Rollups Are the Future—But Their Biggest Bottleneck Might Be a Single Point of Failure

I remember reading some years ago an L1’s proposal to migrate to an L2. That's where I came across the term decentralized sequencers. At the time, it seemed like an interesting but somewhat distant concept—an optimization rather than a necessity. But today, as rollups solidify their role as the dominant scaling solution for Ethereum and beyond, the importance of decentralized sequencers has grown considerably.

For all the innovation that rollups bring, they still carry a significant centralization risk: most of them rely on a single, privileged sequencer. While this approach helps improve transaction speed and cost efficiency, it reintroduces some of the trust assumptions that blockchains were designed to eliminate. The debate around decentralized sequencers is not just about removing centralization for the sake of ideology; it’s about solving real bottlenecks in performance, censorship resistance, and fair transaction ordering.

In this deep dive, we'll explore why sequencers matter, how decentralized sequencer networks work, the emerging designs in this space, and what challenges remain before they see widespread adoption.

What is a sequencer and why does it matter?

Sequencers play a critical role in rollup architectures. In simple terms, a sequencer is responsible for:

• Ordering transactions before they are posted on L1.

• Providing rapid confirmations to users, even before final settlement on Ethereum.

• Mitigating MEV (Maximal Extractable Value) by controlling how transactions are arranged.

  
  

Without sequencers, rollups would function much like L1 blockchains—transactions would have to wait for finalization before they can be considered confirmed, resulting in slower user experiences. A sequencer brings the benefit of near-instant finality, making rollups feel as fast as traditional Web2 applications.

Okay, but why do we need decentralized sequencers?

Well, decentralized sequencers implies the opposite exists too. What's interesting is that centralized sequencers are more scalable and even faster. But its a double edged sword, its advantages in terms of scaling, comes with significant risk.

• Censorship – A centralized sequencer can choose which transactions to include or exclude, leading to concerns about neutrality, fair access and defeats the purpose of decentralized technology.
• Single point of failure – If the sequencer goes offline, transactions cannot be processed until it comes back. While some rollups have fallback mechanisms, they are inefficient and not ideal for mainstream adoption.

This might also seem like an unlikely scenario but it has in fact happened before. Arbitrum’s sequencer once stalled, making the network unusable for over an hour.

• MEV exploitation – A centralized sequencer can extract value from users through unfair transaction ordering, front-running, or sandwich attacks.

These risks make it pertinent that L2s move towards a decentralized sequencer architecture.While a number of chains are still using centralized sequencers like Arbitrum one, optimism and base, we have seen new players like Morph adopting the decentralized sequencer model.

How do decentralized sequencers work?

A decentralized sequencer network, distributes the sequencing function across multiple entities, removing the reliance on a single entity. Its essentially the opposite of centralized sequencers. Its more time consuming and more expensive (in comparison with centralized sequencers) but for what it lacks, it makes up for it with:

• Censorship resistance – No single entity can exclude transactions.
• High availability – Even if one sequencer node goes down, others can take over. This eliminates the risk of network downtime.
• Fair transaction ordering – Preventing MEV abuse and ensuring a level playing field.

Shared Sequencing

In the shared sequencing approach, multiple sequencers collaborate to process transactions in a shared mempool. The sequencers collectively determine the order of transactions and propose blocks to the L1 chain based on a consensus mechanism.

Advantages:

• Ensures consistent transaction ordering across all sequencers
• Reduces the risk of MEV exploitation through a fair ordering mechanism
• Enables seamless failover in case of individual sequencer failures\

Challenges:

• Requires a robust consensus mechanism to ensure fair participation and prevent attacks
• Potential for lower throughput compared to centralized sequencing due to the coordination overhead
• Increased communication complexity among sequencers

Example: The Morph rollup uses a shared sequencing model based on a proof-of-stake consensus among sequencers.

The Future of Decentralized Sequencing

As the Ethereum ecosystem continues to scale and mature, the need for decentralized sequencing solutions will only grow. While the current approaches offer significant improvements over centralized sequencers, there is still room for innovation and optimization.

One area of active research is the development of hybrid sequencing models that combine the benefits of different approaches. For example, a system could use shared sequencing for high-value transactions that require strong censorship resistance, while employing a more centralized approach for low-value transactions to maximize throughput.

Another promising direction is the integration of privacy-preserving technologies like zero-knowledge proofs into decentralized sequencers. This could enable users to submit transactions without revealing their identities or transaction details to the sequencers, further enhancing the censorship resistance and neutrality of the system.

As the technology evolves, we can expect to see more rollups and L2 solutions adopting decentralized sequencing architectures. This will not only improve the security and fairness of these systems but also bring us closer to the vision of a fully decentralized and scalable blockchain ecosystem.

Conclusion

Decentralized sequencers are a critical component of the Ethereum scaling puzzle. By removing the reliance on a single, privileged entity, they mitigate the risks of censorship, single points of failure, and MEV exploitation. While the current approaches have their tradeoffs and challenges, they represent a significant step towards a more resilient and trustless blockchain infrastructure.

As the space continues to innovate and mature, we can expect to see more advanced and efficient decentralized sequencing solutions emerge. These developments will not only benefit Ethereum but also have far-reaching implications for the broader blockchain ecosystem, enabling new use cases and unlocking the full potential of decentralized technologies.