What is your first impression of the “decentralized sorter”?

Does it embody the technical principles and architecture of decentralization? Does it aim to mitigate the risk of network centralization? Or is it a revolution reshaping the “L2 economics” with a new ecological model? Ultimately, the sorter is not merely a technical issue but a complex matter of interest distribution within the L2 economic system: who is responsible for distributing the cake, who is planned to receive it, and how it should be distributed? It acts as a baton, directly determining the type of developers and DApps attracted to the application layer, and indirectly influencing the development direction and foundation of the entire L2 ecosystem. So, in plain terms, the decentralization of the L2 sorter is always a means rather than an end. Interestingly, on May 6th, Morph launched the Morph Holesky testnet, which previews all features of the mainnet, including the first officially implemented L2 decentralized sorter network. How will this new mechanism, which decentralizes the rights to L2 revenue allocation, mobilize different advantages of developers, DApps, and technologies, and whether it can achieve a breakthrough in the widespread adoption and transformation of the L2 ecosystem from “0 to 1”, remains to be seen.

The “Secret War” Behind Decentralized Sorters

The sorter, as the name suggests, is responsible for controlling the order in which transactions submitted to L1 from L2 are packaged, making it a crucial component of L2 architecture.

From an economic perspective, a rough calculation suggests that L2 net income equals sorter net income equals user total spending on L2 transactions minus L2 spending on L1 minus sorter operational costs. This implies that the sorter directly determines the issue of interest distribution regarding the profitability cake of L2—whoever controls the sorter controls the financial resources of L2.

Currently, many L2 projects operate sorters in a centralized manner, where the pricing and revenue control of the sorter are in the hands of the project, constituting their primary revenue model, and without exception, they are all making substantial profits:

According to Dune Analytics, Optimism’s average daily profit over the past 30 days reached as high as $46,600, translating to monthly earnings exceeding $1.3 million. Meanwhile, Base recorded profits exceeding $20 million in March alone, showcasing its remarkable capital attraction ability.

However, this approach also poses significant risks. Once a few centralized nodes go offline, it can lead to prolonged downtime for the L2 network. Additionally, these centralized sorters may prioritize transaction sequencing based on personal interests to maximize their arbitrage opportunities, thus capturing MEV value and potentially delaying user transactions or even censoring and rejecting them.

Therefore, the advantages of decentralized sorters are self-evident. They not only eliminate the impact of single points of failure but also ensure the decentralized nature of the network, maintaining network security and stability. Furthermore, they distribute the majority of sorter revenue to the entire network’s builders.

Previously, whether it’s Metis, Espresso, Astria, or Morph, they have all emphasized the importance of decentralized sorters and incorporated them into their development roadmaps. However, so far, only Morph has made substantial progress in achieving a truly decentralized sorter at the beginning of the month.

Specifically, Metis, Espresso, and Astria have demonstrated two main pathways for building and maintaining decentralized sorters: the “self-operated” model and the “outsourced” model (sharing sorters). The former emphasizes internal management and operational security and stability, while the latter provides more flexibility and openness, promoting technical universality, and reducing operational burdens.

Metis: Representative of the “Self-Operated Store” Model

For example, Metis operates its PoS sorter pool similarly to Rollups like Arbitrum and Optimism. It uses a PoS mechanism for sorter election and block creation. When a user initiates a transaction, it is sent to sorter nodes in the network. The sorter collects and packages transactions, signing a batch using TSS multisignature.

This approach is beneficial for on-chain contract verification because, for verification purposes, TSS signatures are equivalent to signatures from an EOA address, resulting in gas savings. However, the signing process can be complex and time-consuming. Additionally, each change in TSS nodes requires a KeyGen operation (private key fragmentation to generate an aggregated public key), which can also be time-consuming and affected by network uncertainties. Therefore, this method requires a high limit on the number of signing nodes.

Espresso: Modular Design for Shared Sorters

The design intent behind shared sorters represented by Espresso and Astria is to provide decentralized sorters for multiple different Rollup networks. Therefore, the initial architectural design emphasizes modularity and is friendly towards cross-chain interoperability between different Rollups.

However, this approach also brings some limitations:

• It introduces varying degrees of complexity. For example, in Espresso, a single block may contain transactions from multiple different L2 networks, requiring filtering of transactions belonging to its own Rollup chain. Additionally, generating ZKPs may be more complex compared to generating proofs for individual Rollup networks.
• Since a consensus layer needs to reach consensus on transactions from multiple different L2 networks, throughput for a specific L2 network may be affected.
• It’s challenging to adapt to the specific requirements of certain L2 networks. For example, due to differences in mechanisms, the number of transactions that can be accommodated in a block may vary between networks.
• During the consensus block production process, sorters do not execute transactions, which may result in including some invalid transactions (such as incorrect nonces) in blocks, leading to potential loss of transaction fees for users.
• Finally, designing incentive and penalty mechanisms for sorters becomes more complex.

Morph: Implementing Decentralized Sorter Design throughout the Underlying Logic

As the first L2 network on Ethereum to implement decentralized sorter design from the ground up, Morph has emphasized the importance of establishing decentralized sorters from the outset. Following principles of efficiency, low cost, scalability, and ease of maintenance, Morph has designed a feasible solution.

In the Morph operating mechanism, the decentralized sorter network allows multiple nodes (sorters) to participate in transaction packaging and sequencing, rather than being controlled by a single node.

