What Are Based Rollups and How Do They Work?

Rollups have become a much-needed solution for blockchains struggling with scalability issues. 

Despite their benefits to blockchains, such as the ability to scale thousands of transactions per second, they are unable to solve certain issues, such as interoperability and transaction liveness. 

However, a new framework called based rollups is gaining attention as a new approach for scaling rollups. 

Read on to learn what based rollups are, how they work, and how they compare to other types of rollups.

What Are Based Rollups?

Based rollups are a set of Layer 2 solutions that directly leverage the sequencing capabilities of a Layer 1 (L1) blockchain. This model provides a smooth assimilation that leverages the L1’s decentralization, liveness, and security features. 

Ethereum Researcher Justin Drake proposed based rollups in March 2023 as an approach to overcoming issues facing existing rollup solutions. 

Also known as L-1 sequenced rollups, based rollups simplify transaction processing by eliminating complex add-on techniques, such as external PoS consensus mechanisms or sequencer signature verifications, all while assuming the robust architecture of the Layer 1 protocol. 

Based rollups consist of four layers: consensus layer, data availability layer, execution layer, and settlement layer.

For based rollups on a blockchain like Ethereum, for instance, the consensus, data availability, and settlement layers are all Ethereum layers. The execution layer, which is accountable for transaction execution and status updates, is the only one built atop the rollup network. 

Based rollups tackle efficiency challenges from a sequencing vantage point by providing a lean scalability solution. They do this by removing the gas overhead linked to traditional rollup models and bypassing the required token-based operations. 

This proficiency, coupled with the security benefits harnessed from their alignment with Layer 1 networks, make based rollups an excellent scalability solution for blockchains. 

How Do Based Rollups Work?

Based rollups employ a straightforward model of how they deal with sequencing compared to traditional rollups. Whereas traditional rollups use their own sequencer, based rollups utilize the sequencer of the underlying Layer 1 blockchain to achieve similar results. 

The based rollups model allows Layer 1 block proposers to directly work with Layer 2 block builders and searchers to add the next rollup block in the Layer 1 block. 

What Is Based Sequencing, and How Does it Work?

Sequencing is a term that’s mostly associated with rollups. However, the term sequencing describes a process that’s vital in the larger Web3 space. 

Based sequencing refers to the process of organizing transactions into blocks within a chain and is just as important to Layer 1 protocols as it is to Layer 2 networks. 

However, the sequencer models may differ greatly from one blockchain network to another. For instance, a major Layer 1 protocol can have a more decentralized sequencing process, whereas a rollup network can be limited to a centralized sequencing process. 

So, how exactly does based sequencing work:

How Does Based Sequencing Work?

One of the most significant aspects of based sequencing is collaboration.

Layer 1 proposers directly collaborate with Layer 2 builders and searchers when adding rollup transactions. This process is permissionless as any upcoming rollup block can be added to the next Layer 1 block without need for special permissions. 

Based sequencing doesn’t require any external consensus as it’s fully dependent on the existing validation method of the Ethereum blockchain. In addition, they are aligned with Layer 1 protocols as the sequence of rollup transactions sticks to Ethereum’s block order. This makes them firmly meshed with Ethereum, guaranteeing their security and uptime.

By utilizing Layer 1 protocols for sequencing, based sequencing helps based rollups to achieve economic and operational competence as they get rid of gas overheads from signature verifications, thereby reducing the cost and complexity of a rollup operation. This not only helps simplify the sequencing process but also strengthens the rollups’ decentralization and security by harnessing the established infrastructure of the Layer network. 

Based Rollups vs. ZK-Rollups vs. Optimistic Rollups: A Comparison

While based rollups, ZK-rollups, and optimistic rollups are all layer 2 scaling solutions, they differ in certain aspects. When it comes to the type of proofs, based rollups and optimistic rollups both use a fraud-proof mechanism, while the ZK-rollups use zero-Knowledge proofs.

While based rollups leverage the sequencer of the Layer 1 network, the ZK-rollups and optimistic rollups use their own sequencer. Moreover, based rollups and optimistic rollups leverage the consensus mechanism of the Layer 1 protocols, while ZK-rollups use the consensus mechanism of the Layer 1 blockchain for final security but have their own method for validating transactions using ZK-proofs.

Looking at the technical complexity of the three kinds of rollups, based rollups have a comparatively simple framework. ZK-rollups and optimistic rollups have a complex architecture and security technique for handling Layer 2 transactions, which makes them more costly. 

Benefits and Limitations of Based Rollups

Although based rollups have some advantages in how they can help traditional rollups scale blockchains, they also have their drawbacks. 

Below are some benefits and limitations of based rollups:

Benefits

• Decentralization: By leveraging Layer 1 sequencing, based rollups get to inherit the complete decentralization nature of their underlying Layer 1 and capitalize on the already existing infrastructure. 
• Liveness: While most traditional rollups create mechanisms like escape hatches that are built to prevent validator or sequencer failure, based rollups leverage Layer 1 sequencing, which enables them to fully assume the liveness of the base Layer 1. 
• Operating costs: Given that the Layer 1 network already handles the transaction sequencing, based rollups can batch and confirm transactions more efficiently. Additionally, the elimination of sequencer signature verification translates to zero gas overheads which results in lower operational and transactional costs. 
• Simple: Based rollups leverage the architecture of the underlying Layer 1 to handle data availability issues and transaction sequencing. By eliminating additional complexities such as escape hatches, external consensus mechanisms, and signature verification sequencers, they enjoy a simplified technical structure compared to traditional rollups. 

Limitations

• Income challenges: Being reliant on Layer 1 sequencing limits validators from obtaining maximal extractable value (MEV), based rollups don’t directly benefit from Layer 1 sequencing. 
• Sequencing pliability: Assigning sequencing activities to Layer 1 protocols can minimize sequencing flexibility. This can affect the implementation of speedy transaction confirmation and certain transaction sequencing approaches. 

Examples of Based Rollups

Based rollups are a pretty new concept whose theories and implementation elements are currently being explored and honed. As such, there’s only a small number of projects that are currently developing based rollups.

One of the most popular projects is Taiko.

Taiko is a Layer 2 protocol that utilizes the ZK-rollup framework. It has also built Type-1 zkEVM that offers the same functionality and Ethereum opcodes to guarantee compatibility with the current Ethereum ecosystem. 

Soon after the based rollup was proposed, Taiko executed its operation on Ethereum as the consensus mechanism, data availability, and settlement layer. Furthermore, the L2 protocol contracted transaction sequencing to Ethereum validators to simplify the technical structure of rollup.

In January 2024, the project introduced the Katla testnet, which is the first testnet to utilize Taiko’s Based Contestable Rollup (BCR). The BCR based rollup adds dispute resolution activities into the transaction verification workflows. 

Conclusion

While based rollups are a promising solution to the challenges faced by traditional rollups, they are still in their nascent stage, and their development and testing will require more resources and time. 

Still, its benefits, which include decentralization, reduced operating costs, and simplified technical structure, could have a positive impact on the Web3 industry.