Sequencers are cross-chain gateways. They batch and settle transactions from Ethereum and other L1s, but their fee revenue is siloed. This creates a fundamental misalignment where the value they generate for protocols like Uniswap or Aave on other chains is not captured.
airdrop-strategies-and-community-building
Blog
Why L2 Sequencers Should Be Compensated with Cross-Chain Airdrops
The current model of paying sequencers solely in the base chain's native asset (e.g., ETH) creates a fundamental misalignment. This analysis argues for a cross-chain airdrop model to make sequencers long-term stakeholders in the L2's success.
introduction
THE INCENTIVE MISMATCH
Introduction
Current L2 sequencer economics fail to capture the cross-chain value they create.
Airdrops are the native incentive. Cross-chain airdrops from applications using the sequencer's infrastructure directly reward the sequencer for its role in user acquisition and liquidity flow. This is a more efficient model than protocol-specific token emissions.
The evidence is in the flow. Sequencers for networks like Arbitrum and Optimism process millions in daily bridging volume via Across and Stargate. This activity directly grows the Total Value Locked (TVL) and user base of destination-chain applications, which currently provide zero compensation back to the sequencer.
thesis-statement
THE INCENTIVE MISMATCH
The Core Argument
L2 sequencers capture immense cross-chain value but are compensated only for on-chain execution, creating a fundamental economic misalignment.
Sequencers are cross-chain gatekeepers. Their transaction ordering directly influences the profitability of MEV strategies that span Ethereum, Arbitrum, and Optimism, yet they earn zero fees from this activity.
Current fee models are myopic. Sequencers earn only base L2 fees, while protocols like Across and LayerZero monetize the cross-chain intent flow their sequencing enables.
Airdrops are the optimal alignment tool. Retroactive distribution of tokens from cross-chain dApps (e.g., UniswapX, Socket) directly ties sequencer revenue to the ecosystem value they secure.
Evidence: Over 60% of Arbitrum's daily transactions involve assets bridged via Stargate or Hop, demonstrating the sequencer's critical role in a multi-chain economy it does not profit from.
key-trends
THE SEQUENCER INCENTIVE GAP
The Current Misalignment: Three Fatal Flaws
Today's L2 sequencers are compensated solely for ordering transactions on their native chain, creating a massive blind spot for cross-chain value capture.
01
The Problem: The Native-Only Revenue Trap
Sequencers earn fees from L2 block space, but this model ignores the billions in value they enable to flow between chains. Their core service—providing finality and ordering—is a critical input for intent-based systems like UniswapX and cross-chain bridges like Across and LayerZero, yet they capture none of that downstream value.
- Revenue Leakage: L2 sequencer fees are a fraction of the total value settled cross-chain.
- Misaligned Growth: Sequencer incentives don't scale with the ecosystem's cross-chain TVL, which often exceeds $10B+.
<1%
Value Captured
$10B+
Cross-Chain TVL
02
The Problem: Fragmented Security & Liveness
A sequencer's economic security is bounded by its native chain's staking yield. This creates a weak-links-in-the-chain problem for cross-chain protocols that depend on multiple L2s for liveness. If sequencer profits are low, the risk of downtime or malicious ordering increases for the entire interconnected system.
- Security Silos: A sequencer secured by $500M in TVL can facilitate $5B in cross-chain volume, creating a dangerous leverage ratio.
- Systemic Risk: Protocols like Chainlink CCIP and Axelar require high liveness guarantees across all connected chains.
10x
Leverage Risk
~500ms
Liveness Critical
03
The Solution: Cross-Chain Airdrops as Alignment
Protocols that depend on L2 sequencer liveness—including DEX aggregators (CowSwap), intent solvers, and omnichain apps—should airdrop tokens directly to sequencer operators. This creates a direct economic feedback loop, aligning sequencer incentives with the health of the broader cross-chain ecosystem.
- Value Capture: Sequencers earn a share of the fees from every cross-chain swap they help settle.
- Stronger Security: Enhanced rewards enable sequencers to increase staking, directly boosting the security of critical cross-chain infrastructure.
