further supported by empirical research. In TBA Trading and Liquidity in the Agency MBS Market (2013), James Vickery and Joshua Wright of the Federal Reserve Bank of New York examine the role of TBA trading in the U.S. agency MBS market.

Agency MBS—issued by institutions such as Fannie Mae, which play a central role in providing liquidity and stability to the U.S. mortgage market—continued to be issued even after the 2007 financial crisis. Notably, approximately 90% of Agency MBS trading volume occurs through the TBA forward market.

The paper analyzes the liquidity premium associated with Agency MBS eligible for TBA trading and finds that this premium widens during periods of market stress. By allowing mortgage originators to lock in sale prices in advance for new loans, the TBA market enhances risk management and funding stability. The authors conclude that TBA-driven liquidity contributes to lower and more stable mortgage rates in the broader housing finance system.

In conclusion, regardless of the underlying asset, expectations of deep and active secondary market liquidity tend to have a positive impact on primary issuance, which in turn can expand participation across the broader market.

5. Crypto-Native vs. Traditional Finance: Divergent Approaches to RWA Secondary Liquidity

5.1 The Emergence of Crypto-Native Secondary Liquidity Infrastructure for RWAs

While secondary trading activity has yet to become truly vibrant, several firms are actively working to establish RWA secondary markets. Securitize received regulatory approval from the U.S. Securities and Exchange Commission in November 2020 to operate an Alternative Trading System (ATS). This approval was achieved through the acquisition of Distributed Technology Markets (DTM), an already registered broker-dealer and ATS.

Today, the Securitize platform supports secondary trading for six different categories of RWA assets. In addition, platforms such as tZERO and INX also operate RWA secondary trading venues. All of these platforms run their services under broker-dealer licenses and ATS approvals, reflecting the regulatory requirements associated with intermediating RWA transactions.

While these are not exchanges, enabling loans collateralized by RWAs plays an important role in creating liquidity indirectly. Allowing assets to be easily used as collateral has long been a well-established mechanism for generating secondary liquidity in traditional financial markets.

On Aave, one of Ethereum’s leading lending protocols, a permissioned lending market called Aave Horizon was launched as a fully segregated instance of Aave v3, designed specifically for institutional investors and verified participants. Institutions that have completed KYC and received approval can use RWAs such as USCC, JTRSY, and JAAA as collateral to borrow stablecoins including USDC, RLUSD, and GHO.

Notably, while stablecoin liquidity provision remains fully permissionless, allowing anyone to supply capital, borrowing RWAs themselves is not permitted. In addition, the aTokens (receipt tokens) issued upon depositing RWAs are non-transferable in order to maintain regulatory compliance.

Beyond Aave, lending protocols such as Morpho, Kamino, and Loopscale also support borrowing crypto assets against RWA collateral, further illustrating how collateralized lending serves as a key—albeit indirect—pathway for RWA liquidity formation.

In addition, crypto-focused prime brokerage services such as FalconX, as well as specialized crypto market makers, recognize RWAs like BUIDL as eligible collateral. These firms enable users to borrow against BUIDL or establish derivatives positions using RWA collateral, further extending indirect liquidity pathways beyond on-chain lending protocols.

5.2 Tokenization Experiments in Traditional Financial Infrastructure: The DTCC Case

Traditionally, repo transactions have not been designed to create trading liquidity through the buying and selling of assets. Rather, they have been used as a mechanism for institutions to obtain liquidity without selling the assets they already hold. Recently, DTCC (The Depository Trust & Clearing Corporation)—a core piece of infrastructure for the repo market—has begun experimenting with integrating blockchain technology into existing financial infrastructure. DTCC’s Collateral Appchain, built on Hyperledger Besu, tokenizes and operates existing settlement, clearing, and collateral management systems. The significance of this initiative lies in the fact that it preserves the collateral settlement and management practices long used in repo markets, while migrating them directly onto a blockchain-based system.

However, it remains difficult to argue that these developments have already resulted in the formation of secondary liquidity for RWAs. To date, DTCC does not recognize on-chain native RWA assets such as BUIDL or VBILL as eligible collateral, leaving traditional financial systems and on-chain RWA markets effectively segmented. Nevertheless, the formal adoption of blockchain-based systems as institutional rails by traditional financial infrastructure represents an important development. Over time, this shift could increase the institutional and technical acceptance of crypto-native RWA assets as eligible collateral.

Accordingly, DTCC’s Collateral Appchain is better understood not as an initiative that directly creates secondary liquidity for RWAs, but as a signal that traditional financial infrastructure has begun to embrace blockchain-based collateral rails. While this development does not immediately expand on-chain RWA liquidity, it may serve as the starting point of a structural transition in which crypto-native RWA assets are eventually incorporated into institutional collateral frameworks.

6.Conclusion — Institutional Liquidity Infrastructure Will Drive the Next Phase of RWA

6.1 RWAs Are Not Assets Designed for Retail Trading

RWAs initially gained attention as a way for users already active in DeFi to gain on-chain exposure to stable, real-world yields, such as U.S. Treasury interest. As a result, the early RWA landscape—once dominated by platforms offering on-chain private credit, such as Maple Finance and Centrifuge—gradually expanded to include Treasury-backed RWAs, which experienced significant growth as demand for stable yields increased.

Critically, RWAs were not designed to be traded rapidly or frequently. Their primary purpose has been to provide investors with on-chain access to stable, yield-bearing real-world assets, rather than to support high-velocity trading. This demand does not originate from retail DeFi users often referred to as “degen,” but rather from participants seeking to deploy and manage large pools of on-chain capital in a more stable and capital-efficient manner.

Tokenization can standardize many of the operational and legal ambiguities surrounding securities—such as ownership rights, data representation, settlement processes, and secondary transfers. However, it is not a technology that standardizes the underlying risk of the asset itself.

Even when tokenization streamlines operational workflows, the legal and regulatory frameworks remain unchanged. As a result, many RWAs remain assets that can be traded only among a restricted set of eligible participants. For this reason, the frequently repeated claim that tokenization alone will enable small investors to access or freely trade securities that were previously out of reach is fundamentally flawed—unless securities laws are fundamentally rewritten, or the products themselves are designed from inception to accommodate retail participation.

6.2 RWA Secondary Markets Will Emerge as Infrastructure for Institutional Capital

Historically, financial markets have been governed by rules designed to facilitate transactions between capital seekers and capital providers, and they were primarily markets for specialized professionals and high-net-worth participants. Even assets that are now accessible to retail investors—such as equities and government bonds—were originally professional-only markets, with retail participation introduced much later.

Money market funds and private credit remain institutional-dominated markets even today, while repo transactions are fundamentally inaccessible to retail investors. In addition, the current RWA market represents an extremely early-stage market in which even institutional-grade trading infrastructure has yet to be fully established.

Fund tokens such as BUIDL can currently be traded only in highly limited venues, primarily through select crypto OTC desks, and even then, trading volumes are too small to be meaningfully described as active sell-side demand. As discussed earlier, while both DeFi protocols and traditional financial infrastructure are pursuing their own approaches, the two systems remain fragmented at present, resulting in the creation of only limited liquidity.

However, throughout the history of financial markets, once primary issuance reaches a certain scale, structural demands for price discovery and liquidity have consistently led to the gradual formation of secondary markets. There is little reason to believe that the RWA market will be an exception to this pattern. As the volume of RWA issuance increases, demand will naturally emerge for secondary trading infrastructure, derivatives venues, and collateralized lending protocols designed to improve capital efficiency and liquidity.

That said, the secondary market for RWAs is unlikely to take the form of the open, high-frequency trading venues traditionally envisioned in DeFi. Instead, in its early stages, it is more likely to emerge as an institution-centric liquidity infrastructure aimed at maximizing capital efficiency among a limited set of participants. This path represents the most realistic trajectory for the growth of the RWA market.

7. Reference

[1] Ryan L. Davis A. Maslar, Brian S. Roseman : Secondary Market Trading and the Cost of New Debt Issuance (2017)

[2] Andrew Ellul, Marco Pagano : IPO Underpricing and After-Market Liquidity (2006)

[3] James Vickery and Joshua Wright : TBA Trading and Liquidity in the Agency MBS Market (2013)

[4] Rischan Mafrur : Tokenize Everything, But Can You Sell It? RWA Liquidity Challenges and Road Ahead (2025)

8. Download the Full Report

DocSend - Simple, intelligent, modern content sending

DocSend helps you communicate more effectively by telling you what happens to content after you send them and letting you keep control in real time.

https://docsend.com

Heejin Kim
Business Development, Radius
📧 heejin@theradius.xyz

Our extensive 890-day simulation of the ETH/USDC pair shows a different framing. The data indicate that CEX-DEX arbitrage exhibits structural and predictable characteristics, and can be treated as a network-level asset that L2s may be able to capture and monetize natively.

Key Findings at a Glance

• The ETH/USDC pair in a $10M liquidity pool generated roughly $620,000 in cumulative profit over the period.

• Sustained profit comes from pairing volatile assets (like ETH) with deep liquidity. (By contrast, the USDC/USDT pair generated almost no profit).

• Deeper pools directly increase the absolute profit captured from each opportunity, allowing for larger trades.

• The frequency of opportunities increases significantly once market activity (Daily Range) crosses 6%.

A Predictable Path to L2 Revenue

Our data shows a large profit opportunity exists. The question is: How do we realize and share this value? Capturing this significant revenue stream requires a predictable and fair execution layer.

Secure Block Building (SBB) is a joint monetization model that connects L2s and searchers to capture and share this value. By providing searchers with reliable and guaranteed execution for their profitable transactions, SBB maximizes the value extracted from CEX-DEX arbitrage.

This allows L2s to move beyond transaction fee revenue and actively benefit from this consistent network asset, all while providing the institutional confidence and regulatory compliance necessary for a robust ecosystem.

➡ Learn more about SBB.

Download the Full Report

This simulation isolated pure spread-based arbitrage. The next phase of our research will expand to include MEV generated from backrunning user transactions and execution costs to model the total, addressable MEV value.

For a full breakdown of the methodology and detailed results:

➡ ACCESS THE FULL CEX-DEX ARBITRAGE SIMULATION REPORT.

The wall of regulatory risk

Blockchain technology has matured to the point where banks, fintechs, and global financial institutions now view it as foundational infrastructure for modern capital markets, drawn by advantages like tokenized assets, 24/7 settlement, and seamless cross-border transactions.

But this momentum hits a wall when it confronts regulatory reality.

Across the U.S. and globally, regulators evaluate blockchain networks through a consistent lens: Who is in control?

If any actor within a network can materially influence transaction outcomes, whether through ordering, prioritization, or censorship, the network risks being treated as a regulated intermediary. Even the possibility of such control creates regulatory uncertainty and raises concerns about market manipulation, regardless of intent.

So, how do you build a system that's rigorously compliant?

SBB: Designed for compliance, resilience, and scale

Secure Block Building (SBB) provides the technical foundation institutional chains need to meet regulatory standards from day one. It eliminates intermediary-like control at the protocol level, removing the risk that draws regulatory scrutiny and reducing the compliance burden for institutions operating in regulated markets.

But regulatory readiness is only the starting point. SBB moves beyond simple compliance checklists and ensures operational resilience and long-term economic efficiency:

1. Regulatory-readiness: SBB establishes the network as non-intermediary from through neutral transaction ordering. No single actor or coordinated group can unilaterally order, censor, or prioritize transactions.

2. Operational resilience: SBB preserves system integrity under adverse conditions, delivering continuous, fault-tolerant operations that withstand attacks and failures.

3. Scalable revenue: SBB enables efficient market operations that support long-term revenue models. Through transparent price discovery (via built-in arbitrage markets), it creates the economic conditions necessary for institutional-scale markets to thrive.

A closer look at SBB

SBB proves that transaction ordering is neutral by design. It uses cryptographic guarantees to ensure the ordering entity is blind to transaction contents before they are submitted to the chain.

In this demo, SBB applies FCFS (First-Come, First-Served) ordering:

• The ordering entity cannot view transaction contents at the time of ordering, regardless of gas fees.

• This removes the ability, or even the opportunity, for any actor to exert independent control over transaction ordering.

Explore the full architectural details in our documentation

Built for the next generation of global finance

Eliminating intermediary control, reinforcing decentralization, and maintaining transparent behavior are foundational to reducing regulatory risk. SBB delivers these properties at the protocol level, enabling institutions to build onchain infrastructure that meets the demands of modern global finance.

Ready to evaluate SBB for your infrastructure?

Contact our team to discuss regulatory fit, technical architecture, and deployment pathways for your institution.

Introduction

Over the past few weeks, we've spent a lot of time with institutions to understand why adoption of financial products on public blockchains remains limited.

We believe trusted intermediaries (banks and other financial market infrastructure) remain necessary to the future of finance. These intermediaries, who provide essential services like key custody, verifiable credential issuance, and high-value lending, can leverage public blockchains to add superpowers to their financial products, such as instant settlement, global distribution, and composability.

We refer to these key institutions as “regulated users”.

But regulated users have yet to build at scale

Citigroup forecasts annual transaction activity for both stablecoins and bank tokens could each top $100 trillion by 2030, which is impressive, but still small relative to the daily money flows from leading regulated banks, which can exceed $5-10 trillion.

As the diagram illustrates, blockchains now undoubtedly provide a solution to the global market for digital assets, but their current scale remains minor compared to traditional, regulated banking solutions.

What will it take to cross the chasm of adoption?

Increasing the level of economic activity on public blockchains requires policymakers in major jurisdictions to continue establishing clear rules for building and using the technology.

Policy makers (in the U.S.) are basing the need for regulatory oversight of public blockchains upon the level of independent control that exists in the blockchain system. When a public permissionless blockchain lacks independent control it is essentially just software, and software should not be regulated. On the other hand, when someone retains independent control of the public permissionless blockchain, they are acting as an intermediary and should be subject to regulation.

By this logic, public blockchains and their underlying software applications do not automatically fall outside the purview of global lawmakers and regulators. Important facets, such as open-source licensing and upgrade rights distributed across an uncorrelated group of admins, must be assessed to determine the level of control and risk.

We strongly believe and advocate that mature blockchain systems like Ethereum should remain outside of regulatory purview. Institutional users will continue to pool resources on battle-tested public blockchains that lack independent control.

However, we acknowledge that the majority of economic activity are happening within compliant infrastructure and applications. We think the convenience provided by intermediated financial services will continue to be desired by consumers and businesses. These intermediaries choose to build on public chains for resilience, superior settlement, composability, and distribution, but have the business requirements and capabilities to explicitly comply with local laws and regulations.

In order to make the critical policy updates required to accelerate regulated user adoption, the industry must work collaboratively with policymakers across all political parties.

Regulatory CLARITY on blockchain-based financial markets

Fortunately, U.S., blockchain legislation is making undeniable progress.

GENIUS Act

The GENIUS Act became law in July 2025. It allows regulated, licensed institutions to issue "payment stablecoins" on public blockchains. The U.S. Treasury Department is currently drafting rules to onboard these licensed institutions. Treasury has one year from the signing date (July 18, 2025) to create a working application process for license applications.

CLARITY Act

The CLARITY Act, for crypto market infrastructure, passed in the U.S. House of Representatives in July 2025. Under CLARITY, technology that is open source and not independently upgradeable is referred to as a mature blockchain system. The act calls for increasing the level of regulatory scrutiny along with the level of independent control of the blockchain system. This aligns with the majority of today’s existing financial market regulation, which protects users from the bad outcomes of poor financial risk decision making by human intermediaries. Mature blockchain systems are not without risk; but, they are without human intermediary risk.

Senate Banking Committee’s discussion draft on market structure

The Senate Banking Committee’s market structure discussion draft does not mention blockchain maturity, and instead focuses on recognizing the different risks and benefits between centralized firms, decentralized finance protocols, and non-custodial software platforms.

The Senate’s version of market structure is centered on the concept of an ancillary asset—digital assets distributed in connection with an investment contract, when traded in primary markets, such as for the purpose of raising capital. Ancillary assets traded in the secondary market would not be considered securities. Essentially, this is a way to legally separate the investment contract (which is a security) from the underlying asset itself (which is not). Ancillary assets and their issuance would be overseen by the SEC.

Senate democrats propose DeFi oversight

A proposal out of the Senate from Democrats would require DeFi front-end applications to register with the SEC or CFTC and bring them under rigorous KYC rules and Treasury oversight.

Senate Agriculture committee’s market structure discussion draft

The Senate Agriculture committee’s market structure discussion draft published in November 2025 provides a clear definition of digital commodities and the establishment of a spot market digital commodity regulatory regime with the CFTC. It also provides a definition of a digital commodity, that is separate and distinct from a digital security futures and a payment stablecoin, and proposes a framework for excluding decentralized finance trading protocols (predetermined rules and lack independent control) and a decentralized governance structure (that lacks independent control) from direct regulatory oversight.

It also ensures that "non-controlling" blockchain developers are not treated as money transmitters. This distinction allows open source software developers to build tools like privacy solutions without fear of violating federal law.

Update illicit finance laws to work with public blockchains

A primary challenge we hear from institutions is the impossibility of complying with anti-money laundering (AML) and counter terrorist financing (CFT) laws on public blockchains and permissionless DeFi.

The GENIUS act called for a “60 day public comment period…” to identify innovative or novel methods, techniques, or strategies that regulated financial institutions use, or have the potential to use, to detect illicit activity, such as money laundering, involving digital assets…”

The industry submitted 216 comments with detailed problems and solutions for better combating AML and CFT on public blockchains.

Calls to update existing illicit finance laws in the U.S., such as the BSA and PATRIOT act, are supported in the President's Digital Asset Working Group report on blockchain from July 2025, as well as the Senate Banking Committee’s discussion draft on market structure from the same time period.

