Why Fair Sequencing Services Centralize Power

The centralization bottleneck shifts. The promise is decentralization by removing block producers from ordering. The reality is that power consolidates in the sequencer operator, a single entity that becomes the network's mandatory transaction processor.

Validators become irrelevant. In a system like Arbitrum's single sequencer, the decentralized validator set only verifies finalized batches. The sequencer controls the mempool, front-running protection, and the all-important first look at user intents.

Permissionless entry is a mirage. Protocols like Espresso Systems propose decentralized sequencer sets, but economic and latency requirements favor professional operators. This recreates the Proof-of-Stake centralization problem at the sequencing layer.

Evidence: Arbitrum's single sequencer, run by Offchain Labs, processes 100% of transactions before they reach L1. Even with a planned decentralization roadmap, the initial architecture entrenches a dominant position.

Centralization is relocated, not removed. Fair Sequencing Services (FSS) like those proposed by Espresso Systems or Astria decouple transaction ordering from block production. This shifts the critical trust assumption from the L2 sequencer to the FSS operator, creating a new, specialized point of control.

The validator becomes the sequencer. In a traditional L2, the sequencer (e.g., Arbitrum, Optimism) is a monolithic entity bundling ordering and execution. FSS introduces a separate sequencing market, where the entity winning the right to order transactions holds immense power over MEV extraction and censorship resistance.

Proof-of-Stake re-emerges as the bottleneck. To decentralize an FSS, you need a decentralized set of orderers with slashing for liveness faults. This recreates the exact governance and capital concentration problems of Layer 1 Proof-of-Stake networks, just with a different token.

Evidence: The leading FSS designs rely on Tendermint-style consensus. This requires a known, permissioned set of validators, inherently limiting decentralization compared to permissionless proof-of-work or emerging proof-of-stake designs like Ethereum's single-slot finality.

Sequencer consensus overhead is the primary centralizing force. A Fair Sequencing Service (FSS) like Espresso Systems or Astria must run a separate consensus network to order transactions fairly. This creates a massive operational cost that only well-funded entities can sustain, replicating the validator centralization problem of L1s.

The sequencer becomes the MEV sink. While FSS prevents front-running between users, it creates a single privileged actor—the sequencer—who sees the entire block and can extract value via tailored transaction ordering and cross-domain arbitrage before the batch is finalized. This is a new, centralized MEV vector.

Proof-of-Stake FSS centralizes capital. Systems requiring staking for consensus participation, like Espresso's HotShot, create a capital efficiency trap. Capital locked in FSS consensus does not secure the underlying rollup's state, forcing sequencers to over-collateralize across two systems, a barrier that favors incumbents like Arbitrum and Optimism.

Evidence: The Ethereum consensus layer itself demonstrates this tax. Running thousands of validators requires millions in capital and operational expertise. A rollup FSS with 100 nodes and a 10,000 ETH stake requirement creates a $30M+ barrier to entry before processing a single transaction.

Sequencing is the new mining. The entity that orders transactions controls MEV, front-running, and censorship. In a shared sequencer model like Espresso or Astria, this power is consolidated into one service, not distributed.

Shared security centralizes power. It moves the single point of failure from a rollup's operator to a new, cross-chain entity. This creates a systemic risk where a compromise or capture of the sequencer service impacts all connected chains.

This is not a validator network. Unlike Ethereum's L1, where thousands of independent validators propose blocks, a shared sequencer is a single logical actor. Its trust assumptions are weaker than the underlying L1 it claims to secure.

Evidence: The dominance of proposer-builder separation (PBS) debates on Ethereum shows the inherent centralization pressure in sequencing. A shared sequencer service becomes the ultimate, centralized block builder for dozens of rollups.

Centralized sequencers create extractive bottlenecks. They capture MEV and charge fees for ordering transactions, a function that should be a public good. This replicates the rent-seeking model of traditional finance within supposedly decentralized systems like Arbitrum and Optimism.

Permissionless sequencing markets are inevitable. Projects like Espresso and Astria are building shared sequencing layers where validators compete to order blocks. This competition drives fees toward the marginal cost of computation, eliminating the sequencer profit margin.

Prover-bundling follows the same commoditization path. Specialized proving networks, like RISC Zero and Succinct, will allow any operator to generate ZK proofs. This unbundles the proving monopoly from the rollup, turning expensive hardware into a competitive, low-margin utility.

The endgame is a modular stack of commodities. Rollups become thin clients that outsource sequencing to a shared network and proving to a competitive marketplace. The value accrues to the application layer, not the infrastructure.