Aligned
Incentives
+50%
Security Budget
THE CROSS-CHAIN AIRDROP THESIS
Sequencer Incentive Models: A Comparative Analysis
A comparison of dominant sequencer compensation models, evaluating their ability to align incentives, secure the network, and drive ecosystem growth.
| Incentive Mechanism | Native Token Fees | Cross-Chain Airdrops | MEV Auctions |
|---|---|---|---|
Primary Revenue Source | User transaction fees | External protocol incentives & token distributions | Proceeds from MEV bundle auctions |
Sequencer Alignment with Users | |||
Capital Efficiency for Sequencer | Requires staking native token | Operational costs only; no staking required | Requires capital to bid in auctions |
Ecosystem Growth Driver | Limited to L2 activity | Exponential via cross-chain user acquisition (e.g., LayerZero, Wormhole) | Concentrates value among searchers |
Security Model Dependency | L2's native token security | Relies on underlying L1 for finality; incentive is growth, not staking | Auction winner's economic interest |
Typical Sequencer Profit Margin | 0.5% - 2.0% of gas fees | Varies; can be 10x+ fee equivalent via token appreciation | Highly volatile; 5% - 20% of extracted MEV |
Adoption by Major Protocols | Arbitrum, Optimism | Proposed for emerging chains & alt-DA layers | Flashbots SUAVE, Builder APIs on Ethereum |
Risk of Centralization | High (profit-driven cartel) | Lower (permissionless, profit-shared model) | Very High (capital-intensive winner-take-all) |
deep-dive
THE ALIGNMENT MECHANISM
The Cross-Chain Airdrop Blueprint
Sequencer revenue must be redistributed as cross-chain airdrops to cement user loyalty and create a defensible moat.
Sequencer revenue is misaligned. Current models like Arbitrum and Optimism capture MEV and fees, creating a central point of value extraction. This centralization contradicts the decentralized ethos users expect from L2s and fails to build sustainable community loyalty.
Cross-chain airdrops realign incentives. Distributing sequencer profits as airdrops on competing chains via bridges like Across or LayerZero creates a powerful feedback loop. Users receive value where they are, not just where they transact, embedding the L2 into their multi-chain identity.
This strategy counters fragmentation. A user receiving Arbitrum rewards on Base is more likely to bridge back, increasing cross-chain liquidity. This is superior to native-only airdrops which trap users in a single ecosystem, a lesson from early Optimism distributions.
Evidence: Protocols like EigenLayer demonstrate that restaking rewards must be portable. An L2 that airdrops on a rival chain, like zkSync distributing on Arbitrum, will see higher retention than one that does not.
protocol-spotlight
SEQUENCER INCENTIVE ANALYSIS
Case Study: How Leading L2s Are (Or Aren't) Addressing This
Current L2 sequencer compensation models are misaligned, creating security gaps and missed opportunities for cross-chain growth.
01
Arbitrum: The Staked Governance Model
Arbitrum sequencers are permissioned and must stake ARB, but they only earn transaction fees. This creates a fee extraction model with no direct upside from the ecosystem's cross-chain expansion.
- Problem: Sequencers are not economically aligned with the success of native apps or cross-chain activity they enable.
- Missed Opportunity: No mechanism to reward sequencers for facilitating value flow from Ethereum, Solana, or Cosmos via bridges like LayerZero.
$2B+
ARB Staked
0%
Airdrop Share
02
Optimism: The Collective Profit-Sharing Vision
The Optimism Collective retroactively funds public goods, but sequencer profits are siloed. The Superchain vision with Base and Zora demands a unified incentive layer.
- Problem: Sequencer revenue is not recycled to bootstrap cross-chain liquidity or user acquisition.
- The Solution Path: A cross-chain airdrop pool, funded by a slice of sequencer revenue, could reward users bridging in from Arbitrum or Polygon, directly aligning sequencer profit with network growth.
RetroPGF
Model
Superchain
Scope
03
zkSync & Starknet: The Missing Piece in Prover Economics
These ZK-Rollups focus economic incentives on provers (for proof generation), leaving sequencers as a commoditized, low-margin service.