Taken together, this legislative and rulemaking momentum is building the essential bridge for regulated users to access public blockchains. The GENIUS Act charts a clear path for compliant, regulated money, while broader administration efforts adapt critical AML/CFT laws for the digital age. The CLARITY Act and the Senate drafts further define the assets (as "ancillary assets" or "commodities") and, crucially, establish that the underlying infrastructure—like "mature blockchain systems" and true "decentralized finance protocols"—are separate from the regulated intermediaries that use them.

This comprehensive shift—from regulating the technology to regulating the actors and modernizing the rules—is the final piece of clarity institutions needed to begin their on-chain adoption in earnest.

For-profit corporations require privacy

Any public blockchain-based financial product built for corporate users is incomplete without privacy. Corporations are obligated to protect trade and business strategy, as well as customer data.

A key industry requirement has been that any change in policy should be grounded in the user’s right to transact privately, and novel techniques for effectively combating illicit activity on public blockchains should assume transaction privacy exists for users. However, many of the discussions and proposed solutions around AML/CFT compliance on public blockchain assumes account activity remains transparent for public viewing. A mindset shift from default-publicly-viewable to default-private/-need-to-know is necessary for sensible blockchain policy.

The ability to independently verify public blockchain ledgers is a key mechanism that makes public blockchains so useful. It also makes privacy difficult. The industry has invested heavily here and solutions from Aztec, ZK Sync Prividium, Aleo, Canton Network are beginning to come to market.

Conclusion

For nearly a decade, the industry has been building public blockchain infrastructure and DeFi that serve users worldwide, often in spite of regulatory headwinds.

Now, the moment has come to align policy and development. Public blockchains must evolve into bipartisan technology to fulfill their role as global financial infrastructure. The winners of this next phase will be those solving privacy and compliance at the infrastructure layer.

At Radius, we’ve building exactly that: compliant, institutional-grade solutions that empower financial institutions to build and operate on public blockchains.

Contact our team to learn how Radius can help unlock the next trillion dollars in onchain value.

Radius: Trust, Transparency, and the Next Era of Ethereum

Big banks, asset managers, and TradFi’s most influential players are now relying on blockchain to power everything from stablecoins to RWAs and global payments.

But is Ethereum truly ready to shoulder the demands of institutional finance, or are we still building toward that vision?

We gathered leading institutions and infrastructure teams at “Ethereum Forward: Institutions Meet DeFi & L2s” during Token2049 Singapore to surface real challenges and capture a genuine snapshot of how Ethereum is evolving for enterprise adoption.

Special thanks to our co-host Google Cloud, media partner Followin, speakers, and attendees who helped make this conversation possible.

Here’s what we learned from the conversations shaping Ethereum’s next chapter. Dive into the full recap below.

Radius: Trust, Transparency, and the Next Era of Ethereum

Speaker: Jayden Kim (Co-founder & COO, Radius)

Recording: YouTube

If Ethereum is to anchor the next era of global finance, trust must be at its core.

Right now, key challenges stem from L2s relying on single sequencers, leaving them exposed to MEV manipulation, censorship risks, and regulatory pressure. Fragmented rollups also create isolated liquidity silos, hindering user experience and slowing broader adoption. On top of that, regulatory standards around KYC, anti-money laundering (AML), and custody continue to define what’s needed for Ethereum to serve as a credible foundation for global finance.

Radius’s answer is an open, transparent infrastructure.

Radius combines decentralized sequencing (via distributed operators), cross-rollup messaging and liquidity bridges, and transparent transaction ordering that reduces unfair trading advantages. Together, these elements build the foundation for a fairer, more transparent Ethereum ecosystem.

Ondo Finance: Intersection of RWAs & DeFi

Speaker: Matt Blumberg (Head of DeFi, Ondo Finance)

Recording: YouTube

Tokenized RWAs are the next frontier, but current DeFi liquidity models don’t fit their needs.

The solution lies in unlocking capital efficiency through deeper integration with TradFi markets. AMMs were built for crypto assets, not tokenized equities. Shallow liquidity, high capital costs, and impermanent loss make them ill-suited for low-volatility, price-sensitive assets. Central Limit Order Books (CLOBs) may be familiar to TradFi, but their fully funded order requirements lead to inefficient capital lockups.

Ondo’s Solution: Instant Mint/Redeem

Ondo removes these barriers by connecting directly to TradFi liquidity. If a user wants to buy tokenized Apple stock in USDC, Ondo quotes a live TradFi price, instantly mints a 1:1-backed token, and delivers the asset: achieving deeper liquidity and lower costs without pooled capital or funded order books. While some centralization remains necessary for compliance and capital efficiency, instant minting and redemption are to become an industry standard.

Advice for DeFi Builders: Make TradFi integration your foundation. Build seamless interfaces for complex interactions. Avoid exclusive partnerships that limit future integration flexibility. And always design for adaptability—especially as lending, perps/options, and cross-chain execution evolve.

Panel 1: Ethereum’s Next Decade: What Will Still Matter?

Panelists: Francesco Andreolí (Head of DevRel, Consensys/MetaMask), Ashley Morgan(Head of Stablecoins and RWA, Ethereum Foundation), Anurag Arjun (Co-Founder, Avail), Mike Silagadze (Founder & CEO, EtherFi)

Moderator: Sonny (BD, Radius)

Recording: YouTube

This session explored how Ethereum is solidifying its reputation as the institutional blockchain of choice, and where it still needs to evolve.

Today, Ethereum stands out for institutional trust, its deep developer community, advanced tooling, and its EVM environment. The L1/L2 design provides enterprises with both security and scalability—L1 for asset storage and settlement layer, L2s for faster, cheaper transactions. With stablecoins and RWAs on the rise, Ethereum continues to cement its position as the preferred platform for regulated finance.

But nobody sidestepped the realities for what next.

As the ecosystem matures, challenges remain: the lure of high TPS at the cost of security, liquidity fragmentation across isolated rollups, and the ongoing need to attract more web2 talent. But at its core, Ethereum’s long-term credibility will depend on maintaining its security-first ethos while improving interoperability and user experience for all.

Panel 2: Regulating the Future: Stablecoins, DeFi, and Tokenization

Panelists: Glenn Woo (Head of APAC, BlockDaemon), Daniel Oon (Head of BD, Katana), Jason French (Executive Director, Clients, Sygnum Bank), Jay (Research, CAP)

Moderator: Matt Blumberg (Head of DeFi, Ondo Finance)Recording: YouTube

As regulated institutions enter the space, compliance and infrastructure standards are quickly rising.

The panel unpacked what institutional onboarding really entails: strict audits, segregation of duties, and transparency at every step. Service providers must now prove operational rigor and trustworthiness by design. For stablecoins, both retail and institutional users demand clear reserve backing, legal protections, and seamless interoperability. With a surge in new issuers, cross-chain mobility and strong regulatory risk management—especially for yield-bearing assets—are becoming top priorities.

Panelists also confronted the real-world risks.

Market volatility, operational hiccups, and technical vulnerabilities persist even in mature systems. True resilience requires clear rules, rigorous audits, and overcollateralization; not blind optimism. The projects that win institutional trust will be those that embed regulatory alignment, transparency, and interoperability into their core. In this new era, credibility is earned when compliance is the default, not the exception.

Panel 3: The Institutional Friendly Layer: L1 vs L2?

Panelists: Mo Jalil (APAC Enterprise Lead, EF), Omar Azhar (VP of Business Development, ZK Sync), Mark Tyneway (Co-Founder, Optimism)

Moderator: Sunshine Kim (Head of Product, Radius)Recording: YouTube

Institutional-grade infrastructure is defined by outcomes: performance, compliance, privacy, and operational clarity.

Consensus across the panel was that institutions rely on Ethereum’s secure, neutral L1 for global settlement, while leveraging L2s for customized execution, privacy, and compliance. Open, composable networks continue to outperform closed or consortium-based approaches.

The priorities were clear: fast and predictable settlement, strong data controls, frictionless UX, gas abstraction, compliance readiness, transparent upgrade paths, and clear cost structures. Ecosystems like OP Stack and ZK Sync are working to delivering the kind of scalable infrastructure that can truly meet institutional demands.

Upcoming for Radius

We learned a lot from the conversations at Token2049 Singapore. And now, we’re bringing that momentum to Devconnect Buenos Aires this month. We’re excited to share our latest progress and continue building resilient rails for institutional-grade adoption.

If you’re working on bringing institutions onchain and want to collaborate, we’d love to connect and shape the next phase of this journey together.

This article introduces the design for State Lock Commitment, a new blockspace commitment mechanism for Proposer-Builder Separation (PBS). Current inclusion-based commitments fail to guarantee execution consistency, leading searchers to adopt risk-averse strategies that reduce market efficiency.

We propose a dual-component approach that goes beyond simple inclusion promises. First, an Exclusion Commitment is issued: a builder-agnostic, upfront reservation that guarantees a specific state will not be altered by conflicting transactions. This is followed by a standard Inclusion Commitment (preconfirmation) for the bundle that wins the subsequent auction. Together, these commitments provide strong guarantees equivalent to Execution Commitment, allowing searchers to bid with greater confidence. The architecture includes a Gateway (for proposers) and a LockEngine (for builders), enabling proposers to auction exclusive state rights, prevent conflicts, increase revenue, and foster a more robust and efficient MEV market.

Read on Ethereum Research:

Parallel Auctions on Commit-Boost

This article is authored by Chanyang Ju(wooju), Researcher at Radius. Thanks to Hugo for his contribution to the PoC and AJ for reviewing this post. 1. Abstract This article introduces State Lock Commitment, a new blockspace commitment mechanism for Proposer-Builder Separation (PBS).

https://ethresear.ch

Scaling Ethereum isn’t just about speed. The real goal is to deliver meaningful value to users. Swellchain is a Layer 2 network designed with this purpose, enabling users to make better use of their assets and increase the impact of restaked assets.

Swellchain: The Restaking Chain

Swellchain features a Proof of Restake (PoR) model that encourages a cycle of growth: as more activity occurs, rewards for restakers and infrastructure providers increase. This attracts additional participation, deepens liquidity, and supports greater decentralization, aligning Swellchain closely with Ethereum’s broader vision.

Swellchain addresses three primary challenges common to current Layer 2s: limited liquidity, centralized control, and lack of native yield. By adopting PoR, Swellchain lets users restake liquid assets to secure the network and earn rewards tied directly to on-chain activity.

How Radius Strengthens Swellchain

Secure Block Building (SBB) enables rollups to access MEV (Maximal Extractable Value) as a stable and transparent revenue stream. Rather than relying on harmful practices, such as frontrunning (where transaction orders is manipulated for profit), SBB uses backrunning approach. Here, arbitrage trades are are are executed after user transactions, ensuring revenue benefits the rollup and its stakeholders.

For Swellchain, SBB enhances the PoR model by transforming MEV from a challenge into a catalyst for growth:

• Consistent and sustainable MEV revenue through backrunning

• Protection against negative MEV behaviors like frontrunning

• Reliable income to support long-term expansion

• Stronger PoR cycle, increasing rewards, security, and user participation

Built for Superchain

Swellchain is built on the OP Stack and is part of the Superchain, a network of rollups working to scale Ethereum together. SBB is built with Flashbot’s Rollup-Boost, making it natively compatible with the OP Stack. This means any OP Stack-based rollups can integrate SBB from the outset, enabling backrunning revenue as native features.

Key benefits of SBB for the Superchain include:

• Protocol-native integration for OP Stack rollups

• New opportunities for realizing MEV revenue

• Stronger foundations for the growth of Superchains

Swellchain Joins Alpha Engine

Swellchain is one of the first rollups in Alpha Engine, a modular platform bringing together MEV revenue (Radius), shared security (Symbiotic), and cross-rollup interoperability (Avail). Participation in Alpha Engine allows Swellchain to concentrate on its core strengths while leveraging broader infrastructure for more efficient and secure scaling.

What’s Next

Secure Block Building helps rollups like Swellchain capture MEV sustainably, setting the stage for a more connected, value-aligned economy. Our upcoming Lighthouse will connect L2s, Ethereum L1, and centralized exchanges through shared MEV markets, bringing us closer to true economic interoperability where value flows seamlessly across the ecosystem.

Website | Blog | Docs | X | GitHub

Overview

Transaction fees alone are not sufficient for long-term L2 growth. To better understand how top-of-block backrunning arbitrage can contribute to L2 revenue, we teamed up with Orakle, the blockchain research group at KAIST, to analyze arbitrage activity on Optimism. Our joint study identified the main profitability drivers—including trading volume and fee structures—providing insights to help L2s strengthen their revenue models and support searchers in accessing the best opportunities.

Key Research Insights

We analyzed OP Mainnet from June 23, 2023, to November 30, 2024. Here’s what we found:

• DEX Volume Drives Arbitrage – Higher trading volumes on DEXs create more price discrepancies, which in turn increase arbitrage opportunities.

• Cross-DEX Arbitrage Performs Better – Strategies that route trades across platforms such as Velodrome V2 and Uniswap deliver significantly higher profits than single-DEX approaches.

• Most Profitable Pools – High-value pools involve tokens such as WETH, USDC, DAI, and OP, for example, Uniswap v3’s WETH/USDC pair, which represent strong targets for searchers and attract valuable trading activity to L2s.

See research report by Orakle and Radius: Arbitrage Profit Analysis

Dive into our research methodology and full findings here.

Data sourced from OP Mainnet via Lambda256’s Nodit.

Radius

Radius is building Secure Block Building (SBB) a framework for capturing MEV in a transparent and fair way through backrunning. SBB allows searchers to execute high-volume and cross-DEX strategies, while ensuring that L2s share in the resulting value.

Looking ahead, cross-rollup environments are expected to generate even more opportunities than isolated networks. Our upcoming Lighthouse will enable searchers to operate seamlessly across L2s, Ethereum L1, and centralized exchanges, expanding MEV opportunities across the ecosystem.

Partner With Us

We’re already working with L2s like Fuse and Swell to demonstrate how SBB supports scalable MEV infrastructure that drives revenue and opportunity across.

If you are interested in collaborating, please contact our research team via X (@Hyunxukee) or follow us on (@radius_xyz).

What we’re doing

At Radius, we spend a lot of time thinking about Ethereum’s biggest challenges -- and how to make the ecosystem better for users and chains alike. In the past, we’ve focused on keeping transaction ordering fair, because practices like frontrunning and sandwich attacks create hidden costs that erode trust and push users away.

Our efforts have made L2s safer and more reliable. Now, we’re moving forward to help L2s capture MEV in a way that’s both fair and sustainable, unlocking a new growth path for the ecosystem.

The challenges L2s face

One of the biggest problems for L2s today is revenue. Most rely on transaction fees, but those swing wildly with market activity and network usage. That leaves L2s on unstable financial footing.

The impact? L2s can’t depend on fees as a consistent income stream and users lose trust due to costly or unfair experiences.

To strengthen Ethereum, we need better solutions: ones that offer reliable revenue for L2s and a safer, more predictable experience for users.

Secure Block Building (SBB)

Secure Block Building (SBB) is our product that helps L2s capture MEV revenue fairly without harming users. By connecting L2s with searchers, SBB enables profits from backrunning, where trades are executed after user transactions. This gives L2s a stable source of MEV-based revenue, without compromising fairness or trust.

How SBB works

1. Searchers identify opportunities like price discrepancies or liquidations for new blocks in an L2.

2. They submit these transactions to the L2 sequencer, which includes them after user transactions. This is backrunning.

3. Meanwhile, user transactions remain encrypted until included, preventing manipulation (like frontrunning or sandwiching).

This keeps users protected while unlocking MEV profit that flows back to the rollup.

👉 Learn about the different types of MEV in our documentation.

Building a stronger Ethereum

SBB is just the beginning. It’s the foundation for our broader vision: cross-rollup arbitrage that helps L2s earn revenue across the entire Ethereum ecosystem.

To make that possible, L2s need to execute searcher transactions correctly and securely. SBB provides the infrastructure to make that happen, and sets the stage for our next step: Lighthouse.

Lighthouse is a decentralized network for cross-rollup MEV. It acts as a coordination hub that connects searchers to arbitrage opportunities across:

• Layer 2s

• Ethereum L1

• Centralized exchanges

This network unlocks MEV at a global scale, maximizing revenue for L2s and enabling economic interoperability across Ethereum.

Join Us

• Contact us to learn how SBB can support your L2

• Read our Documentation

• Check out Symbiotic’s Network Highlight: Radius Secure Block Building (SBB)

Following our Alpha Engine introduction, we’re launching our onboarding guide for developers, alongside Nitro rewards program to push the boundaries for rollup growth and scale.

Here’s how you can jump in if you’re building an L2 or looking to become an Alpha Engine partner:

What is Alpha Engine?

Alpha Engine is a unified platform built to tackle the challenges in rollup growth: revenue, security, and connectivity. It’s powered by a modular stack: Radius, Symbiotic, and Avail to deliver efficiency and scale across the rollup ecosystem.

• Radius: Captures MEV to generate revenue so rollups can earn beyond transaction fees

• Symbiotic: Reduces costs through shared, decentralized security leveraging restaked assets

• Avail: Enhances cross-chain interoperability and throughput with a high-performance data availability layer

Our Alpha Engine onboarding guide has all the details: integration tips, real-world examples, and Nitro rewards to scale rollups.

Dive into the full blog post to see how Alpha Engine is powering partners and L2s right now.

What’s New: Nitro Rewards

Nitro is a new growth incentive program designed to spark growth. Nitro offers structured rewards to strengthen rollup ecosystems integrated with Alpha Engine, just as nitrogen boosts engine performance. These incentives—such as points and yields—can attract users, inspire builders, and streamline operations.

