Centralized sequencers have always been a threat to layer 2 rollups. Sequencers determine transaction order, and due to such capability, they are capable of MEV attacks, to reorder transactions to earn money at the cost of users. They are also able to filter the transactions and block the execution of some transactions. MORPH eliminates these vulnerabilities by having a decentralized system of sequencers that ensures even ordering and prevents censorship. This paper discusses the transformation of the design of MORPH in altering the security of Layer 2.
One of the largest issues in blockchain is MEV -maximum extractable value. In case of the execution of transactions in a specific order, proficient operators can gain money by brokering them. Front-running attacks allow malicious users to observe queuing deals and place their own deals at increased fees to ensure they jump the queue. Sandwich attacks insert a transaction between and capture the value in between a victim. Liquidation attacks are used to cause profitable liquidations. The centrally located sequencers which observe all pending work possess enormous MEV prospects.
The users lose when sequencers are playing MEV. Front-running obliges them to pay higher than they ought. Sandwich attacks appropriately value users. Artificial liquidations damage the DeFi players. The unseen price of these vices may be in billions. Decentralized sequencers do away with MEV by eliminating the information advantage that enables sequencers to cheat.
The ban is also a very dangerous threat. The centralized sequencers are able to reject specific transactions. They may be pressured by the governments to block transactions with sanctioned entities. The MEV-incentivized sequencers would have the ability to censor competitors or trades that are damaging to them. Such censoring capacity contradicts the very essence of blockchain which is censorship resistance.
The architecture of MORPH addresses the two issues. Most sequencers come to a mutual consensus rather than one sequencer controlling order. There is no node that determines the order of transaction. The collective agreement generates order to prevent the exploitation of MEV or blocking of transaction by any single sequencer.
Strong consensus is used in the system to maintain fair ordering. The collection of sequencers gives an undertaking to an order of transaction by cryptographic demonstrations. Any sequencer attempting to front-run or censor does not pass verification. The coordinated agreement is distributed to detect and reject any invalid ordering eliminating incentive manipulations.
The real-life implication is a less risky Layer 2. Users will be able to rely that their transactions will be conducted without manipulation. MEV exploitation is no longer a problem with DeFi protocols. Order of transactions is fully deterministic and can be checked and is no longer at the whims of a single sequencer. Apps that can be developed by developers can be based on such guarantees.
The competitive advantage of MORPH is obvious. Centralized sequencers at the layer 2s provide critics with a story about risk. The term trusted sequencer risk is very common in security reviews. MORPH removes this threat and enhances the security evaluation.
Equity encourages adoption by users. As individuals are acquainted with MEV, they seek systems with fewer possibilities of abuse. Even mainstream users will require equal treatment in the ordering of the transactions with improved education. Such advantage of Layer 2s will bring in more advanced players.
The protocol promotes rapid onboarding of sequencers. New sequencers are able to integrate without sophisticated configuration. They make money on submitting blocks and on being involved in consensus. The network is very resilient to attacks or censorship due to the big and healthy set of sequencers.
Fairness is not the only advantage of decentralization. Single points of failure are eliminated by distributed sequencers. If one fails, Layer 2 continues. It would be the economic impractical to attack various independent sequencers. This resiliency attracts businesses that are highly available.
Censorship resistance deals with the regulatory issues. The blockage of transactions cannot be made selective by governments when a large number of sequencers operate on the network. This is in line with the crux of blockchain. Applications that require censorship resistance are safe to run on MORPH.
The system has MEV redistribution built into it. Sequencers do not take all MEV and keep it to themselves; they share it with value-creating users. Tokens are incinerated, users receive rebates, or the protocol treasury acquires the value in a fair manner. The MEV activity is beneficial to users rather than detrimental.
Compared to centralized sequencers, MORPH has advantages. Arbitrum and Optimism continue to have centralized sequencers that are run by developers, which introduce risks of single points of failure and manipulation. The design of MORPH does not have such issues, which attracts conservative users and businesses.
Timing matters. Arbitrum and Optimism intend to decentralize but they are still not completely decentralized. MORPH will have an initial first-mover advantage in the form of a decentralized sequencer network when it launches, which may change the perception of the industry.
The economical model maintains the network safe. Sequencers gain transaction payments, which is encouraging to take part honestly. Slot auctions select sequencers in a random manner and avoid favouritism. The offending nodes undergo slashing and provide integrity. The incentives perpetuate decentralization.
Sequencer monitoring and governance tools allow the community to monitor sequencers. Misbehavior is noted by the observers and bad actors are evicted with the help of governance tokens. Continuous governance ensures a sequence of high quality of the sequencer.
In the long run, it can be expected that decentralized sequencers will be the norm. When users get used to the equity provided by MORPH, centralized sequencers will become a thing of the past. Layers 2s which do not embrace decentralization will lose users to more fair systems. The early adoption of MORPH puts it in a good position to take this unavoidable change.