- Problem: Sequencer centralization risk increases as economic rewards are skewed away from liveness and user experience.
- Strategic Leverage: Compensating sequencers with cross-chain airdrop rights would create a powerful, decentralized business development arm, attracting users and liquidity from competing ecosystems.
Prover-Centric
Incentives
High
Centralization Risk
04
The Blast Blueprint: Sequencer as Growth Engine
Blast pioneered the model of redirecting sequencer fees and Lido/stETH yields back to users, creating a viral growth loop.
- The Proof of Concept: It demonstrated that sequencer revenue can be weaponized for user acquisition.
- The Evolution: The next step is to extend this to cross-chain flows. A sequencer capturing fees from an Across or Socket bridge transaction should direct a portion of that value as an airdrop to the bridging user, creating a powerful cross-chain growth flywheel.
Yield-Backed
Growth Model
$2B+
TVL in 30 Days
counter-argument
THE REALITY CHECK
Counter-Argument: The Liquidity & Centralization Trade-Off
Compensating L2 sequencers with cross-chain airdrops creates a dangerous incentive misalignment that centralizes liquidity and control.
Airdrops centralize sequencer incentives. Sequencers rewarded with native tokens from other chains prioritize that chain's user experience and liquidity flow. This creates a sequencer-level vendor lock-in that contradicts the L2's stated neutrality.
Liquidity follows the incentive. If an Arbitrum sequencer earns OP tokens, its transaction ordering will favor Optimism's canonical bridge and DEXs like Velodrome. This fragments liquidity across L2s instead of unifying it.
This recreates CEX walled gardens. The model mimics how Binance promotes its BNB Chain—centralized control steering users to a preferred ecosystem. A decentralized sequencer network must avoid protocol-level favoritism.
Evidence: LayerZero's Omnichain Fungible Token (OFT) standard demonstrates protocol-agnostic liquidity. It enables native cross-chain transfers without sequencers picking winners, a model superior to incentivized, biased routing.
risk-analysis
THE INCENTIVE MISMATCH
Execution Risks & Mitigations
Sequencers capture immense value for L2s but are compensated with inflationary, single-chain tokens, creating a critical security and performance vulnerability.
01
The Problem: Sequencer as a Single Point of Failure
A single, under-compensated sequencer is a massive security risk. Its failure halts the chain, enabling censorship and MEV extraction. Current token rewards are insufficient to guarantee >99.9% uptime or penalize malicious behavior effectively.
~30 min
Downtime Risk
1
Critical Node
02
The Solution: Cross-Chain Airdrops as Performance Bonds
Compensate sequencers with tokens from the protocols they secure (e.g., Uniswap, Aave, Compound). This aligns incentives: sequencer profit is tied to the health of the entire cross-chain ecosystem they enable, not just one L2's native token.
- Direct Value Alignment: Sequencer rewards scale with bridged TVL and transaction volume.
- Skin in the Game: Airdropped tokens act as a slashable performance bond.
- Ecosystem Growth: Incentivizes sequencers to optimize for Across, LayerZero, and Wormhole bridge efficiency.
$10B+
Aligned TVL
Multi-Chain
Revenue Source
03
The Problem: Fragmented Liquidity & User Experience
Users face slow bridges and fragmented liquidity pools. Sequencers have no incentive to prioritize cross-chain messages or batch transactions for intent-based systems like UniswapX or CowSwap, leading to ~5-20 minute settlement delays and poor UX.
5-20 min
Settlement Delay
High Slippage
User Cost
04
The Solution: Airdrops for Cross-Chain Latency SLAs
Tie airdrop vesting schedules to Service Level Agreements (SLAs) for cross-chain finality. Sequencers earn more EigenLayer restaked ETH or protocol tokens for achieving sub-second attestations and >99.99% bridge message reliability.
- Quantifiable Performance: Rewards are data-driven, based on proven latency and success rates.
- Protocols as Buyers: dApps pay for reliability via their token treasury, creating a sustainable market.
- Network Effects: High-performance sequencers attract more protocols, creating a virtuous cycle.