As Alpha Engine evolves, Nitro will too, rolling out new components and partnerships to keep the momentum going and drive L2 scalability.

How Nitro Rewards Work

Nitro rewards are tied to the adoption of Alpha Engine’s core components. Each component - Radius, Symbiotic, Avail, and more - brings its own flavor of benefits, paired with tailored rewards:

Radius Nitro: Using tools like Lighthouse and Secure Block Building (SBB), Radius turns MEV into revenue for your rollup.

Reward: Radius Points (details to be shared).

Symbiotic Nitro: Symbiotic provides economic security via restaked assets, allowing rollups to reduce infrastructure costs while maintaining control over security implementations, operations, and slashing mechanisms.

Reward: Symbiotic Points

Avail Nitro: Avail enhances connectivity with AvailDA (secure data availability via KZG commitments) and Avail Nexus (fast cross-chain transactions), improving interoperability and user engagement.

Reward: Avail Points (details to be shared).

Nitro Rewards at a Glance

Expect more rewards as Alpha Engine evolves.

Nitro rewards work as a growth engine for rollups. By joining the Alpha ecosystem, you’ll unlock these incentives, while reward distribution policies can be customized and tailored by each rollup.

Fast-Track Your Rollup Growth

Alpha Engine, paired with Nitro rewards, is the launchpad to scaling rollup ecosystems. Explore the developer guide to integrate Alpha Engine tools today or contact us to get started today.

TL;DR

• Rollups have made Ethereum faster and cheaper, but staying successful long-term is a challenge.

• Alpha Engine is a new unified growth platform that helps L2s stay profitable, secure, and connected together for lasting growth.

The Growth Problem

Launching a rollup is easy and has become more accessible - thanks to tools like rollup frameworks and Rollup-as-a-Service (RaaS) providers.

But keeping a rollup growing afer launch? That’s the real challenge.

Three major roadblocks stand in the way of rollups:

• Limited revenue. Transaction fees alone are unpredictable and unsustainable for long-term growth.

• High security costs. Achieving robust security demands massive capital and resources.

• Isolated networks. Lack of interoperability leads to fragmented ecosystems and restricts liquidity flow.

Without a clear growth path, rollups struggle to scale efficiently.

That’s where Alpha Engine comes in.

Introducing Alpha Engine

Alpha Engine is a unified growth platform that pulls together three main solutions -- Radius, Avail, and Symbiotic -- each handling different parts of the economic puzzle that rollups face. It’s not a rollup deployment framework, but a complete toolkit that helps rollups stay profitable, secure, and connected.

Alpha Engine solves this by addressing three major problems rollups face:

• Revenue Growth: New revenue streams beyond just transaction fees

• Shared Security: Lower costs and capital-efficient security infrastructure without sacrificing control

• Network Unification: Seamless interoperability and liquidity across the rollup ecosystem

By integrating these solutions, Alpha Engine creates a sustainable economic flywheel for rollups.

Inside Alpha Engine: Core Components

Radius: Revenue Growth

Radius creates scalable revenue through MEV via Lighthouse, ensuring rollups generate revenue beyond unpredictable fees.

Using tools like Lighthouse and Secure Block Building (SBB), Radius turns MEV into revenue for your rollup.

Symbiotic: Shared Security

Symbiotic introduces a shared security protocol, allowing rollups to cut infrastructure costs while maintaining control over security implementations from collateral assets to operator selection to slashing mechanisms.

Avail: Network Unification

Avail enhances connectivity with AvailDA (secure data availability via KZG commitments) and Avail Nexus (fast cross-chain transactions), improving interoperability and user engagement.

Together, the core components of Alpha Engine creates a system where more revenue, decentralized security, and tighter connections keep rollups growing.

These pieces create what they call an “economic flywheel”—a self-reinforcing system where more revenue, better security, and tighter connections keep rollups spinning and growing.

Symbiotic Networks

Symbiotic has a diverse networkd that serve as essential building blocks for shared security. The Alpha Engine ecosystem is secured by Symbiotic’s infrastructure providers that add even more growth benefits to Alpha Engine:

• RedStone: RedStone is the fastest-growing oracle in 2024, specialising in yield-bearing collateral for lending markets. Its Total Value Secured (TVS) grew from below $1bn in January to $6bn+ now.

• Hyve DA: Hyve is the first Data Availability (DA) solution designed to power any data-intensive Layer 2s, rollups, appchains, and even Layer 1s. Fully chain- and token-agnostic, HyveDA seamlessly supports any blockchain, regardless of its settlement layer, virtual machine, or native token.

• Capx Cloud : Capx Cloud is a Symbiotic network that enables decentralized AI agent deployment, crypto-economically secured through Symbiotic protocol

• Kalypso: Kalypso by Marlin is a circuit-agnostic ZK Proof Marketplace supporting private inputs, using Symbiotic restaking to provide liveness and response times guarantees for proof generation.

• Drosera: Drosera is an automated risk management protocol for addressing any risk within the EVM (not just smart contract exploits).

• Cycle Network : Cycle Network offers bridgeless liquidity abstraction through verifiable state aggregation, supporting all Bitcoin and EVM blockchain ecosystems and secured by Symbiotic.

• Ditto: Ditto is building a trustless execution protocol to run event driven workflows on-chain with economic guarantees from restaking protocols.

L2s Powered by Alpha Engine

The following L2 rollups will be leveraging Alpha Engine’s revenue, shared security, and unification solutions to drive growth and scale efficiently:

• Swell: The restaking chain, powered by Proof of Restake. Built on OP and part of the Superchain family.

• CapX: Capx is an Ethereum Layer 2 network that empowers users to build, monetize, and trade AI agents. By offering an all in one platform for capital formation and distribution, Capx enables users to build AI agents, driving the future of user-owned and governed AI ecosystems.

• Silicon: Silicon is a zk-Rollup-based Ethereum Layer 2 blockchain network, purpose-built to seamlessly integrate with and expand the Web3 ecosystem.

• Fuse: Fuse is a decentralized blockchain platform designed to empower businesses and developers with scalable, efficient, and cost-effective solutions

• Cycle Network : A universal, secure and verifiable chain abstraction that offers a bridgeless aggregate liquidity network for all blockchains.

• Ternoa: zkEVM L2 with native privacy features

• Vessel: Vessel is a Zero-Knowledge(ZK) powered decentralized exchange that is gradually evolving into a comprehensive Layer 3 network for DeFi.

• Lift: LIFT deploys AI Agents to transform content on screens into streaming knowledge. LIFT watches sports, streaming, news, social commerce and gaming to create data feeds of what is happening “now”, making content searchable, interoperable and actionable in real-time.

• Arcana : Arcana’s Chain Abstraction protocol unifies users assets across multiple chains into a single balance that can be spent on their desired chain, without bridging, near instantly.

Fueling Alpha Engine: Key Fuel Partners

Beyond its core components, Alpha Engine is strengthened by fuel partners: ecosystem contributors that amplify ecosystem impact with security, liquidity, and infrastructure.

Today, four fuel partners power Alpha Engine:

• Nucleus: The Default Yield Provider for Networks

• Swell: Diversified security provider for rollups and networks

• Ternoa IVS: Trust-minimization infrastructure via TEE

• Fuse: SDK and APIs for consumer applications

By bringing together core components, Symbiotic Networks, and fuel partners, Alpha Engine creates an unstoppable growth flywheel for rollups, scaling alongside them.

Join the Alpha Engine Ecosystem

Alpha Engine isn’t just a platform. It’s a movement to make it easier for rollups to scale, all while uniting them into an interconnected ecosystem.

We’re building the foundation for long-term success and inviting the next generation of rollups and partners to join us. Alpha Engine will be ready for rollups soon, with new opportunities to get involved from day one.

Join the movement. Build with Alpha Engine.

Alpha Engine by Radius | Symbiotic | Avail

SBB is a critical step forward in helping rollups capture MEV revenue while prioritizing user protection. With SBB, rollups no longer need to choose between profitability and user trust in the rollup ecosystem.

What is Secure Block Building (SBB)?

Rollups are facing a challenging tradeoff: on one side lies the opportunity to generate MEV revenue. On the other, harmful MEV practices like frontrunning or censorship harm users and undermine their trust. This tradeoff between capturing value and protecting users has limited the potential of rollups to scale profitably.

Secure Block Building (SBB) is a solution that bridges this gap. Built with a cryptographic foundation, SBB enables rollups to protect users from harmful practices like censorship and transaction reordering. User transactions within SBB are encrypted to ensure fairness and prevent malicious behavior.

For rollups, this means they can sustainably grow their ecosystems by capturing MEV revenue via Lighthouse Network, while maintaining user trust.

Learn more about SBB: https://docs.theradius.xyz/

Symbiotic: Securing the SBB Network

SBB Network operates on a decentralized shared security foundation by Symbiotic.

Symbiotic combines the efforts of two key groups: Vault Providers and Node Operators.

Vault Providers

Vault providers are responsible for staking, deposits, withdrawals, and rewards. They secure the decentralized infrastructures with diverse collateral assets, such as ETH and BTC.

Our vault providers for SBB include: Swell, Gauntlet, Etherfi, Mellow, and MEV Capital.

Node Operators

Node Operators secure decentralized infrastructures by staking assets and ensuring security.

SBB’s node operators include: Lugandoes, Pier Two, Stakely, P2P, Kiln, Finoa, A41, Everstake, Hashquark, Chorus One, Stakin, Blockdaemon, NodeInfra, and InfStones.

SBB Network Launch Partners

We’re excited to kick things off with NodeInfra as our lead partner and upcoming integrations with rollups such as Fuse and Swell to showcase SBB’s ability in giving rollups the capability to drive MEV revenue while protecting users.

From SBB to Lighthouse

The launch of SBB is the beginning. It’s the first step toward Lighthouse, a decentralized network that unlocks MEV revenue opportunities for rollups. Lighthouse represents the future of scalable MEV infrastructure, empowering rollups to achieve new levels of profitability.

Build with SBB Today

SBB is live and ready for integration.

Whether building a new rollup or scaling an existing one, SBB provides the tools to protect users while unlocking revenue potential.

Contact us: https://www.theradius.xyz/contact

Website | X | Docs

Today, we’re excited to announce we’ve raised $7M in seed funding, led by Pantera Capital, to bring this vision to life.

This funding will help us build the economic infrastructure rollups need for a profitable future—one rooted in stability, fairness, and shared success.

Why This Matters

Ethereum has made incredible progress in recent years. Thanks to better compute and more efficient proving systems, rollups are now faster and cheaper than ever.

But one big challenge remains: finding a sustainable revenue model.

Right now, rollups depend on transaction fees for revenue. Unfortunately, a significant portion of that revenue is consumed by high data costs on Ethereum. Raising fees isn’t the answer—it would only drive users away. Without a new approach to revenue, rollups serious challenges to grow and remain competitive.

MEV: The Hidden Gold

At Radius, we’ve discovered a better path forward: MEV.

MEV (Maximal Extractable Value) is an additional economic value that can be extracted from block production. While some types of MEV—like transaction reordering—can be harmful, other forms of good MEV—like backrunning arbitrage—actually improve market efficiency and help ecosystems work better.

Yet, this untapped goldmine remains out of reach for most rollups today.

That’s where Radius comes in. We help rollups unlock good MEV and turn it into a sustainable revenue stream. This new model enables rollups to tackle high L1 costs, overcome limited fee revenues, and unlock unprecedented growth opportunities.

Lighthouse: MEV-Powered Revenue Engine

Lighthouse is a decentralized network that connects rollups with searchers to capture MEV opportunities. It turns MEV into an independent revenue source.

How it works: Searchers discover valuable MEV opportunities within rollups and submit their bundles to Lighthouse. Lighthouse helps searchers bid for inclusion, while rollups earn fees from executing winning bundles—creating revenue beyond user transaction fees.

Keeping Users Safe with Secure Block Building (SBB)

While MEV unlocks new revenue, traditional extraction methods have often come at a cost: exposing users to risks like censorship and transaction reordering. These issues damage trust and undermine the ecosystems rollups aim to grow.

At Radius, we believe rollups shouldn't have to choose between generating revenue and protecting users. That’s why we have Secure Block Building (SBB). Built on cryptographic foundations, SBB ensures that rollups can earn MEV revenue without exposing users to harmful practices.

Together, Lighthouse and SBB form an economic powerhouse—protecting users while maximizing revenue, paving the way for ecosystem growth.

Expanding the Revenue Horizon

Lighthouse will expand to unlock even greater opportunities for rollups by connecting them to Ethereum L1, centralized exchanges (CEXs), and other rollups. These connections allow searchers to access broader MEV landscape, such as cross-rollup arbitrage, CEX-DEX arbitrage, atomic arbitrage, and liquidations, and Ethereum L1-rollup arbitrage (based sequencing).

Every new connection creates more revenue for rollups. This will create a powerful cycle of growth: more revenue, greater resources to attract users, increased activity, and greater value creation. Ultimately, this strengthens Ethereum as a whole.

Our Journey So Far

We’re grateful to work with some incredible rollup teams, including: Swell, Fuse, PlayFi, Ternoa, and Vessel. We’re also working alongside infrastructure leaders like Symbiotic, Avail, Starkware, Eigenlayer, and Nuffle to build the future of Ethereum.

But what excites us even more is where we're heading next.

Where We’re Heading

This marks an exciting new chapter for Radius. Our funding will drive the next phase of our product development, ambitious research efforts, and team expansions.

In 2025, we'll launch Lighthouse to help rollups capture MEV revenue, and by 2026, we will expand across Ethereum to maximize revenue opportunities.

Rollups are essential to Ethereum’s future, and we’re here to make sure they succeed. Through Lighthouse, we’re redefining how rollups generate and share value—making Ethereum a more rewarding place for everyone.

Where to Follow Along

The best way to keep up with our journey is on Twitter (@radius_xyz).

The future of rollup economics starts here. For rollups, visit theradius.xyz to learn how your rollup can unlock new revenue. ✨

There is so much more to come — stay tuned for what’s next!

Disclaimer: This report is for informational purposes only and should not be considered investment advice.

1. Introduction

As blockchain technology rapidly advances, Layer 1 and Layer 2 solutions are evolving to meet the demands of users and projects by providing platforms that cater to their needs. When compared to other Layer 1 solutions, the Ethereum network offers powerful network effects due to its vast user and developer base, along with superior security and decentralization. To continue playing a central role in the blockchain economy, Ethereum must maintain its network decentralization and security while addressing scalability and sustainability issues. These challenges are being addressed through Ethereum's strategic roadmap centered around rollup technology, which plays a crucial role in the future vision of Ethereum. The rollup-centric roadmap goes beyond mere technical advancements to provide a strategic approach for increasing user engagement and expanding the ecosystem. The Ethereum community is pursuing the goal of continually improving user experience and network performance, maintaining a decentralized ecosystem, and solidifying its position as a mainstream blockchain technology. This vision is not just theoretical but is being realized through concrete implementation. Devcon, hosted by the Ethereum Foundation, is one of the largest annual events where Ethereum developers, researchers, and community members worldwide gather. This event serves as a platform to discuss the latest technologies, research, and the vision and direction of the Ethereum ecosystem, engaging all individuals interested in Ethereum and decentralized technologies.

At the Sequencing Day event, held as part of Devcon 2024 and hosted by Radius, Puffer, and Espresso, presentations from speakers highlighted various missions to advance the Ethereum ecosystem. This article will provide insights gained by the Radius team at the Devcon and Sequencing Day event, based on the contributions of these speakers who shared diverse approaches and strategies for expanding the Ethereum ecosystem.

2. Background

2.1 Definitions

• Proposer-Builder Separation (PBS)

  This mechanism in Ethereum separates the roles of proposing and building blocks. It aims to foster competition and prevent centralization by delegating the task of block construction to specialized entities known as block builders, while the proposer remains responsible for submitting the block to the network. This separation aims to reduce the economic and technical burdens on validators and enhance security and decentralization in the block creation process. However, to effectively achieve security and decentralization, several technical challenges need to be overcome.

• Cross-Chain composability

  Cross-Chain Composability refers to the ability of applications and protocols across different blockchain networks to interact freely and seamlessly. This concept supports the integration of services by allowing distributed applications to utilize assets, data, and logic hosted on various chains within the blockchain ecosystem. Cross-Chain Composability reduces technological barriers and connects the resources of multiple blockchains, thereby creating platforms that offer richer and more diverse functionalities to users. It enables users to continue transactions or processes started on one blockchain on another, achieving seamless interoperability between blockchains.

• Shared Sequencing

  Shared Sequencing refers to a structure where multiple different rollups share and utilize a single sequencing mechanism. This approach maximizes efficiency and minimizes overhead by allowing multiple rollup instances to use the same sequencing logic for transaction processing. Shared Sequencing enables more efficient use of resources compared to each rollup having its own independent sequencing, and it enhances network cohesion and interoperability. This structure is particularly advantageous when various rollups need to interact with each other, enhancing the scalability and flexibility of the overall system.

• Based Sequencing

  Based Sequencing is a term used when the sequencing of a rollup is driven by the base Layer 1. This refers to a structure that utilizes the block building pipeline of a base layer like Ethereum to construct Layer 2 blocks. In this process, the L2 is designed to be based on the sequencing logic of L1, ensuring that the data and transactions of the L2 block are directly included in the L1 block. This design enables L2 to inherit the liveness and decentralization of L1, facilitating a seamless integration between L1 and L2. This technology allows users to have a more consistent experience within the Ethereum ecosystem.

