Shared Sequencer MEV

A primary feature is the emergence of cross-rollup MEV, where arbitrage and liquidation opportunities span assets and applications on different rollups using the same sequencer. This creates a larger, more complex MEV landscape than isolated chains.

• Example: An arbitrageur could exploit a price discrepancy for the same token between an AMM on Rollup A and a lending market on Rollup B.
• Requires sophisticated bots that can monitor and act on state across multiple execution environments simultaneously.

The shared sequencer acts as a centralized order flow auctioneer for all connected rollups. It receives transaction bundles from searchers and builders, running an internal auction (e.g., a first-price sealed-bid auction) to determine the final, cross-rollup block ordering.

• This centralizes MEV revenue capture at the sequencing layer.
• The design of this auction (e.g., PBS - Proposer-Builder Separation) is critical for fairness and efficiency, preventing the sequencer from front-running user transactions.

A defining characteristic is the potential for MEV redistribution. Revenue generated from the sequencing auction can be shared back to the ecosystems of the participating rollups or their users, rather than being captured solely by the sequencer operator.

• Funds can be directed to public goods funding, user rebates, or rollup treasury.
• This creates a governance question: how should MEV profits be allocated among rollup communities, sequencer operators, and stakers?

The architecture's decentralization and censorship resistance are paramount for MEV fairness. A centralized sequencer could censor transactions or extract MEV maliciously.

• Solutions include sequencer decentralization through proof-of-stake, forced inclusion protocols that allow users to bypass the sequencer, and verifiable delay functions (VDFs) to add randomness to ordering.
• The goal is to make MEV extraction transparent and contestable, not eliminate it.

By providing a single, canonical ordering source for multiple rollups, shared sequencers can significantly reduce MEV-driven reorgs (chain reorganizations). On isolated chains, competing proposers may reorg the chain to capture MEV, causing instability.

• A robust shared sequencer with fast finality provides a stable base layer, making predatory reorgs economically non-viable.
• This leads to a better user experience with more predictable transaction inclusion and finality.

Shared sequencers are designed to integrate with existing MEV infrastructure like MEV-Boost. Builders can construct optimized bundles for the shared sequencer's auction, similar to how they do for Ethereum validators.

• This leverages the existing ecosystem of block builders and relays.
• The shared sequencer effectively becomes a super proposer in a larger MEV supply chain, outsourcing bundle construction to a competitive builder market.

The primary MEV opportunity in a shared sequencer environment is cross-rollup arbitrage. This occurs when the same asset (e.g., ETH, USDC) trades at different prices on two or more rollups that share the sequencer. The sequencer can identify and capture this price discrepancy by ordering transactions to buy low on one rollup and sell high on another within the same block.

• Requires atomic composability across rollups via the sequencer.
• Latency is critical: Faster observation and inclusion leads to higher profitability.
• Example: Buying WETH on Arbitrum for $3,500 and selling it on Optimism for $3,505 in a single, atomic sequence.

A shared sequencer with decentralized proposers introduces the risk of time-bandit attacks, where a sequencer node intentionally reorganizes (reorgs) previously sequenced blocks to extract MEV that was missed. This is a form of consensus-level MEV.

• Threat to finality: Challenges the notion of fast pre-confirmations for users.
• Mitigated by cryptographic commitments (e.g., binding commitments to L1) and slashing mechanisms.
• Contrasts with L1: More frequent and potentially profitable than Ethereum mainnet reorgs due to higher transaction throughput and value concentration.

The sequencer holds the exclusive right to order transactions within its batch for each rollup. This creates traditional ordering-based MEV opportunities such as frontrunning and backrunning user transactions.

• DEX arbitrage & liquidations: Can be extracted within a single rollup's transaction flow.
• Centralization concern: A single centralized sequencer captures all this value.
• Decentralized sequencer pools aim to democratize this MEV, distributing rewards to stakers or using it for public goods funding (e.g., via MEV smoothing).

A sophisticated MEV strategy that combines actions across the shared sequencer layer and the underlying L1 (e.g., Ethereum). A cross-domain bundle might include:

• A transaction on Rollup A (via the shared sequencer).
• A transaction on L1 (e.g., settling the rollup's batch).
• Atomicity is enforced if both actions are included in the L1 block.