<1s
Target Latency
99.99%
Uptime SLA
05
The Problem: Centralization and Governance Capture
A single entity controlling the sequencer can censor transactions or extract maximal MEV. Without diversified, aligned compensation, there is no economic counterweight to centralization pressures from Arbitrum or Optimism foundations.
1 Entity
Governance Risk
Maximal MEV
Extraction Risk
06
The Solution: Decentralization via Multi-Protocol Stake
Cross-chain airdrops distribute sequencer ownership across dozens of protocol DAOs. This creates a Sybil-resistant, decentralized validator set whose loyalty is to ecosystem health, not a single L2. Think Celestia-style data availability but for execution integrity.
- Anti-Capture: No single protocol can corrupt the sequencer set.
- Collective Security: The cost of attack must compromise multiple, unrelated token economies.
- Credible Neutrality: Sequencers become a public good for the modular stack, akin to EigenLayer operators.
Multi-DAO
Oversight
Public Good
Alignment
future-outlook
THE INCENTIVE MISMATCH
The Future: Shared Sequencing & The Stakeholder Imperative
Current L2 sequencer models create a fundamental misalignment between value capture and value creation, which shared sequencing must solve.
Sequencers capture all MEV while providing zero direct value to the underlying L1. This creates a parasitic economic model where L2 activity enriches a single operator without securing the base layer. Shared sequencers like Espresso or Astria must redistribute this value.
Cross-chain airdrops are the only viable incentive. Direct staking rewards fail because L2 tokens lack inherent security demand. Distributing tokens from bridged applications like Uniswap or Aave aligns sequencer profit with ecosystem growth and user acquisition.
This transforms sequencers into business development engines. A sequencer compensated in UNI from bridged volume directly monetizes its order flow for the protocol. This creates a positive feedback loop superior to simple fee sharing.
Evidence: LayerZero's omnichain fungible token (OFT) standard demonstrates that applications, not chains, drive cross-chain value. Sequencer incentives must mirror this reality to avoid disintermediation by intent-based networks like UniswapX.
takeaways
SEQUENCER ECONOMICS
Key Takeaways for Builders & Investors
Current L2 sequencer models are broken. Here's why cross-chain airdrops are the only viable compensation mechanism.
01
The MEV Problem: Sequencers as Unpaid Order Flow Auctions
Sequencers capture billions in MEV by reordering and front-running transactions, but this value is opaque and rarely shared with the network. This creates misaligned incentives and centralization pressure.
- Key Benefit 1: Cross-chain airdrops transparently convert captured MEV into protocol-owned value.
- Key Benefit 2: Aligns sequencer profit with long-term L2 health, not short-term extraction.
$1B+
Annual MEV
0%
Shared Today
02
The Solution: Protocol-Owned Liquidity via Airdrops
Compensate sequencers with tokens from partner chains and dApps (e.g., Arbitrum, Optimism, Base airdrops to Starknet sequencers). This builds a native, cross-chain treasury.
- Key Benefit 1: Creates a self-reinforcing flywheel: more activity attracts more airdrops, funding further development.
- Key Benefit 2: Mitigates the 'fee token vs. governance token' dilemma by diversifying the revenue base.
10x+
TVL Multiplier
Multi-Chain
Revenue Source
03
The Precedent: UniswapX and the Intent Future
UniswapX and CowSwap prove that compensating fillers for order flow works. L2 sequencers are the fillers for cross-chain intents.
- Key Benefit 1: Positions the L2 as the essential settlement layer for intent-based architectures like Across and LayerZero.
- Key Benefit 2: Future-proofs revenue against L1 gas price volatility and pure rollup competition.
$10B+
Intent Volume
~500ms
Settlement Speed
04
The Investor Lens: Valuing the Cross-Chain Moat
An L2 compensated by external airdrops is not a cost center; it's a profit center with a diversified balance sheet. This is a fundamental rerating event.
- Key Benefit 1: Provides a clear, on-chain metric for fundamental value beyond just TVL and transactions.
- Key Benefit 2: Reduces dependency on inflationary native token emissions, creating a more sustainable model.
-90%
Emission Reliance
P/E Ratio
New Valuation
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