• Preconfirmations

  Preconfirmations refer to types of preliminary or provisional approval that a transaction receives before being finalized in a blockchain. This can enhance the efficiency of the blockchain network and improve user experience. Preconfirmations can be classified into two main types:

  • Inclusion Preconfirmations:

    These types of preconfirmations provide users with an advance notification that their transaction will be included in a block. That is, before the transaction is actually recorded in the main block of the blockchain, users can know in advance that it will be included. This increases the certainty of transaction processing and allows users to be confident that their transaction will be successfully processed.

  • Execution Preconfirmations:

    Execution preconfirmations not only confirm that a transaction will be included in a block but also ensure its execution results. This involves giving users a heads-up about any state changes or computational outcomes that may occur when the transaction is executed, allowing them to anticipate the final outcome of the transaction in advance. Thus, it provides additional assurance to users and enables faster decision-making before the transaction is fully processed.

  These preconfirmations approache can help users manage their expectations regarding the responsiveness and transaction processing times of blockchain systems.

• Application

  An application is a software program designed to enable users to perform specific tasks. In the context of blockchain, an application interacts with smart contracts or leverages blockchain functionalities to provide specific services to users. These applications, also known as DApps (Decentralized Applications), are used in various fields including financial services, gaming, and social networking.

• AppChain

  An AppChain is an independent blockchain optimized for the specific requirements of an application. It is typically designed to support a single application or a closely related group of applications, featuring customized governance and its own network protocols. AppChains possess unique security mechanisms, transaction processing methods, and data management strategies to maximize the efficiency and performance of the supported application.

• Application-Specific Sequencing

  Application-Specific Sequencing refers to a sequencing approach that is tailored for specific applications or functionalities. This term is used when the transaction sequencing in a rollup is designed to be optimized for certain types of applications. For example, a rollup system that implements sequencing logic specifically for handling only certain types of token transfers or DEX swaps. Unlike general-purpose sequencing, this method allows for more efficient or optimized processing for specific types of operations, thereby enhancing the performance and reliability of the associated applications.

• Block Space Marketplace

  A conceptual or actual marketplace where the rights to produce and fill blocks (block space) are bought and sold. This marketplace involves various participants, including proposers, traders, and builders, who interact to optimize the economic and technical efficiency of blockchain operations.

3. User-Centric Design for Ethereum

Ethereum is dedicated to enhancing user experience and expanding economic opportunities for its ecosystem participants by focusing on security, decentralization, and scalability. To this end, the platform continuously introduces innovations aimed at improving transaction processing speed, lowering fees, and simplifying access through intuitive interfaces. Technological advancements like danksharding improve efficiency and transaction throughput, while efforts to ensure censorship resistance create a free and equitable trading environment. These initiatives contribute to attracting a broader user base and fostering a more inclusive ecosystem. We view these advancements, including discussions from events like DevCon and Sequencing Day, as part of Ethereum's broader mission to elevate user experience. We classify these developments into categories and assess their impact on users, demonstrating how they contribute to creating a cost-effective and efficient trading environment. This article explores Ethereum’s initiatives to enhance user experience from our perspective, with a focus on rollups as a key component of the roadmap to decentralization and scalability. We analyze the strategies and research currently underway, providing insights into how these innovations not only improve user experience but also expand economic opportunities within the Ethereum ecosystem.

3.1 Strengthening Censorship Resistance

One of the major risks faced by Ethereum is the increase in transaction censorship and user value extraction due to the centralization of the Proof-of-Stake (PoS) mechanism. User value extraction refers to the phenomenon where the benefits that should go to general users are monopolized by a few participants through transaction fees, high gas costs, and suboptimal transaction processing methods. In such scenarios, a small number of participants are more likely to monopolize the economic benefits and opportunities that should be returned to Ethereum users.

Currently, MEV is managed under the assumption that proposers lack the expertise to fully exploit MEV opportunities. To address this, Ethereum has adopted the Proposer-Builder Separation (PBS), which allows validators to delegate the task of block construction to specialized entities known as block builders through an auction process. The result is the current structure of block construction in Ethereum.

Two entities. generate approximately 90% of all Ethereum blocks. If these entities collude to censor specific transactions submitted to Ethereum, the affected users may experience significant transaction delays. As a result, while the separation of powers contributes to decentralization among validators and reduces the technical and economic burdens on them, it introduces a new risk of centralization at the level of block builders. Block builders, as external specialized entities, could monopolize block construction due to their high technical requirements and capital capabilities. This could lead to negative consequences for users, such as high fees, transaction delays, and unequal access to block space. Additionally, since the proposer holds the final decision-making authority as a single entity, there is a risk of collusion between proposers and builders. These issues threaten the core value of censorship resistance in blockchains and undermine fairness and transparency.

• MEV is Intrinsic.

  This perspective assumes that MEV inherently exists in any decentralized blockchain system and will inevitably be extracted in some form. Instead of eliminating MEV, this approach seeks to leverage it by selling the rights to access MEV opportunities. In this model, the right to monopolize block space or block building within Ethereum is traded externally, ensuring competition and transparency in the marketplace itself. For instance, auction-based mechanisms like Execution Auction enable the sale of block execution rights, while lottery-based approaches such as Execution Ticket distribute execution opportunities through randomized allocation. These mechanisms aim to create a competitive and transparent market for MEV extraction.

• MEV is Extrinsic.

  This perspective views centralization issues in Ethereum as fundamental problems arising from design limitations and seeks to address them through structural changes. It aims to reduce centralization in the block-building process by involving multiple participants and promoting competition. Examples include Braid, which introduces multiple proposers to the process; FOCIL (Fork-Choice-Enforced Inclusion Lists), which enhances censorship resistance by enforcing fork-choice rules; and POD, which employs leaderless signature verification through validator sets to strengthen censorship resistance for specific applications. These approaches focus on designing mechanisms to distribute block-building responsibilities and mitigate the risks associated with centralization.

These two perspectives offer distinct methodologies to tackle the challenges of centralization and censorship in the block-building process. While they differ in their approaches, it is crucial to recognize that they may overlap or complement each other in practice, providing a more comprehensive strategy to uphold the core values of decentralization, fairness, and censorship resistance in Ethereum.

3.1.1 Intrinsic View

The presence of MEV (Maximal Extractable Value) strongly incentivizes outsourcing the construction of Execution Payloads to an external market of Builders. This occurs because the roles of the Proposer and Builder are separated, allowing builders to optimize MEV opportunities and generate higher profits. As a result, Validators are incentivized to delegate block building to builders who can guarantee higher MEV profits, rather than attempting to optimize execution payloads themselves. To address this challenge, researchers at the Ethereum Foundation are exploring various approaches, including Execution Auctions and Execution Tickets.

• Execution Auction

  This method involves bidding for the rights to propose a block. Participants can bid to acquire the execution proposal rights for a specific future slot. The proposer with the highest bid secures the right to propose a block in that slot. Subsequently, the validators (attesters) of the beacon block verify the highest bid and vote accordingly. This creates a market structure that separates the roles of attesters and execution block proposers.

• Execution Ticket

  Execution Tickets operate by selling block proposal rights in the form of lottery tickets. After selling a fixed number (N) of tickets, one ticket is randomly selected for each block, and its owner gains the right to propose the block. The selected ticket is then removed from circulation, and new tickets are issued for future rounds. At any given time, there are always N tickets in circulation, giving each ticket holder a 1/N chance of proposing a block.

Execution Auctions provide an opportunity for proposers to offer execution payloads before their turn arrives, offering long-term pre-confirmations. In this system, if a single entity bids across multiple blocks in an auction, it leads to multi-block MEV issues as the auction allows for such extraction opportunities over several blocks. The reason this is possible in the auction model is because auctions can span multiple blocks, allowing an entity to continuously win bids and gain advantages across consecutive blocks. A more serious concern is that this structure could exacerbate censorship issues, as multi-block MEV allows for the potential manipulation and exclusion of transactions over extended periods. As an alternative, the Execution Ticket method has been proposed. This method redeems rights at an unspecified future time and, while it helps mix if a single entity acquires a series of consecutive tickets, it faces limitations as the ticket prices may not accurately reflect their true value.

These mechanisms represent different methods for determining how the rights to propose and build blocks are allocated within the blockchain network. Both approaches aim to detangle MEV rewards from the block proposal process, reducing centralizing pressures on the validator set. This structure treats MEV opportunities as a tradable commodity, allowing the creation of a market where these opportunities can be fairly auctioned or distributed. Additionally, it introduces a set of rules governing this market, ensuring fair and transparent allocation of opportunities across participants.

3.1.2 Extrinsic View

Inclusion Lists and FOCIL (Fork-Choice-enforced Inclusion Lists) are mechanisms designed to enhance censorship resistance in the Ethereum network. Both are currently proposed as EIP-EIP-7547 and EIP-7805, with Inclusion Lists being considered for inclusion in Fusaka, the next Ethereum upgrade following the 2025 Pectra upgrade.

• Inclusion Lists

  Inclusion Lists specify a list of transactions that execution proposers must include. By ensuring that proposers include a predetermined number of transactions provided by the beacon proposer, this mechanism helps mitigate the negative effects of centralization and censorship by a single execution proposer controlling consecutive slots. The key process involves:

  1. At time t: A randomly selected staker creates an Inclusion List containing valid transactions.

  2. At time t+1: The block producer generates a block that must include all transactions from the Inclusion List while having the freedom to reorder or add extra transactions.

  This approach ensures that even if block producers are centralized, they cannot fully censor transactions.

• FOCIL (Fork Choice-enforced Inclusion Lists)

  FOCIL builds on the Inclusion List model by introducing a randomly selected validator committee for each slot. These validators create local Inclusion Lists based on their mempools and broadcast them to the network. The final block proposer aggregates these local Inclusion Lists to form a combined list, which they must include in their block payload. While proposers can rearrange or add new transactions, they must adhere to the aggregated Inclusion List. The main steps are:

  1. Validators generate and release local Inclusion Lists.

  2. The block proposer aggregates these local Inclusion Lists and broadcasts the combined list.

  3. The next slot's proposer uses the aggregated list to generate the block.

  4. Validators verify the block's compliance with the aggregated list and determine its validity.

  FOCIL ensures robust and stable censorship resistance and fairness within the Ethereum network.

• Braid

• At Sequencing Day, Max Resnick (@MaxResnick1) presented the Braid architecture, which assigns multiple proposers to a single block. Each proposer works in parallel across chains, maintaining consistency through synchronous consensus mechanisms. Each chain has its own proposer, and all proposers select subsets of transactions to include simultaneously. The Ethereum execution layer collects transactions from all sub-chains, deduplicates, orders, and executes them according to predefined rules. This reduces the risk of a single entity manipulating the transaction record.

Several unresolved issues remain in the BRAID structure, including the exclusive authority of the final block proposer to make decisions after observing the outcomes of other proposers, the impact of exclusive order flow auctions on the structure, and the management and setting of gas limits across parallel chains. However, BRAID demonstrates meaningful potential as an alternative to existing models like FOCIL, offering a fresh approach to addressing these challenges. Each of the described techniques aims to achieve decentralization and fairness within the network, but they each involve their own trade-offs. Identifying the optimal solution remains an open question. For example, execution tickets have been proposed to prevent monopoly issues that may arise in execution auctions dominated by a single actor. However, since there is no enforced mechanism to limit the number of tickets a single entity can hold, there remains a possibility of ticket concentration among a few actors or even a single entity. To mitigate this issue, Inclusion Lists have been introduced. Furthermore, FOCIL can potentially complement execution auctions or execution tickets, functioning in an interdependent manner to address these challenges effectively.

While FOCIL and BRAID primarily focus on preventing censorship in block production using multi-proposer structures, the next approach, POD), takes a different direction. POD aims to eliminate the risks of censorship and reordering while focusing on implementing an efficient, decentralized auction logic.

• POD (Partially Ordered Data Set)

• Shresth(@shresth3103) presented about POD that employs a timestamp-based transaction processing mechanism to facilitate fast and efficient auctions. This decentralized system eliminates centralized relays and processes bids through validator committees interacting with block proposers in real time. The main process involves:

  1. Validators add timestamps and signatures to transactions and issue attestations.

  2. Block proposers subscribe to the POD network, receiving bid information via streaming.

  3. Validators set an auction closing timestamp, after which no new transactions are included.

  4. The block proposer processes bids locally, creates a block, and submits it to the Ethereum network.

  POD ensures low-latency, fair, and efficient auctions while holding validators accountable for any censorship-related issues. Methods like POD may be better suited for restructuring systems to meet specific objectives. However, it is important to note that the direction of censorship resistance targeted by POD differs from that of general blockchain censorship resistance. While its current focus is on auction-based applications, it could still serve as a valuable approach in suitable application scenarios.

Censorship resistance is also a crucial factor for rollups. Rollups are a key technology designed to address Ethereum's scalability challenges, enabling the network to overcome Layer 1 transaction throughput limitations and accommodate more users and applications. However, for rollups to reliably fulfill this role, censorship resistance must be guaranteed. Rollups operate by processing transactions off the Layer 1 blockchain, such as Ethereum, aggregating them into batches, and then submitting them to the main chain. If censorship resistance is compromised during this process, certain actors or groups may block or manipulate the ordering of transactions. Such scenarios could undermine the decentralization and fairness of rollups, erode user trust in the network, and ultimately have a negative impact on the growth and expansion of the Ethereum ecosystem.

In conclusion, censorship resistance is an essential factor for the stable operation of rollups and the sustainable growth of the Ethereum network. Achieving this requires ongoing research and technical improvements within the Ethereum ecosystem. While various technical approaches and designs are being explored, each solution comes with its own strengths and weaknesses, depending on the context. Therefore, technical decisions must always carefully consider the trade-offs involved and go through a deliberate process to identify the optimal solution for each situation.

3.2 Reducing Operational Costs

Ethereum leverages its smart contract functionality to perform complex tasks, particularly through Layer 2 solutions, which enable affordable data availability and cost-efficient use of block space, thereby broadening the applicability of the Ethereum network. Since the announcement of the Rollup-Centric Ethereum Roadmap in 2019, rollup technology has made significant advancements in fraud prevention and validity proofs. These technological advancements allow for the widespread application of the Ethereum network and provide valuable tools that generate greater value for block space consumers. Traditional Layer 2 solutions require all transaction data to be stored on Layer 1, and the use of CALLDATA in this process, due to its cost and space limitations, causes scalability issues. Indeed, it is estimated that approximately 90% of the cost of L2 transactions arises from data storage needs according to the existing CALLDATA structure as noted here. As a solution, Danksharding has been proposed as a strategy to address Ethereum's scalability issues, aiming to reduce users' L2 transaction costs and increase transactions per second (TPS) to over 100,000.

Proto-Danksharding has been proposed as an intermediary step in this process, introduced through EIP-4844. This proposal introduces the concept of 'data blobs,' a method for economically storing large data sets required for L2 operations but not needing permanent storage on the L1 blockchain. This new mechanism allows for the temporary storage of data while maintaining the necessary data availability and validation. These changes aim to significantly reduce gas costs associated with data storage and decrease overall transaction fees. The introduction of blobs has significantly improved Ethereum's efficiency, enabling more transactions to be processed at lower costs and thereby enhancing the overall scalability of the Ethereum network. According to the analysis in Impact of EIP-4844 on Ethereum’s Ecosystem, the introduction of Proto-Danksharding has had a notable cost-reduction effect on the operational costs of rollups. This analysis demonstrates that data blobs can significantly reduce the costs incurred while efficiently storing transaction data for rollups. This initial stage is crucial in solving scalability issues, and as Ethereum progresses toward full Danksharding, it is expected to experience faster and more cost-efficient transaction processing. Proto-Danksharding allows a rollup transaction to attach a single blob to a block, while Danksharding will expand this to 64 blobs. Danksharding will provide a vast amount of space for optimistic rollups to dump compressed transaction data. While there are still several tasks left to complete Full-Danksharding, primarily focused on changes to the consensus layer, no additional work is required from execution client teams, users, or rollup developers.

These technological advancements will contribute significantly to reducing the economic burden on the network while maintaining security mechanisms like fraud prevention and validity proofs in the Ethereum network.

3.3 Expanding Revenue Opportunities

MEV is a significant source of revenue generated within the blockchain ecosystem, predominantly benefiting users who manage to capture this value. However, under the current market structure, MEV is primarily concentrated in the hands of L1 Proposers and external Builders who operate outside the protocol. This concentration results in a disproportionate distribution of value, where the wealth created by users is not equitably shared among the ecosystem's key contributors but is instead monopolized by a small group of intermediaries. This imbalance not only affects economic sustainability but also impacts the overall user experience negatively by creating a less inclusive and equitable ecosystem. Addressing this issue involves a critical redesign of the MEV revenue distribution structure to enhance the economic sustainability of the ecosystem. The key to resolving this challenge lies in expanding revenue opportunities for contributors across protocols and developing mechanisms that ensure a fair distribution of MEV. By implementing such measures, the ecosystem can move towards a more balanced and equitable model, where all stakeholders, including L1 Proposers, L2 Sequencers, and Dapp operators, benefit from the value they help generate. A fair and transparent distribution of MEV can significantly improve the user experience by fostering a sense of fairness and trust in the ecosystem. Users are more likely to engage with and invest in a platform where they feel their contributions are recognized and rewarded appropriately. This session will explore various proposals for effectively distributing MEV revenue among key players, discussing ways to reinforce the ecosystem's long-term sustainability and enhance user satisfaction by making the system more user-centric and equitable.