This allows for complex strategies like bridging arbitrage, where MEV is captured between the rollup state and the L1 state during the settlement process.

A key design challenge is how MEV revenue is distributed. Proposer-Builder Separation (PBS), adapted from Ethereum, is the leading model.

• Builders compete to construct the most valuable block of rollup transactions, including MEV.
• Proposers (sequencer nodes) simply select the highest-paying block header.
• Revenue flows from builders to proposers, and can be further distributed to rollup users (via lower fees) or token stakers.
• Prevents centralization by separating block building power from proposing power.

Fast Lane / Priority Queue: A paid channel for users to submit transactions with guaranteed ordering or inclusion, competing with MEV bots.

Threshold Encryption: A cryptographic technique to hide transaction content from the sequencer until after ordering, neutralizing frontrunning but potentially reducing chain efficiency.

MEV Auction: A mechanism where the right to build a block (or order a sequence) is auctioned off, explicitly capturing MEV for redistribution.

Out-of-Protocol MEV: Value extraction that occurs outside the sequencer's view, such as between a user's wallet and the sequencer's mempool.

Shared sequencers introduce new models for MEV distribution and auction design. Key approaches include:

• Sequencer Fee Auctions: Users bid for priority within the block.
• Proposer-Builder Separation (PBS): Decouples block building from proposing, as seen in Ethereum.
• MEV Redistribution: Protocols can capture and redistribute MEV revenue back to rollup users or stakeholders.
• Encrypted Mempools: Mitigate harmful MEV by delaying transaction visibility.

Contrasting the dominant models:

• Centralized Sequencer (Status Quo): A single entity (often the rollup team) controls transaction ordering. This creates a single point of failure and potential for censorship.
• Shared Sequencer: A decentralized network orders transactions for multiple rollups. Benefits include decentralization, liveness guarantees, cross-rollup composability, and potentially fairer MEV markets. The trade-off is increased protocol complexity and potential latency.

MEV is the profit that can be extracted by reordering, including, or censoring transactions within a block, beyond standard block rewards and gas fees. In a shared sequencer context, this refers to the value that can be extracted from the ordering rights of the sequencer itself. Key forms include:

• Arbitrage: Exploiting price differences across rollups or L1.
• Sandwich Trading: Front-running and back-running user DEX trades.
• Time-Bandit Attacks: Reorganizing the sequencer's output for profit.

An architectural pattern that separates the roles of block building (selecting and ordering transactions) from block proposing (committing the final block). Shared sequencers often implement a PBS-like design to mitigate MEV centralization. Builders compete to create the most profitable block bundle, while a decentralized set of proposers (or validators) selects the winning bundle, ideally based on criteria beyond just profit to promote fairness.

A cryptographic technique used by shared sequencers to prevent front-running. Participants (e.g., builders) first submit a commitment (a hash) of their proposed block order without revealing the contents. After all commitments are received, they reveal the full transaction list. This prevents others from copying and front-running a profitable transaction order, as the profitable order is hidden until after the commitment phase closes.

A privacy mechanism where transactions are encrypted before being sent to the shared sequencer's mempool. The sequencer orders the encrypted transactions. Decryption only occurs after the ordering is finalized, using a distributed key that requires a threshold of participants to collaborate. This prevents the sequencer or builders from seeing transaction contents during the ordering process, neutralizing many forms of MEV like front-running.

A market-based mechanism where the right to be the sequencer for a period (an "epoch") is auctioned. Potential sequencers bid for the role, with proceeds often going to a protocol treasury or being burned. This can align incentives and decentralize control, but also creates a new MEV opportunity: the auction winner may seek to recoup their bid by extracting MEV during their tenure, requiring additional safeguards.

MEV opportunities that span multiple execution environments, such as between different rollups or between a rollup and Ethereum L1. A shared sequencer that orders for multiple rollups becomes a focal point for this activity. For example, an arbitrageur can exploit a price difference between assets on Rollup A and Rollup B by ensuring their transactions are ordered correctly across both chains in the same sequenced batch.