3.3.1 Monetizing Ethereum Blockspace

This is closely related to the concept of PBS (Proposer-Builder Separation), as capturing MEV involves several complex issues. Moreover, it’s not just about extracting MEV, but about extracting it "well," which is tied to the direct revenue that can be obtained from the block-building process. This is the backdrop for the emergence of PBS, where the imbalance in the profits between block proposers leads to centralization, prompting the separation of the block building process from the block proposal process. This naturally led to the formation of a builder market, where MEV can be optimized and block building roles are carried out. Proposers will propose the block from the builder that offers the highest bid. However, since the interests of these two separated roles conflict, an intermediary role is needed to mediate between them. To address this, services and projects have emerged to coordinate the process of buying and selling block space, enabling efficient transactions.

The common goal of these projects is to design the L1 proposer-participating block space market more efficiently, creating an environment where participants can secure appropriate profits, ultimately supporting the sustainable growth of the Ethereum ecosystem. Now, let's take a look at how these various approaches and projects are addressing the problems of block space trading.

• MEV-Boost

  MEV-Boost is a middleware software designed to handle MEV generated during the block creation process on the Ethereum network in a fair and efficient manner. This tool is an implementation of the PBS model, mediating interactions between the proposer and the builder. The primary goal of MEV-Boost is to prevent MEV monopolies by a few participants, maintaining the decentralization and efficiency of the network, and ensuring that all validators fairly share MEV revenue. The high-level functioning process is as follows:

  1. Initial setup of proposers and builders: The block proposer runs MEV-Boost to establish communication with builders. The builder prepares MEV opportunities and reward information related to the block they will generate.

  2. Builder submits block header and reward information to MEV-Boost: The builder sends the block header and expected MEV reward information to the proposer through MEV-Boost. This information includes block structure, transaction order, and reward amounts.

  3. MEV-Boost collects builder proposals: MEV-Boost receives block headers and reward proposals from multiple builders and compares them. The proposer can identify the block with the highest reward through MEV-Boost.

  4. Proposer selects the optimal block: The proposer selects the block with the highest MEV reward from the builder, and the selected builder’s block header and reward information are included in the final block.

     (At this stage, MEV-Boost ensures that validators cannot steal MEV from the builders and claim all the MEV rewards for themselves.)

  5. Proposer submits the block to the network: The proposer submits the selected block to the Ethereum network for validation by validators. The network verifies the block's validity and reaches consensus.

  6. Distribution of MEV rewards: After the block is submitted and agreed upon by the network, the MEV reward promised by the builder is paid to the proposer.

Recently, more than 90% of Ethereum blocks have been confirmed through MEV-Boost. Through MEV-Boost, validators sell the right to build blocks to the builder offering the highest bid in the auction. Builders aggregate transactions from both public mempool and private order flow, construct the most profitable block, and then bid in the public auction for the right to build the block. While MEV-Boost has increased validator profits, several challenges still remain. The main issues with MEV-Boost are that builders have a strong incentive to extract maximum value, which can lead to excessive costs for end users. Additionally, proposers lack the authority to enforce transaction inclusion, which may reduce censorship resistance, and trust issues between searchers and builders could make it difficult for new builders to enter the market. These challenges could hinder the effective operation of MEV-Boost, and improvements are needed to create a more fair and transparent blockchain ecosystem.

• EthGas

• EthGas views block space not just as a technical resource but as a financial asset. To structure transactions between Validators and Traders, it introduces a Pre-confirmation model designed to facilitate block space agreements across up to 64 slots. However, methods for assessing and predicting the future value of block space are still under research, and standardized methodologies are currently lacking. As an alternative, EthGas adopts a market-based mechanism focused on real-time dynamic pricing for pre-confirmation. At this stage, prices are determined based on the supply and demand between block builders and traders, with MEV (Maximal Extractable Value) serving as a key input variable. This approach is considered a reasonable interim solution until sufficient price data accumulates to enable the adoption of more robust pricing models. Furthermore, to minimize resource wastage due to order cancellations, transaction failures, and new MEV opportunities during the pre-confirmation process, EthGas introduces a secondary market. This market repurposes unused block space and incorporates new order flows and MEV opportunities to enhance transaction efficiency. In the long term, EthGas is also exploring the possibility of expanding block space into fixed-rate financial products to ensure market stability and predictability.

  Kevin (@lepsoe), the founder of EthGas, presented this innovative approach at Sequencing Day, illustrating how it serves as an example of a block space marketplace that coordinates collaboration between Proposers and Traders, aiming to enhance the profitability of both parties and optimize the block space market.

These two approaches can be seen as examples of block space marketplaces that facilitate collaboration between Proposers and block buyers, aiming to enhance the profitability of both parties through the block space trading market.

3.3.2 Revenue Solutions for L2

Radius aims to internalize MEV opportunities, creating an environment where rollups can reduce external dependencies and build sustainable revenue models. To achieve this, Radius optimizes MEV capture processes and designs an efficient coordination mechanism that allows rollups and participants interested in purchasing blockspace to fairly share economic benefits. AJ (@ZeroKnight_eth), the CEO of Radius, presented this strategic vision at Sequencing Day, outlining how they address specific challenges through their approach.

1. Problem: Lack of Effective MEV Capture Mechanisms for Rollups

Currently, rollups lack effective mechanisms to capture and utilize MEV opportunities independently. As a result, revenue often concentrates in the hands of centralized external actors, and resources within the ecosystem are inefficiently allocated. These structural limitations act as significant barriers to establishing a sustainable economic structure for rollups.

2. Solution: A Block Trading Service for MEV Internalization

Lighthouse is a block trading service designed to activate L2 blockspace transactions, maximize the efficiency of the rollup ecosystem, and strengthen cooperation among participants. Lighthouse empowers rollups to effectively internalize MEV, helping them build independent and sustainable revenue models.

Lighthouse segments blockspace to optimize MEV utilization:

• ToB (Top-of-the-Block): This segment is designed to maximize MEV opportunities. Participants interested in purchasing blockspace can execute various MEV strategies, including CEX-DEX arbitrage, cross-rollup atomic arbitrage, and liquidations.

• BoB (Bottom-of-the-Block): This segment is reserved for protecting user transactions, safeguarding them from censorship and predatory MEV strategies.

3. Expected Outcomes

• Maximizing Economic Efficiency Through Real-Time Auctions

  Lighthouse introduces a real-time auction mechanism, creating a structure where participants interested in purchasing blockspace and rollups can maximize their economic benefits:

  • Maximizing Participant Profits: Participants can bid for rights to ToB space through Lighthouse auctions, enabling them to strategically capture and execute MEV opportunities.

  • Direct Rollup Monetization: Rollups can directly receive revenue generated from MEV through Lighthouse.

  This structure ensures that participants can quickly secure execution outcomes and maximize profits through optimized MEV strategies.

• Flexible Integration with Rollup Governance

  Lighthouse is designed to operate without interfering with rollup governance structures or block production cycles. Its flexible auction cycles allow it to adapt to diverse rollup environments seamlessly. This ensures that rollups can integrate Lighthouse without compromising their autonomy and operational rhythms.

• Building a Sustainable Ecosystem

  Lighthouse activates the blockspace marketplace, strengthens cooperation between rollups and participants interested in purchasing blockspace, and protects user transactions. Through this approach:

  • Rollups can reduce external dependencies and establish independent revenue models.

  • Participants can strategically execute MEV opportunities and optimize their profits.

  • Users benefit from protected transactions in a transparent and fair blockspace environment.

Lighthouse aligns the economic incentives between rollups, participants interested in purchasing blockspace, and users, ensuring transparency and fairness within the blockspace marketplace. Through this, it fosters economic alignment, trust, and long-term sustainability within the Ethereum ecosystem.

3.3.3. Driving DApp Profitability

Many researchers have tried to address MEV through protocol-level changes, but these efforts have yet to provide a satisfactory solution. Assuming that decentralized applications (dApps) create value through their unique user bases, network effects, or specific problem-solving capabilities, several solutions have been developed from the idea of granting individual apps the authority to control the sequencing of transactions to more effectively capture and internalize MEV value specific to each app.

• App-Specific Sequencing (ASS)

• ASS is gaining attention as a new methodology for managing and distributing MEV. It allows a dApp to control the inclusion and order of state-affecting transactions without the overhead and potential loss of asset configurability associated with maintaining its own appchain. This approach helps dApps mitigate negative external effects and internalize value within their own ecosystems. Unlike traditional protocol-centric structures, ASS provides a user-centric framework that enables applications to take the lead in harnessing MEV. Furthermore, research by Astria’s researcher Lily (@lobstermindset) and her proposed EIP-7727 articulate the feasibility of ASS, presenting new technical tools for its implementation. Lily introduces a new type of transaction processing that allows applications to control transaction sequencing more precisely, suggesting that ASS could maintain profitability for applications and reduce reliance on block builders. However, ASS faces significant challenges such as lack of composability and potential conflicts between applications, which require further technical research. The results of such research might consider EIP-7727 as proposed by Lily. However, further research and in-depth review are needed for ASS, and there are also critical views regarding it, which will be addressed in Session 4.

• Aarc

• In a multi-chain environment, decentralized applications (dApps) face structural challenges of managing liquidity dispersed across various chains. For instance, each dApp managing its liquidity independently leads to redundancy, and specific chains experiencing liquidity depletion or reduced transaction volumes can create economic inefficiencies. Traditional solver systems also rely on centralized methods or lack effective cooperation between dApps. To address these issues, Anshul (@anshulforyou), CTO of Aarc has proposed a Shared Solver system that allows multiple dApps in a multi-chain environment to collaboratively manage liquidity. Its operation is as follows:

  1. Liquidity Pool Creation: Various dApps deposit their funds into a shared solver's liquidity pool. For example, each dApp contributes $100K to form a large-scale liquidity pool totaling $1M. Once formed, the Coordination Layer checks the pool's status and performs initial rebalancing to maintain balance.

  2. User Request Reception: Users send transaction requests (e.g., USDC transfers, complex asset trades) on specific chains. These requests are received by the Spoke Router Contract, which analyzes the content and provides necessary information for deciding the processing method.

  3. Transaction Processing through Router Contract: The shared router contract (permissioned contract) appropriately allocates liquidity based on the requests. It checks transaction constraints (e.g., each dApp’s liquidity limits) and approves the transactions.

  4. Cross-Chain Transactions Execution: If users request transactions involving assets from multiple chains, the Coordination Layer and router contract collaborate to process the transactions. For example, a user might conduct a complex trade using USDC on Polygon and ETH on Arbitrum.

  5. Support from Relay System: A centralized or decentralized Relay System transmits cross-chain transaction requests and ensures stable transaction execution, even in the event of network congestion or errors, enhancing availability and reliability.

  6. Transaction Completion and Liquidity Update: After transactions are completed, the Coordination Layer updates the liquidity pool and, if necessary, performs rebalancing. The updated status is synchronized across all participating dApps, maintaining transparency and efficiency.

This shared solver system reduces economic inefficiencies within the blockchain ecosystem and promotes collaboration among various dApps through integrated liquidity management. However, it has some drawbacks. For example, if a specific dApp focuses on certain tokens (e.g., USDT) compared to a generalized solver, users can only conduct transactions with a limited range of tokens, and the capability to handle multiple chains and a variety of tokens simultaneously may be restricted. Additionally, the structure of the shared solver shifts towards the revenue model of the dApp itself, which can limit profitability when support for a broader range of assets and chains is needed. This mechanism enables the development of user-friendly solutions integrated within various dApps, activating new use cases and facilitating flexible asset movement across blockchains without the need for users to bridge funds or move them to specific chains. Moreover, it provides greater economic benefits and efficiencies for both users and dApp developers.

3.4 Facilitating Monolithic User Experience: Cross-Chain Interoperability

The Ethereum ecosystem is focusing on monolithic user experience to develop a cohesive and efficient user experience through research and innovation. The advancement of rollup-based Layer 2 technologies has given rise to many L2 and L3 projects, but a critical limitation of most rollups is their operation of independent sequencers. This mode of operation significantly limits interactions between rollups and appchains, leading to slow and costly bridging issues. This undermines synchronous composability and results in the dispersion of liquidity. Rollups process transactions independently through isolated sequencers and post these transactions asynchronously to Ethereum L1. While this method effectively maintains the sovereignty and performance of individual rollups, it complicates interoperability between different Layer-2 solutions. Shared sequencing allows users to experience the benefits of a single Ethereum chain while preserving each rollup's unique advantages such as sovereignty, low cost, and low latency. Through a shared sequencer, a group of rollups shares a sequencer, which is responsible for sequencing the next block for all connected rollups and proposing the block. Thus, the shared sequencer can atomically include transactions from multiple rollups, reflecting arbitrary user intents. In this session, we will explore the technical approaches of major projects that are developing methods to enhance interoperability between rollups.

• Espresso Systems

• Espresso enhances the composability of the blockchain ecosystem by recognizing shared sequencing as an auction mechanism to strengthen inter-network interoperability, introducing a marketplace for this purpose. Within the marketplace, shared sequencing and the HotShot consensus algorithm provide low-latency block commitments. Ellie (@ellierdavidson) talked about a trustless synchronized interoperability standard called CIRC (Coordinated Inter-Rollup Communication) at Sequencing Day. The operation of this mechanism at a high level is as follows:

  1. Transactions are generated by users within each rollup, and the chains exchange messages through their own implemented contracts for handling message exchanges.

  2. The shared sequencer aggregates transactions from multiple rollups into a single superblock from a public memory pool or private order flow. The shared sequencer then simulates execution that can generate some cross-chain messages.

  3. This superblock is passed to the confirmation layer, which can be instantiated as a high-throughput, low-latency BFT protocol.

  4. Rollups monitor the confirmation layer to fetch each transaction, update their state, and compute snark proofs.

  5. Rollup state update proofs are aggregated into a single proof, after which Ethereum's settlement layer contract verifies the proofs and finalizes the state updates between rollups.

  CIRC provides an integrated interface that allows various types of rollups to interact with each other, enabling Ethereum Layer 2 solutions using different rollup technologies to exchange messages and efficiently synchronize states.

• OP Labs

• OP Labs is a project designed to realize composability in the blockchain ecosystem, strengthening interoperability across networks to enhance user experience. Centered on its modular framework, the OP Stack, OP Labs develops critical technologies such as sequencing rules, settlement mechanisms, and cross-chain messaging protocols. These efforts enable smooth data transfer and asset exchange across chains, supported by shared security and scalability within a Superchain framework.

  The Superchain is a horizontally scalable cluster of chains functioning as a networked block space through the OP Stack. It integrates multiple OP chains via a shared Sequencer, enabling atomic cross-chain composability across chains. At Sequencing Day, Mark (@tyneslol) emphasized the key technologies and mechanisms supporting interoperability include:

  1. CrossL2 Inbox: A multicast log-based messaging system designed to securely share logs across chains.

  2. L2-to-L2 Cross-Domain Messenger: Simplifies inter-chain calls and data exchanges, offering domain binding and replay prevention.

  3. Shared Lockbox: A single smart contract on L1 that ensures asset fungibility and liquidity across L2s.

  4. ERC-7802 Standard: Streamlines cross-chain asset transfers with mint-and-burn interfaces.

  These mechanisms minimize cross-chain latency, facilitate reliable data exchanges, and provide token standards for cross-chain operations. The chain abstraction enables multiple chains to function seamlessly as one. Additionally, protocols compliant with the ERC-7802 Standard can perform cross-chain operations without modifying token contracts. This design simplifies and enhances chain integration and interoperability, making cross-chain processes more efficient and cohesive.

Interoperability issues represent a core challenge for message exchange and data consistency among Layer 2 scaling solutions. Currently, OP Labs, in collaboration with the Uniswap team, has proposed the cross-chain token standard ERC-7802. Additionally, Espresso presented a proposal on standardizing interaction through CIRC (Cross-Interchain Rollup Communication) at Sequencing Day. The establishment of standardized protocols simplifies information exchange and interaction between blockchain platforms, reflecting advancements in technological maturity. However, since both projects are centered around ecosystems built on shared sequencers, collaboration among multiple rollups is essential. Further research and development are needed to address these challenges and provide additional solutions in this domain.

3.5 Ensuring Instant User Experience: Preconfirmations

Preconfirmations, in the context of blockchain transactions, are pivotal elements that significantly enhance the user experience by bridging the gap typically seen between Web2 applications and decentralized apps. This process involves a commitment to the inclusion or execution of a transaction by an authority such as validators or block builders, who have the power to propose and construct blocks. This aspect of blockchain technology is crucial as it allows users to receive immediate feedback on their transactions, akin to the responsiveness expected from traditional web applications. A project named Primev has been at the forefront of exploring and institutionalizing this concept. They have been working on generalizing preconfirmation to a form that is widely accepted within the blockchain community. One of the key innovations being developed by Primev is an MEV-boost mechanism designed for bidding processes that leverage preconfirmation. This mechanism aims to facilitate trustworthy transactions between providers of preconfirmation services and bidders, thereby enhancing the reliability and efficiency of executing transactions.

• Primev

  The Primev project facilitates the buying and selling of transaction execution preconfirmations through interactions between Bidders and Providers via a service called mev-commit. This network defines Bidders and Providers in generalized roles, enabling the coordination of transaction commitments in an efficient and reliable manner. The roles of Bidders and Providers can vary depending on the context. For example, while a Rollup Sequencer typically curates and orders transactions for L2 rollups as a Provider, it may also need to act as a Bidder in specific situations where cooperation with L1 block builders is required.

  Primev operates through the following process:

  1. Bidders submit their bids from an encrypted mempool to the mev-commit network.

  2. The bids are conveyed to the Providers, who evaluate them and decide whether to issue a commitment.

  3. Committed transactions are recorded on the mev-commit chain and are disclosed at the time of execution.

  4. If the commitment is met, the Provider receives the bid amount, ensuring a trustworthy transaction.

Preconfirmations can significantly improve the user experience by reducing transaction latency, allowing users to receive immediate feedback, and providing assurance before transaction finalization, thus building trust in application usage.

3.5.1 Based Sequencing

In March 2023, Justin Drake proposed the concept of Based Rollup. Based Rollup adopts a based sequencing approach, allowing users to enjoy the security and reliability of L1 while experiencing the diverse features and services of L2. However, a potential issue is that based rollups inherit constraints like Ethereum's 12second block time, which can be a disadvantage in user experience. Such slow transaction verification speeds can complicate interoperability between dApps and negatively impact UX. To address these limitations in based rollups, the concept of preconfirmation was introduced in the terms of the based sequencing. This technology provides users with an economic commitment before their transactions are included in an L1 block, alleviating the inconveniences caused by transaction delays. The sequencer of the based rollup, who is an L1 proposer, can include the next rollup block as part of the next L1 block without permission, thus can issue such preconfirmations. Now, let's examine the practical design methodologies for preconfirmations in based sequencing.

Preconfirmations significantly improve user experience by reducing transaction latency, allowing users to receive immediate feedback, and providing assurance before the finalization of transactions, thus building trust in application usage. However, the preconfirmation process begins when a user sends a preconfirmation request along with a tip for a specific transaction, making a robust 'preconfirmation tip' mechanism essential for its effective application. This tip must provide a direct incentive for proposers to prioritize the user's transaction for inclusion in the block. Further discussions on this topic will continue in Session 4, while this session will explore the strategies adopted by projects within the faction that have chosen Based Sequencing.

• Taiko Gwyneth

• Taiko began evolving into a based rollup in the second half of 2023 as named Gwyneth and is designing the following sequencing design to allow a decentralized L1 proposer running taiko-geth to maintain synchronization with the L2 mempool:

  1. Transactions submitted by users to L2 are included in the mempool.

  2. L2 searchers find profitable transactions within the mempool to form bundles of L2 transactions.

  3. The L2 block proposer, who is an L1 searcher, then classifies these L2 transaction batches as an L2 block, which is included in the L1 transaction bundles.

  4. A validator then verifies these blocks for inclusion on the Ethereum main chain.

  Within this sequential process, Taiko Gwyneth introduces a preconfirmation mechanism to allow users to receive fast transaction processing results. Here, the proposer can post preconfirmation information to other network participants before submitting the block. However, the decentralization of the block proposing process can be problematic; if multiple proposers include the same transactions and submit blocks simultaneously, many blocks containing duplicated transactions may roll back, causing proposers to lose the fees from the block proposing process. To address this issue, Cecilia (@ceciliaz030) of Gwyneth Taiko has proposed a leader election mechanism that restricts only one proposer to be elected as a leader at a given time to finalize the block, thus preventing block collisions. Additionally, at Sequencing Day, Cecilia shared insights on Gwyneth’s "Based Interoperability and Generalizations," presenting a positive outlook on Composability beyond Synchronous L1, focusing on L2 interactions.

• Puffer Unifi

• Puffer Unifi is a based rollup launched by Puffer Finance. The transaction sequencing for UniFi is outsourced to Ethereum L1, and Puffer Unifi’s preconfirmation mechanism is implemented through EigenLayer’s restaking validators. Here is the user transaction processing procedure in Puffer Unifi:

  1. Transaction Receipt: Transactions submitted by users are first processed by Puffer validators who support 'native restaking' on the Ethereum network.

  2. Preconfirmation Commitment Provision: Validators provide a preconfirmation commitment within about 100 milliseconds, quickly informing users that their transaction has been received and will be included in a future block.

     (To ensure compliance with the preconfirmation commitment, additional penalty conditions are imposed through the Puffer UniFi AVS mechanism.)

  3. Transaction Packaging: After providing preconfirmation, Puffer validators package these transactions with others and submit them as a block to Ethereum L1.

  4. Block Submission and Transaction Status Verification: Finally, the Puffer Sequencer Contract, part of the Puffer UniFi smart contract, accepts the batch transactions within the submitted block, ensuring that the transaction status is verified and irreversible.

  Applications built on Puffer UniFi can enhance the user experience in the final transaction confirmation process without incurring significant development costs, by utilizing the L1 sequencing and preconfirmation mechanisms provided by UniFi, without needing to construct complex bridge mechanisms.

In addition to the projects mentioned above, there are notable projects that are building Based Rollups. For example, Spire and RISE participated as speakers during Sequencing Day. Matthew, the co-founder of Spire (@Spire_Labs), emphasized the strength of Base Sequencing, which can inherit the network effects of Ethereum's already established infrastructure in L2. Sam (@sam_battenally), the co-founder of RISE, focused on the technical advantages of Based Rollups, optimization strategies for reducing operational costs, and the scalability of decentralized ecosystems. Through this, he presented on the direction of Ethereum’s ecosystem development. In the context of liquidity fragmentation within the Rollup ecosystem, Based Rollups are widely regarded as a potential effective solution. Given the continued positive progress of several major protocols, the implementation and integration of Based Rollups are expected to increase liquidity across the entire Rollup ecosystem. These advancements are seen as crucial steps in overcoming technical limitations and enhancing interoperability among different blockchain networks.

3.5.2 Decentralization of Preconfirmation

Ethereum considers decentralization as one of its core values and aims to further strengthen it through the proposer-builder separation (PBS) model. However, if the Preconfirmation process relies on a small number of systems or builders, centralization issues may inadvertently arise. This could limit the validator's choice and pose a threat to the network's security and fairness. To address this, Gateway and Commit-Boost have been introduced to support critical data processing and logic execution in the Preconfirmation process, ensuring the independence of validators and the decentralization of the network. The Gateway is proposed as a component that allows L1 proposers to delegate the Preconfirmation process, while maintaining L1 stability and increasing access to various L2 functions and services. Additionally, Commit-Boost standardizes the Preconfirmation commitment communication between validators and proposers, simplifying the protocol's interactions.

• Gateway

• Introduced to simplify the user experience and better coordinate preconfirmation requests. Through the Gateway, proposers can delegate preconfirmation rights, and the Gateway handles more complex tasks such as communicating with users and maintaining the uptime of full nodes. Projects building preconfirmation gateway solutions include Gattaca, Titan, and Ultra Sound. Especially, at Sequencing Day, Gattaca's Kubi (@kubimensah) and Lorenzo emphasized a gateway-centric market structure that enables decentralized block creation through pre-confirmations and enhances the oversight capabilities of proposers. They also showcased a demo of the gateway's open-source version, which is currently under development.

• Commit-Boost

• Drew (@DrewVdW) presented that Commit-Boost aims to standardize communication between validators and proposers, improve the efficiency of the Preconfirmation process, and ensure validator independence. At the same time, it interacts with the Gateway to enable L1 proposers to delegate the Preconfirmation logic, providing access to L2 functions and services. Commit-Boost is designed based on a modular structure, offering standardized interfaces for communication between validators and various protocols.

The main operations of these two components are as follows:

1. Validator runs Commit-Boost

   • Validators run Commit-Boost as a sidecar to prepare for signing requests.

   • Commit-Boost operates based on the validator's configuration file and securely manages data related to signing keys.

2. Proposer creates Preconfirmation request

   1. The proposer, designated by the network's consensus mechanism, proposes a block.

   2. Before providing the block to the builder, the proposer requests Preconfirmation data from Commit-Boost.

3. Gateway → Commit-Boost

   1. The proposer's Preconfirmation request is forwarded to Commit-Boost via the Gateway.

   2. The Gateway validates the data and passes the request to Commit-Boost for appropriate handling.

4. Commit-Boost generates signature

   1. Commit-Boost uses the SignerAPI to sign the requested data with the validator's signing key.

   2. This signature ensures the integrity of the Preconfirmation data and verifies the requested conditions.

5. Gateway → Commit-Boost

   1. Commit-Boost returns the generated signature to the Gateway, which then forwards it to the proposer or builder.

   2. The signed data is used by the builder to create the block or by the proposer to construct the block.

6. Block submission and consensus

   1. The proposer includes the signature data received from Commit-Boost in the block and submits it to the network.

   2. Other validators in the network verify the block's validity and adopt it through the consensus process.

7. Monitoring and status management

   1. Commit-Boost records request processing status and signature results in monitoring tools like Prometheus and Grafana.

   2. Validators can use this to check the system's status in real-time and optimize performance.

Commit-Boost is a tool designed to standardize the Preconfirmation process between proposers and builders and efficiently provide validator signatures. It fundamentally strengthens data mediation and security by collaborating with the Gateway, which can provide a fast user experience through Preconfirmation while supporting the decentralization and efficiency of the Ethereum network. Through these solutions, L1 proposers can delegate Preconfirmation processing of transactions in advance, effectively bridging the gap between L2's fast transaction requirements and L1's security and reliability. This minimizes user experience (UX) issues related to L1’s slow block times and reduces the complexity of inter-dApp interactions when transaction confirmation speeds are slow. As a result, the Gateway, combined with Based Sequencing, enhances Ethereum's network scalability and performance, offering developers and users a better blockchain experience.

4. Open Problems

4.1 Rollup-centric Ethereum: Balancing Mutual Benefits

Electric Capital researcher Ren (@0xren_cf) has discussed how extractive L2s are to Ethereum through a detailed data analysis. The discussion focused on three main points: the fee structure of rollups, the impact of rollups on the Ethereum network, and the interplay between rollups and Ethereum.

1. Fee Structure of Rollups and Their Contribution to the Ethereum Network

   • Rollups process transactions on the Ethereum blockchain, providing higher throughput and lower gas costs, which are crucial for solving Ethereum’s scalability issues.

   • However, some critics argue that most of the revenue generated by rollups is retained by the rollup operators, without sufficient economic contribution to the Ethereum network itself. This concern has grown especially after the introduction of EIP-4844, which significantly increased the profit margins of rollups.

2. Impact of Rollups on Ethereum Activity and ETH Holders

   • The activation of rollups has increased the usage of the Ethereum network, which theoretically could boost the value and demand for ETH. However, there is a possibility that the importance of ETH could diminish if rollups primarily use their own tokens and less ETH.

   • Additionally, while rollups reduce L1 settlement costs, this could inversely weaken the role of ETH as a gas token. Nevertheless, ETH remains crucial due to other roles like security assurance.

3. Game Theoretical Dynamics Between Rollups and Ethereum

   • From a game theoretical perspective, each actor in the relationship between rollups and Ethereum seeks to maximize their economic benefits. In this scenario, rollups aim to maximize profits at minimal costs, while Ethereum seeks to secure resources needed for the network’s safety and development.

   • This dynamic can lead to criticisms that rollups are not providing sufficient value to Ethereum and are monopolizing profits, which calls for efficient resource allocation and pricing mechanisms between rollups and Ethereum.

In conclusion, Ren's presentation articulated that it is difficult to definitively conclude that rollups are exploitative towards the Ethereum network. It emphasized that a balance between the economic benefits of rollups and their contribution to the Ethereum network is necessary, and this balance can be achieved through continuous technological progress and policy adjustments. Moreover, the interaction between rollups and Ethereum needs to be carefully coordinated to ensure the overall health and development of the network, reinforcing the importance of this critical discussion.

4.2 Preconfirmation Tip Incentive Alignment

Preconfirmations in blockchain technology represent a significant advancement aimed at enhancing user convenience by improving transaction speeds and efficiency, traits particularly valued in applications where time is critical. This capability allows for advantages previously unattainable on the Ethereum network, where speed limitations have often been a bottleneck. Preconfirmations provide a form of assurance that transactions will be processed in the upcoming blocks, thereby reducing the uncertainty and latency typically associated with blockchain transactions. However, the implementation and widespread adoption of preconfirmations are not without challenges, particularly in terms of economic incentives. The concept of preconfirmations necessitates a delicate balance of incentives for block builders and proposers. Without proper incentives, developers and miners may find little reason to adopt this advanced feature. If preconfirmations are provided for free, they could lead to a reduction in the block rewards that proposers and block builders receive, potentially causing financial losses. This financial model could deter the very parties needed to implement and maintain this system, as the lack of direct compensation for including these preconfirmed transactions might not justify the effort and resources required. To counteract this, users are often required to pay tips for preconfirmations. These tips serve as an incentive for block builders to include these transactions in their blocks promptly. However, these tips have properties similar to MEV (Miner Extractable Value) bundle bribes and can vary significantly based on the current state of the network and transaction demand, adding a layer of complexity to the profitability and sustainability of offering preconfirmation services.

Nethermind's Conor (@ConorMcMenamin9) and Kuru's Rohan (@0xtrojan_) are prominent researchers who have been studying preconfirmation pricing models to address these economic challenges. Their research aims to devise a model that balances the need for speedy transactions with the financial realities faced by those who facilitate these transactions. At Sequencing Day, they presented their findings, which explore how to optimize the tipping system to ensure that all parties are fairly compensated for their contributions to the blockchain ecosystem, thus maintaining the viability and attractiveness of preconfirmations. This ongoing research is crucial as it seeks to resolve the profitability issues for preconfirmation providers, ensuring that this innovative technology can be sustainably integrated into the Ethereum network.

• Kuru (Rohan)

• This research focuses on transaction modeling and deriving pricing functions and strategies for preconfirmation providers, particularly exploring dominant strategy modeling for how preconfirmation providers can operate.

  1. Scope of Research:

     • Focus: Centered on DeFi applications, particularly on-chain order books where market makers are willing to pay additional costs for reduced latency. However, issues like the fair exchange problem and block gas limits are excluded from this study and are left for future research.

  2. Model Assumptions:

     • Definition of MEV: Defined as opportunities based on the Relative Ordering of Transactions, distinct from Just-In-Time (JIT) MEV.

     • Poisson Distribution: MEV opportunities follow a Poisson distribution based on a known arrival rate (lambda), modeling the number of events occurring within a specified timeframe.

     • Fee Model: Proposers monetize priority fees linearly, while preconfirmation providers set an additional fee F, offering preconfirmations only if the fee exceeds F.

  3. Key Elements of the Model:

     • Pre-Con Strategy: Sets a specific waiting time W before deciding whether to offer a preconfirmation. If W equals the block time, it captures the total MEV without offering preconfirmation.

     • Probability Calculations: Calculates the probability of MEV opportunities occurring based on the arrival rate and waiting time.

     • Repeated Game: Preconfirmations occur repeatedly during the block time T in intervals of W, with W=T considered a single game scenario.

  4. MEV Opportunities and Revenue:

     • Expected MEV Value: MEV opportunities decrease exponentially, and the total MEV value during the block time is derived.

     • Pre-Con Fee Revenue: The frequency of preconfirmation depends on the fee F and W, with a higher F inducing more frequent preconfirmation offerings.

  5. Conclusion and Further Research:

     • Presence and Impact of Pre-Con Fee: The presence and size of Pre-Con Fees significantly alter profitability and strategies. To maximize profits, strategies must be adjusted based on preconfirmation transaction demand and pricing.

     • Further Research Needed: Additional studies are necessary on block gas limits, fair exchange issues, slippage, and potential improvements through Merkle roots.

• Nethermind (Conor)

• This research delves into the economic practicality and the essential nature of pre-confirmation protocols. It explores and elaborates on well-known types of preconfirmation protocols and outlines revenue models for each, providing clear evidence of their economic effectiveness.

  1. Scope of Research: Analyzes the trade-offs of various preconfirmation protocol types and the technology that implements them.

  2. Protocol Classification:

     Preconfirmation protocols are primarily classified into two major types: Independent Sub-Slot Auctions (ISSAs) and Dependent Sub-Slot Auctions (DSSAs). These types differ in how preconfirmations are managed and how the roles and benefits are distributed among participants.

     • Independent Sub-Slot Auctions (ISSAs):

       • Proposers independently conduct auctions for each sub-slot.

       • Proposers, lacking the resources to conduct auctions themselves, rely on relayers to facilitate the auctions.

       • Builders chosen through auctions construct the blocks for their respective sub-slots.

     • Dependent Sub-Slot Auctions (DSSAs):

       • Proposers conduct auctions per sub-slot, but winners gain auction rights for subsequent sub-slots.

       • Winning builders gain both the economic benefits from the sub-blocks they construct and the rights to auction subsequent sub-slots, enhancing their economic gains.

  3. Comparison with MEV-Boost:

     MEV-Boost optimizes block proposers' revenue through auctions. In contrast, preconfirmation protocols ensure more definitive economic rewards by securing commitments from block proposers to include transactions beforehand.

     • ISSAs

       Pros:

       • Provides a clear mechanism for distributing transaction inclusion rights for each sub-slot.

       • Supports proposers in independently managing sub-slot auctions.

       Cons:

       • If the additional tips provided during preconfirmation are insufficient, proposers' profits may decrease compared to MEV-Boost.

       • Frequent auctions for each sub-slot can lead to increased transaction costs and reduced system efficiency.

     • DSSAs

       Pros:

       • Grants auction rights for subsequent slots to the current slot's auction winners, strategically maximizing the value of the entire block.

       • Offers builders the opportunity to gain additional rewards not only from sub-block creation but also from managing future auctions.

       Cons:

       • Carries a risk of centralization. If the same builder consistently wins auctions, they may dominate multiple sub-slots, reducing competition.

       • When a specific builder monopolizes auction rights, it creates barriers for smaller participants, hindering competition and decentralization.

  4. Conclusion:

     • Preconfirmation protocols can result in approximately a 74% decrease in proposer revenue compared to MEV-Boost if sufficient preconfirmation tips are not provided. However, this study highlights the ability to estimate the minimum threshold of preconfirmation tips required to offset the revenue loss. If tips exceed this threshold, proposers may achieve higher revenues than with traditional block-building methods.

     • However, implementing these protocols involves additional complexities and risks of centralization, necessitating systematic analysis and evaluation.

The research results specifically present strategic approaches and revenue models that preconfirmation providers can utilize, contributing to an enhanced understanding of the overall MEV ecosystem. Indeed, they provide sufficient justification for the revenue structure and feasibility of the preconfirmation protocol. Further detailed findings on this topic can be found in the study available at Estimating the Revenue from Independent Sub-Slot Auction Preconfirmations.

4.3 Application vs AppChain

Marshall (@mvyletel_jr), a researcher from 1kx, presented on the trade-offs between app-specific sequencing and app chains, suggesting that App-Specific Sequencing (ASS) might not be the ideal long-term solution. To understand this discussion further, it's necessary first to examine the main differences between Applications and AppChains.

The main issues with AppChains include high initial costs, difficulties in securing liquidity, and a lack of composability. In contrast, ASS offers an alternative that can mitigate these issues of AppChains. ASS is designed to internalize the MEV generated within applications, significantly improving economic profitability. It also allows for customized sequencing mechanisms tailored to specific application needs, optimizing user experience and reducing negative external effects. Moreover, compared to AppChains, ASS involves relatively lower initial infrastructure costs and utilizes existing chains, reducing the burden of operating an independent chain. However, ASS also has its limitations in the long term. In terms of composability, if it fails to include external transactions in bundles, it may limit interoperability between applications, causing issues in protocol cooperation and asset mobility. Additionally, the possibility of bundled transactions being censored or missed in the PBS pipeline can negatively impact user experience. ASS also entails dependencies on infrastructure providers and, in the long run, may transition to alternatives like AppChains or Application-Specific Rollups due to basic protocol pressures and ecosystem construction demands.

In conclusion, ASS offers high customization and MEV profitability, and it has the potential to overcome the limitations of the traditional Application model. However, if it fails to resolve issues related to composability and ecosystem construction, its long-term sustainability may be limited. While the future of applications cannot be definitively stated, the contributions of ongoing research and experimentation hold substantial potential for continuously deriving and improving better mechanisms. Thus, a thorough exploration and analysis of such research are required, along with an open-minded approach to embracing new ideas and approaches.

5. Conclusion

This document has explored various research topics that exemplify the Ethereum community's commitment to enhancing user experience and broadening economic opportunities. Here’s a high-level summary:

• Decentralization Efforts: Our discussions highlighted Ethereum's dedication to increasing network decentralization. Initiatives like the redistribution of MEV and the introduction of PBS are enhancing transaction fairness and transparency. The natural integration of Gateway in based sequencing also shows a shift towards decentralizing proposer authority, significantly boosting user trust in the network's operational integrity.

• Technical Innovation for Economic Opportunity Expansion: Centered on rollups, Ethereum's strategy to tackle scalability challenges extends beyond network enhancements to stimulate economic growth. Technologies such as Danksharding are reducing transaction costs on L2, fostering the development of diverse services and applications within the ecosystem. Additionally, technical frameworks like the blockspace market and ASS are designed to redistribute MEV to contributors, thereby enriching the network’s overall value and cultivating an attractive environment for users and developers.

• Improving User Experience through Interoperability and Network Efficiency: Ethereum's L2 solutions demonstrate remarkable adaptability to application-specific needs, reflecting deep consideration of how the ecosystem can integrate and interact seamlessly with other blockchain systems. Ongoing standardization efforts related to based sequencing and shared sequencing combined with L1 proposers, ensure that users enjoy a unified and delay-free transaction experience, significantly improving overall user satisfaction.

In summation, Sequencing Day, hosted by Radius, Puffer, and Espresso, provided an invaluable perspective on strategies and innovations aimed at refining the Ethereum ecosystem. Our analysis revealed how these approaches are pivotal to achieving scalability and increasing user adoption. However, despite the progress in technological advancements and the introduction of novel mechanisms, several challenges remain. The revenue structures of rollups, the economic and practical implications of preconfirmation, and the long-term viability of sequencing for specific applications necessitate further investigation and dialogue. Addressing these issues requires a concerted effort within the community to develop solutions and integrate new functionalities, thus reinforcing Ethereum's position as a robust and diverse global digital infrastructure.

In conclusion, the Ethereum ecosystem's ongoing evolution is a multifaceted endeavor focusing on technological innovation, strategic development, and community engagement. Through these concerted efforts, Ethereum continually aims to enhance the user experience, demonstrating its pivotal role in shaping the future digital landscape. The community's commitment to addressing complex challenges and pushing the boundaries of innovation is crucial for Ethereum to transform into a more transparent, fair, and scalable platform.

Reference and Further Reading

Ethereum roadmap | ethereum.org

The path to more scalability, security and sustainability for Ethereum.

https://ethereum.org

Scaling Ethereum | ethereum.org

Rollups batch transactions together offchain, reducing costs for the user. However, the way rollups currently use data is too expensive, limiting how cheap transactions can be. Proto-Danksharding fixes this.

https://ethereum.org

https://mirror.xyz/barnabe.eth/QJ6W0mmyOwjec-2zuH6lZb0iEI2aYFB9gE-LHWIMzjQ

Fork-Choice enforced Inclusion Lists (FOCIL): A simple committee-based inclusion list proposal

focil => fossil => protocol ossification by Thomas, Barnabé, Francesco and Julian - June 19th, 2024 This design came together during a small, week long, in-person gathering in Berlin with RIG and friends to discuss censorship resistance, issuance, and Attester-Proposer-Builder-Consensus-Execution-[insert here] Separation.

https://ethresear.ch

Based preconfirmations

Special thanks to Dan Robinson, Mike Neuder, Brecht Devos for detailed design discussions. TLDR: We show how based rollups (and based validiums) can offer users preconfirmations ("preconfs" for short) on transaction execution.

https://ethresear.ch

Blockspace refers to the space within a block that can include transactions on Ethereum and various other blockchain networks, and it can be seen as an asset with intrinsic value. This blockspace is a limited resource, and its efficient use significantly impacts the profitability, efficiency, and user experience of a network. When blockspace is treated as an asset, users can reserve or trade this space according to their needs. This approach helps minimize resource waste in block production and optimizes resource usage across the entire network. As a result, users can secure the required blockspace while allowing any excess space to be transferred to others, balancing the supply and demand for blockspace. This process greatly contributes to the efficient operation of the network.

This approach is closely aligned with Ethereum's PBS research, which separates the roles of Proposer and Builder, not only stabilizing and decentralizing the network but also enabling efficient use of blockspace while maximizing the revenue of each entity. Radius is currently developing the Blockspace Network to maximize the value of blockspace and enhance the efficiency of blockchain networks, thereby creating new revenue opportunities and expanding network capabilities.

3.1 The Significance of the Blockspace Network

In Ethereum, a specialized entity known as the Builder optimally arranges transactions within a block to maximize revenue. This process generates approximately $400 million in annual revenue for Ethereum, indicating the high level of optimization in block production that enables the network to achieve maximum profitability.

While the efficient use of blockspace and the pursuit of optimal revenue are essential in both L1 and L2 networks, most prior research and development have focused on L1. As a result, rollups and other L2s have yet to reach optimal efficiency. Typically, L2 rollups use their own Sequencers to build blocks and rely solely on transaction fees, which means the potential value of blockspace is not fully utilized and has not achieved the same optimized structure as Ethereum.

The Blockspace Network is designed to address the inefficiency of blockspace in L2 networks and maximize its value. This network connects entities that wish to sell blockspace with those looking to buy it, increasing the liquidity of blockspace transactions and aiming to enhance the overall profitability of the network through efficient resource allocation.

Moreover, the Blockspace Network allows blockspace across multiple chains to be managed within a unified market. This streamlines resource usage not only on the Ethereum mainnet but also across various L2 networks and other chains. Through this integrated market, blockspace fragmentation between chains is reduced, liquidity is improved, and user experience and network scalability across the Ethereum ecosystem are expected to be enhanced.

3.2 Our Role and Innovation through the Blockspace Network

Radius Blockspace Network provides an integrated platform that allows various participants to effectively trade and use blockspace. This network connects L2 rollups (Sellers) with block builders (Buyers), enabling builders to compose blocks with the optimal order of transactions based on the blockspace owned by rollups. This approach helps to maximize the value and profitability of blockspace while simultaneously improving L2 network efficiency and resource utilization.

Key Features of the Radius Blockspace Network:

• Auction Mechanism for Optimal Profit:

  The Blockspace Network allows builders to create blocks based on the latest state of multiple rollups and participate in an auction. During this process, the network helps select the builder's block that will bring the highest revenue to the rollup. The auction mechanism promotes transparent pricing of blockspace and efficient resource allocation, supporting market participants in placing optimal bids to maximize rollup revenue.

• Balancing Blockspace Supply and Demand:

  By effectively connecting rollups looking to sell blockspace with builders aiming to buy it, the Blockspace Network maintains a balance between supply and demand, facilitating transactions at optimal prices. This balance enables efficient trading of blockspace across different chains and protocols, ensuring the network maintains an optimal distribution of resources. Additionally, such balance reduces the volatility of blockspace prices, helping to establish a stable revenue structure in the long term.

• Providing Additional Revenue Opportunities:

  The Blockspace Network goes beyond existing revenue models by helping rollups generate additional income. This enhances the utilization of blockspace and increases the liquidity of the network. Rollups can manage their blockspace flexibly, and as builders construct highly profitable transactions, the demand for blockspace increases. Consequently, rollups can create additional revenue through the auction mechanism beyond simple transaction fees.

• Improving Composability and Block Production Efficiency:

  The Blockspace Network contributes to solving composability issues by facilitating transaction compatibility and integration across multiple L2 networks. It consolidates transactions from different chains to create the optimal block, improving block production efficiency. This not only enhances resource usage efficiency across chains but also ensures smoother interactions between rollups, thereby improving scalability and stability within the Ethereum ecosystem.

• Enhancing Transparency and Fairness of Blockspace:

  The Blockspace Network provides mechanisms to ensure the transparency and fairness of blockspace transactions, allowing all participants to have access to the same information and opportunities. This prevents inefficient use of blockspace caused by elements like MEV and helps foster a fair competitive environment among network participants. As a result, blockspace serves not only as an asset for generating revenue but also plays a crucial role in ensuring the stability and decentralization of the network.

Through these key features, Radius’ Blockspace Network will enhance the utilization and liquidity of blockspace within the L2 ecosystem, creating an optimal revenue model through efficient resource distribution.

3.3 The Future of Blockspace Network and Our Vision

The Blockspace Network is expected to work synergistically with the existing Proposer-Builder Separation (PBS) model, maximizing the efficiency of blockspace transactions within L2 networks and building a decentralized ecosystem. Radius is actively conducting research to realize the concept of the Blockspace Network, developing new technologies and systems to provide an infrastructure that enables the stable trading of blockspace. This research focuses on enhancing the stability and flexibility of blockspace transactions and finding ways for various users and protocols to efficiently use and share blockspace.

In particular, since the Blockspace Network creates an integrated market where multiple blockspace sellers can gather and trade, it can also resolve existing composability issues within L2. With blockspace from various chains being managed in one place, efficient handling of transactions between different L2s or chains becomes possible. This provides an environment where multiple rollups and chains can interact seamlessly, alleviating transaction compatibility issues across L2 networks and strengthening chain connectivity.

By addressing blockspace fragmentation and providing an integrated market, the Blockspace Network improves resource usage efficiency and liquidity across various chains and L2 networks. This unified market improves user experience, enhances network scalability, and positively impacts the entire Ethereum ecosystem.

Ultimately, by establishing this integrated blockspace market through the Blockspace Network, Radius aims to accelerate L2 ecosystem activation, efficiency improvements, and decentralization. This will enable efficient and stable network construction by meeting diverse user needs and supporting chain integration, contributing to the development of a stronger and more robust Ethereum ecosystem and its surrounding chains

2.1 PBS in Ethereum

In Ethereum, Proposer-Builder Separation (PBS) was introduced to tackle issues of centralization and MEV (Maximal Extractable Value) extraction by splitting the roles of the Proposer and Builder. Over time, PBS has evolved significantly — starting as an out-of-protocol concept and gradually moving towards an in-protocol structure.

Initially, PBS relied on the introduction of a "Relay" through Flashbots' MEV-Boost architecture, which maintained trust between Proposers and Builders and facilitated efficient block production. As the model developed, Enshrined PBS (ePBS) aimed to minimize the Relay's role and further optimize the network's validation process. Within the in-protocol PBS framework, structures like Two-slot PBS and the Payload Timeliness Committee (PTC) were created to enhance transparency in block creation. Additionally, Protocol-Enforced Proposer Commitments (PEPC) were introduced to enforce Proposers' commitments at the protocol level, helping clarify the specific roles and responsibilities of Proposers and Builders.

Other mechanisms, such as Inclusion Lists and Execution Tickets, were also developed to ensure fair inclusion of transactions and to decentralize and enhance the efficiency of block production rights. The conversation on how these evolving mechanisms affect block production and resource allocation continues to be an active area of discussion within the Ethereum ecosystem.

The advantages of this approach are as follows:

1. Increased revenue for Proposers through MEV optimization

   The process of extracting MEV is highly complex and requires specialized knowledge for optimization. Builders are the entities optimized for this task, constructing MEV-optimized blocks to provide to Proposers. Proposers can select these blocks to gain high revenue without the burden of block building.

2. Stabilization of Proposer set decentralization

   Since one can participate as a Proposer and earn high revenue without the need for MEV expertise, more participants are motivated to become Proposers. This increase in participants promotes decentralization and contributes to the stabilization of the network. Such a structure plays a crucial role in enhancing network security and preventing centralization.

The PBS concept can also extend to Layer 2 (L2). L2 Sequencers will aim to optimize blockspace to maximize their revenue. Therefore, by separating the role of Sequencers, Builders can construct blocks while Sequencers select the most profitable block. This allows L2 Sequencers to maximize their profits by choosing optimized MEV blocks without the burden of block building. Simultaneously, decentralizing Sequencing participants helps maintain the robustness and liveness of the L2 network. Such a structure promotes decentralization of the L2 network, contributing to a more stable and secure system.

2.2 PBS in Layer 2: New Interpretations and Expansion

Proposer-Builder Separation (PBS) in L2 shares similarities with the concept in L1 but is adapted to consider L2’s unique characteristics and challenges. L2 was developed to solve Ethereum’s scalability issues and reduce transaction fees, but problems still exist in terms of transaction construction, block creation, MEV extraction, network decentralization, and efficiency. In particular, L2’s PBS focuses on the role of the Sequencer and the subsequent optimization of blockspace, with discussions revolving around MEV and network efficiency.

2.2.1 L2’s Characteristics and Challenges

One of L2’s main challenges is “composability” and compatibility issues across various networks. Composability refers to the interaction between different protocols or chains, and it poses challenges on two fronts in L2:

1. Composability across the same L2s: For example, if multiple chains use the OP Stack, how will they communicate without going through L1? This communication issue is tied to the inherent limitations of L2 networks.

2. Composability across different L2s: Compatibility problems also arise among L2s using different technologies, such as zk-Rollups, StarkWare-based L2s, and zkEVMs. Each operates with different structures, leading to inconsistencies in transaction execution and block creation.

Additionally, block production and MEV extraction in L2 take on new interpretations. Faster block production times and pre-confirmation mean that transactions can be confirmed faster than on L1, resulting in different MEV optimization approaches. Since Sequencers can quickly produce and validate blocks, the frequency of block creation increases, but the methods to enhance block profitability become more complex.

2.2.2 PBS in L2 and the Role of Sequencers

The role of Sequencers in L2 is akin to a combined form of the Proposer and Builder roles in L1. Sequencers are responsible for assembling blocks, processing transactions, and determining the order in which transactions are included in the network. However, the process of Sequencing also raises significant challenges related to maximizing MEV revenue and efficient block production. Specifically, the characteristics of L2 Sequencers can lead to the following issues:

• Sequencer Centralization and Liveness Issues: Since L2 Sequencers are often not sufficiently decentralized, they may not guarantee complete network liveness. A single point of failure in a Sequencer can lead to network outages or vulnerabilities to denial-of-service attacks, hindering stable transaction processing.

• Inefficient Use of Blockspace: L2 Sequencers manage their own transaction pools and can prioritize or reorder transactions to extract MEV. However, compared to a specialized Builder in L1 who constructs optimized blocks, this approach may not use blockspace as efficiently. Such inefficiency could lead to increased transaction fees and reduced network performance. If a Sequencer lacks expertise in block construction optimization, there may be limitations in maximizing MEV revenue.

To address these issues, it is necessary to decentralize Sequencers and separate the role of professional Builders responsible for optimized block building. This enables optimization at each stage of block construction and transaction inclusion, enhancing the overall efficiency of the network.

2.3 The Future of PBS in L2: Community Asset vs. Public Good

PBS in L2 can be interpreted in various ways depending on the specific characteristics of the L2 network and its Sequencer structure. A major topic of discussion is whether Sequencers should be seen as community-managed assets (commodities) or as a public good utilized by the entire network. This debate is significant because how Sequencers are viewed and how blockspace is accessed have a substantial impact on the profitability and level of decentralization within the L2 network.

From this perspective, PBS in L2 proposes new approaches and structures for optimizing blockspace and separating the roles of Sequencers, and these will be key factors in determining the profitability, efficiency, and level of decentralization within the L2 network.

1. The Evolution of Proposer-Builder Separation (PBS)

The concept of Proposer-Builder Separation (PBS) was proposed to address the issue of centralization in the Ethereum network, where the proposer could monopolize power to maximize MEV (Maximal Extractable Value) profits. A solution was introduced to separate the roles of the proposer, who previously generated and included blocks in the chain, into the builder, who creates the blocks, and the proposer, who includes them in the chain. This separation aims to enhance the efficiency of block production and the fee market, while mitigating network centralization. Let's explore the evolution and development of PBS over time.

1.1 Initial PBS

• https://ethresear.ch/t/proposer-block-builder-separation-friendly-fee-market-designs/9725

  In June 2021, Vitalik Buterin, the founder of Ethereum, proposed the concept of Proposer-Builder Separation (PBS), introducing an innovative approach to address block production and the network's MEV (Maximal Extractable Value) issues. At that time, Vitalik suggested separating the roles of proposing blocks (Proposer) and building blocks (Builder) to mitigate centralization caused by MEV extraction in the network.

  The core of PBS is that the Proposer acts as a simple block proposer who receives bids, while the Builder constructs the blocks and submits them to the network. This allows the Builder to optimize the transactions included in the block to maximize profit, and the Proposer evaluates the validity and bid value of each block to select the one that will ultimately be included in the network. This structure helps to alleviate network centralization due to MEV extraction and enables efficient fee market management.

  Vitalik presented various design requirements and implementation ideas to make this PBS structure feasible. This initial proposal laid the foundation for the development of PBS and paved the way for more concrete implementation stages in the future.

1.2 Out-of-Protocol PBS

• https://ethresear.ch/t/mev-boost-merge-ready-flashbots-architecture/11177

  The first attempt to realize the concept of PBS was the "MEV-Boost" architecture proposed by Flashbots. This architecture aims to support efficient block production by minimizing the direct connection between the Proposer and the Builder, introducing a trusted intermediary between them. This intermediary is known as a Relay, and it serves as a mediator that receives bids from Builders and passes them on to the Proposer. Through the Relay, the interaction between the Builder and the Proposer becomes more secure and efficient; however, this introduces the issue of trust in the Relay itself. Specifically, it is crucial to ensure that the Relay manages the bids from Builders fairly and accurately relays them to the Proposer. Trust in the Relay's proper handling and fair management of Builder bids is therefore essential.

• https://ethresear.ch/t/why-enshrine-proposer-builder-separation-a-viable-path-to-epbs/15710#optimistic-relaying-an-iterative-approach-to-pbs-8

  ePBS (Enshrined Proposer-Builder Separation) is a significant upgrade to Ethereum, aiming to enhance security and decentralization by making the interactions between Proposer and Builder more efficient. With the introduction of ePBS, the role of the Relay is greatly reduced, diminishing its function as an intermediary, although some of its roles may still be retained. Instead of managing the bid transmission and verification between the Builder and Proposer, the Relay will adopt a more restricted yet efficient function.

  Even after the implementation of ePBS, the Relay can still assist in bid management and verification between the Builder and Proposer or act as an intermediary to facilitate block creation and submission in specific situations. This means the Relay can continue to play a role in enhancing the network's stability by transparently conveying bid information and monitoring the Proposer's signing of valid bids.

  ePBS not only reduces the operational burden and costs associated with the Relay but is also designed to be compatible with future features such as MEV-burn and censorship resistance. This enhances the stability and efficiency of the Ethereum protocol while offering flexibility for selectively leveraging the Relay's intermediary functions when necessary.

  Consequently, ePBS limits the functionality and influence of the Relay, yet by integrating this structure at the protocol level, it strengthens the network’s stability, efficiency, and security. Continuing certain roles of the Relay while introducing ePBS is expected to play a key role in optimizing Ethereum’s block production process and building a more decentralized and secure ecosystem.

1.3 In-Protocol PBS

• https://ethresear.ch/t/two-slot-proposer-builder-separation/10980

  To further refine the PBS structure, Vitalik proposed a "Two-slot PBS" structure for Ethereum 2.0 in July 2021. This structure separates the roles of the Proposer, who determines which blocks are included in the blockchain, and the Builder, who actually creates the blocks, while managing this entire process within the protocol itself. By doing so, the aim was to address trust issues and complexities that may arise from external interactions.

  A key change in the Two-slot PBS structure is dividing the single block production process into two slots. In the first slot, the Proposer receives bids from Builders, decides on the block header, and includes it in the Beacon block. In the second slot, the Builder generates the block and includes it in an intermediary block. Through this process, block production is systematically handled within the protocol, with an Attestation Committee validating the block's validity. In this structure, the Beacon block, which records the network state, and the intermediary block, which connects it to the execution block, operate independently to enhance both the efficiency and security of the block.

  However, this structure also presents some challenges. First, the increased time required for block production can reduce network efficiency. Second, the fork-choice rule between the Beacon block and the intermediary block becomes more complex, potentially leading to a higher likelihood of block re-organizations (re-orgs).

• https://ethresear.ch/t/payload-timeliness-committee-ptc-an-epbs-design/16054

  To overcome the limitations of the Two-slot PBS structure and further enhance the efficiency and security of block production, the introduction of the Payload Timeliness Committee (PTC) has been proposed. PTC is one of the enhancements to the ePBS structure, providing a mechanism to ensure that the Proposer must include a block from an honest Builder.

  Within this structure, a PTC is formed separately from the Attestation Committee to monitor the timeliness and submission of blocks by the Builder. Once a Builder is selected, the PTC monitors whether the block is submitted on time. If the Builder meets the submission deadline, the PTC votes on the Payload Time to confirm the timely submission of the block. This voting process is crucial in verifying both the submission time and the validity of the block, ensuring a transparent and reliable collaboration between the Proposer and Builder.

  By doing so, some of the issues inherent in the Two-slot PBS structure are addressed, particularly those related to delayed block submissions by Builders or inefficient block production processes. When the PTC is implemented, it accurately tracks block generation timing, allowing blocks to be created based on this timing and significantly reducing the risk of block invalidation or re-organizations (re-orgs). The enhanced transparency brought by the PTC thus improves the overall stability and efficiency of the block production process.

  As a result, PTC provides oversight of Builder behavior and guarantees timeliness within the ePBS structure, contributing to efficient blockchain operations and stable block creation. By complementing the Two-slot PBS structure, PTC acts as an improvement to reinforce the integrity and performance of the entire network.

• https://ethresear.ch/t/unbundling-pbs-towards-protocol-enforced-proposer-commitments-pepc/13879

  While the Two-slot PBS and PTC structures contribute to transparency and efficiency in the block creation process, PEPC (Protocol-Enforced Proposer Commitments) goes a step further by reinforcing the responsibility and validity of Proposers at the protocol level. The essence of PEPC is to allow Proposers to set specific validity conditions—referred to as "proposer commitments"—for the blocks they propose, which are then enforced directly by the protocol.

  In this structure, the Proposer creates a "template" for block creation and attaches programmable conditions to this template. The Builder is required to construct a block that adheres to these conditions, and if the conditions are not met, the block cannot be included in the Ethereum blockchain. These proposer commitments enable the Proposer to include specific requirements or contractual structures, ensuring that only blocks meeting these criteria are considered valid.

  With PEPC, Proposers can guarantee the desired shape and validity of their blocks through a range of contractual conditions, all of which are rigorously enforced by the protocol. This approach strengthens the role of the Builder while effectively managing risks related to blocks that deviate from set rules or are otherwise invalid, creating a reliable infrastructure for the network.

  This mechanism allows Proposers to maintain transparent and efficient contractual relationships with third parties, particularly Builders, preventing potential issues during the block creation process. PEPC enhances block creation quality and validity through clear Proposer commitments, and at the same time, plays a crucial role in improving the overall stability of the network.

  Ultimately, PEPC establishes a clear responsibility structure for block production and strengthens collaboration between Proposers and Builders, contributing to the secure and stable operation of the Ethereum network. By ensuring that the Proposer’s intentions and conditions are enforced at the protocol level, PEPC minimizes uncertainty and potential conflicts in the block generation process.

1.4 Inclusion Lists (crLists, Censorship-Resistant Lists)

While Proposer-Builder Separation (PBS) promotes competitive block creation by separating block production rights, it also poses a limitation by giving Builders full control over which transactions are included in the blocks. To address this, the concept of Inclusion Lists has been proposed. These lists are created by the Proposer and specify a set of transactions that must be included in the next block. This mechanism acts as a safeguard against transaction censorship or monopolistic control by the Builder. By mandating certain transactions for inclusion, it encourages Proposer participation and maintains fairness in block creation, while still preserving the competitive environment fostered by the PBS structure.

• https://eips.ethereum.org/EIPS/eip-7547

  EIP-7547 is a proposal that defines the workings of the Inclusion List mechanism. According to this proposal, the Proposer creates a list of transactions that they want to be included in the block, and the Builder is required to construct the block according to this list. The Inclusion List serves as a fundamental tool for countering censorship, promoting the fair inclusion of transactions, and maintaining balance between the Proposer and Builder.

• https://ethresear.ch/t/no-free-lunch-a-new-inclusion-list-design/16389

  With the adoption of PBS, validators generally outsource block creation to Builders, resulting in a structure where Builders control which transactions are included in the blocks. If the Proposer refuses to accept a block created by the Builder, they risk losing MEV (Maximal Extractable Value) profits. To address this, the concept of the Forward Inclusion List has been proposed. A Forward Inclusion List applies to the next Proposer, requiring them to include certain transactions in their block. This design aims to limit the Builder's power over transaction censorship and return some of the block composition authority to the Proposer, enhancing fairness in transaction inclusion.

  The Forward Inclusion List helps prevent Builders from censoring transactions without restriction and allows the Proposer to set a guaranteed list of transactions for inclusion. This improves the network's resistance to censorship and promotes a more equitable transaction inclusion process.

1.5 Execution Tickets

Currently, Ethereum’s structure operates in a way where validators assigned to each slot within an epoch sequentially propose blocks and receive rewards. However, Execution Tickets propose a new mechanism in which the right to propose a block is sold in the form of tickets. The holder of such a ticket gains the right to propose a block for a given slot. This allows block production rights to be obtained simply through the purchase of a ticket, without the need for staking or validator participation. The goal of this mechanism is to pursue both decentralization and efficiency in block production rights.

• https://ethresear.ch/t/execution-tickets/17944

  Execution Tickets introduce a separation of two core roles within Ethereum:

  • Beacon Chain Validator:

    • Participates in the consensus process of the Beacon Chain, verifying the state of the chain and deciding on block headers.

    • Manages the Inclusion List, which consists of transactions that must be included in the block, thereby ensuring resistance to censorship.

    • Receives rewards based on staked ETH. With reduced computational requirements, it becomes easier for individual stakers to participate, enhancing decentralization.

  • Execution Block Proposer:

    • Anyone can obtain the right to create execution-layer blocks by purchasing an Execution Ticket.

    • A ticket holder is randomly selected for each slot to propose a block, functioning in a lottery-like manner.

    • The Proposer is rewarded through transaction fees and MEV (Maximal Extractable Value) derived from the block.

    • Due to the high uptime, low latency, and significant MEV extraction capabilities required, specialized entities are likely to take on this role.

  This separation allows Validators to focus on decentralized consensus while introducing specialized Execution Block Proposers who can efficiently generate and monetize blocks, thereby enhancing the efficiency and security of the network.

  In the auction for Execution Tickets, if a user secures consecutive slots, they can potentially generate multi-slot MEV (MMEV), extracting more value by controlling several slots in a row rather than individual ones. However, the randomness in the Execution Ticket lottery helps mitigate the risks of MMEV. Since tickets are randomly assigned, it becomes difficult for a user to predictably control consecutive slots, preventing malicious attempts to exploit the network.

This article introduces how Radius AVS and NFFL, both AVSs (Actively Validated Services) using Eigenlayer’s restaking protocol for economic security, work together to improve decentralization and speed up transaction settlement in rollups—two critical components for scaling rollups.

What is Radius AVS?

Radius AVS is a decentralized sequencing solution designed to address the common challenges often seen with centralized sequencers, such as censorship and system failures, while maintaining optimal performance.

Radius AVS integrates directly into the rollup and works within the rollup itself. This internal integration allows the rollup to have more control and independence (sovereignty) over block building processes while promoting decentralization.

Currently live on testnet, Radius AVS is collaborating with external operators as it moves toward mainnet launch. Once launched, rollups can adopt Radius AVS for decentralized sequencing and leverage Eigenlayer shared security.

Key Benefits:

1. User protection: Protects users against censorship, frontrunning, and sandwiching attacks through an encryption-based mechanism.

2. Liveness guarantee: Keeps the rollup operating even if a sequencer fails, preventing network downtime.

3. High Performance: Offers high transactions per second (TPS) using a leader-based sequencing model, ensuring decentralization without compromising performance (See Figure 1).

What is NFFL (Nuffle Fast Finality Layer)?

NFFL is currently live on testnet.

The Nuffle Fast Finality Layer (NFFL, formerly SFFL) aims to provide a fast settlement layer that allows participating networks to quickly access information from other networks in a safe way.

To achieve this, NFFL leverages both NEAR and EigenLayer, giving protocols a way to provide interoperability features by verifying state attestations secured by restaked ETH.

The architecture is comprised of two off-chain actors, the Operators and the Aggregator, the AVS nodes, and multiple on-chain contracts:

• on Ethereum Mainnet, there's the NFFL AVS contract set, which interacts directly with EigenLayer contracts.

• on rollup networks, there are NFFL verifier contracts to check network state attestations.

• on NEAR, there is a NEAR DA contract for each participating rollup network which serves as a medium for providing data availability.

Key benefits:

• Faster finality for rollups through crypto-economic security: Rollups participating in NFFL can provide crypto-economically secured state root attestations to applications that want to leverage it for fast finality.

• L2 - L2 interactions: Applications could utilize the Nuffle Fast Finality Layer to build cross-chain logic. This opens a new design space that allows any app developer to build applications as if it is one chain with 3-4 seconds finality. The applications have a broad range from cross-chain lending to very fast bridges.

Bringing It All Together: Decentralized Sequencing and Fast Finality

By integrating the unified solution Radius AVS and NFFL, rollup developers can improve their existing infrastructure with the combined advantages of decentralized sequencing and fast finality. This helps rollups scale effectively.

Here's how these two protocols work together to decentralize rollups and speed up transaction settlements.

How it works: The Architecture

• Rollups build blocks using Radius AVS and submits the blocks to NEAR DA for block finality. Once blocks are confirmed, the state is executed, and the state execution is finalized by NFFL.

• NFFL nodes verify the updated state, aggregate signatures off-chain, and submit them to Ethereum ensuring fast finality, or other L2s so that state roots could be used from anywhere.

For detailed documentation, see:

• Radius AVS for Decentralized Sequencing

• NFFL Overview

RISE Chain: A Parallelized EVM Layer 2

RISE is a next-generation Layer 2. True to Ethereum’s vision, RISE reaches unprecedented scalability while maintaining security and decentralization. With technology optimizations such as parallel EVM, continuous execution and layered MPT; RISE is on track to surpass 100,000 transactions per second and 1 Gigagas per second, enabling blockchain to support mass adoption with near-instantaneous, low-cost transactions. This leap in performance will unlock the next generation of blockchain applications and global adoption.

Based Rollups

Based rollups aim to decentralize L2s by leveraging Ethereum validators for transaction sequencing.

Preconfirmations in based rollups are commitments made by entities called preconfers. These commitments assure users that their transactions will be included in Ethereum, providing users with an experience similar to centralized sequencers.

Preconfers are subject to slashing if they fail to fulfill these commitments, providing a strong incentive for them to fulfill their promises and thus increasing user confidence in based rollup transactions.

Radius x RISE Chain Collaboration

Radius and RISE are partnering to enhance based rollups in the following areas:

1. User Protection in Based Rollups

   Based sequencing assigns sequencing rights to Ethereum validators. Without proper management, this could potentially expose users to censorship and harmful MEV (Extractable Value) risks.

   The encrypted mempool solution addresses this issue ensuring transactions are protected from censorship and frontrunning. This allows based rollup to enjoy composability Ethereum while protecting users from exploits.

   We refer to this type of preconfirmation as "encrypted preconfirmation" ensuring that users can enjoy the benefits of based rollups.

2. Cost Reduction for Based Sequencing

   It's a common belief that Based Sequencing is expensive—and right now, it kind of is! This perception was popularized by Taiko's initial loss-leading strategy, though we've recently seen Taiko begin to generate a steady profit. This is encouraging for the Based ecosystem, but there's still work to be done.

   While Based Sequencing currently costs more than centralized sequencers, there's significant potential for improvement.

   Batching Blocks: Centralized sequencers can batch compressed block data and optimally utilize all six blobs for each DA batch. Given that the intrinsic cost of blob transactions (21k gas) currently constitutes the majority of DA costs, maximizing the data in each transaction can significantly reduce expenses.

   Onchain Overhead: Some Based Sequencing designs require far more L1 transactions than necessary. For instance, each block might require proposal, proof, and bond transactions. There is considerable room to optimize these processes.

   Amortizing Costs Among Rollups: Based Sequencing offers a credibly neutral approach for deploying rollups into an open ecosystem. This opens up opportunities to amortize costs across multiple rollups that adhere to a common standard.

Maximizing Ethereum Revenue

Our partnership with RISE improves user protection and cost efficiency for based rollup, potentially creating significant economic benefits for rollups through the blockspace network.

This network is designed to maximize revenue across the entire Ethereum ecosystem by efficiently capturing and distributing value within the network without negatively impacting users.

The diagram below illustrates the process flow from user transactions on rollups to Ethereum:

For more details, refer to our research article:
https://ethresear.ch/t/derivatives-market-for-implementing-based-sequencing/19593