Compared to the Metis solution, Morph utilizes Tendermint consensus signing and introduces BLS aggregated signatures in this consensus to reduce verification costs. Thus, compared to schemes using TSS for batch signatures, this approach requires no additional P2P interaction, leading to higher efficiency in signature algorithms. Moreover, the process of changing signing nodes is simpler, and the entire process remains decentralized without the need to consider single-point issues.

Morph: Dual-Layer Design Mechanism of “Underlying Security + Multiple Revenue”

The core architecture of Morph’s decentralized sorter can be summarized as providing a dual-layer design mechanism revolving around “L1 staking ETH for admission” + “L2 staking Morph tokens for election”:

• At the L1 layer, users can stake ETH to form an LST economy, allowing them to earn staking/restaking rewards similar to ETH PoS, effectively leveraging the ETH LST fund pool to provide underlying security for the decentralized sorter.
• At the L2 layer, staking Morph tokens generates PoS interest income. With Morph tokens serving as underlying interest-bearing assets, users can further participate in on-chain ecosystem use cases by staking tokens, creating diverse revenue derivative scenarios.

L1: Admission via ETH Staking

Firstly, users can stake their ETH on the mainnet into Morph as collateral to participate in the decentralized sorter network. If a sorter behaves maliciously, this portion of collateral will be forfeited. Once Morph receives the staked ETH, it utilizes the deeply integrated ETH Restaking protocol to implement Ethereum asset restaking at the underlying level, assisting the L2 layer in obtaining consensus security brought by Ethereum staking, thus realizing the vision of “sharing Ethereum mainnet security”.

Through this design, Morph enables ETH holders to achieve the same effects as Ethereum staking, restaking, or even liquidity staking. This approach leverages ETH to provide underlying security for the decentralized sorter (as Ethereum’s fund size is large enough to raise the cost of malicious attacks), while also releasing liquidity in the form of LST for users, significantly enhancing capital efficiency.

From the perspective of opportunity cost, users need not worry about staking ETH with Morph to participate in the decentralized sorter, as they will not lose potential Ethereum LST/LRT rewards.

L2: Election and Block Production via Morph Token Staking

Building upon this foundation, the second step involves staking Morph tokens (which are currently unreleased) on L2 for sorter election and block production.

Users can delegate their Morph tokens to any sorter node to accumulate staked amount. Ultimately, the network ranks sorters based on their staked amounts, and the top X sorters successfully elected can participate in block production and transaction submission.

As a reward, sorters that successfully participate in block production and election can receive newly minted Morph tokens as rewards. Essentially, sorter block production is akin to “PoS node mining” at the L2 level, and the minted rewards represent PoS interest income.

This approach grants Morph tokens the attribute of being a “native asset with underlying income.” It enables the creation of a new layer of LST economic mechanism and DeFi trading scenarios based on this underlying income asset:

Users eligible for block production can earn new LST (such as stMORPH) based on their staked Morph tokens. This stMORPH can accumulate staking rewards and further participate in on-chain ecosystem use cases, creating diverse revenue derivative scenarios such as DEX, lending, and liquidity staking. This allows users to quickly leverage the existing rich DApp ecosystem.

This can be coupled with ecosystems like Ethereum, allowing users to, for example, provide liquidity pools in Curve, exchange stMORPH for other crypto assets or form LP in Uniswap, or collateralize and lend out other crypto assets in protocols like Aave, to obtain diverse income from DeFi and other scenarios.

Overall, with multiple revenue streams in play, Morph’s decentralized sorter mechanism, as the first of its kind on the network, builds multiple revenue streams for ETH+Morph token holders. It leverages the security of the Ethereum fund pool while activating Morph tokens to support the creation of a rich on-chain DApp ecosystem.

The Ecological “Racehorse Mechanism” Based on Sorter Profits

Furthermore, this decentralized sorter mechanism has given rise to another potentially grand vision: redistributing sorter profits (or disposal rights) to on-chain projects/DApp developers, enabling the L2 ecosystem to truly possess a “self-growing” attribute.

In essence, Morph takes macro responsibility for coordinating incentives among various self-organized ecosystems (developers/projects/DApps/protocols), while each micro ecosystem is responsible for specific application implementation and user ecosystem cultivation, thereby stimulating micro vitality. This mode, facing developers/DApps rather than users directly, may be the singularity for L2 to achieve ecological breakthroughs and explosive growth.

In the future, after Morph’s sorters collect gas fees from users, the profits can be redistributed to on-chain projects/DApps according to a predetermined distribution mechanism, giving rise to a new incentive mechanism. For example, projects can fairly and transparently receive rewards based on their contributions, similar to a “community racehorse” ecological self-growth competition mechanism. Leveraging the decentralized sorter mechanism, Morph effectively uses the sorter fee profit disposal rights as a baton to reward and stimulate DApps that contribute spontaneously to the Morph ecosystem.

This fully leverages the strengths of different projects, achieving highly market-oriented competition among DApps in terms of Morph’s market promotion and innovative services, incentivizing these contributors to collectively achieve sustainable development of the Morph ecosystem.

For example, if Morph chooses to link incentive measures with the amount of gas spent by DApp smart contracts and the number of active users, developers will indirectly receive incentives. This encourages them to spend as much gas fees as possible on their contracts and increase the number of active users, achieving a breakthrough in “from 0 to 1” adoption and mass adoption.

This allows developers, DApps, protocols, and even market makers and other B-side operators to quickly form different types of “Morph sub-ecosystem communities” based on their existing user groups and flexibly implement targeted and precise strategies based on the actual situation of their communities:

• For example, DApps can introduce incentive quotas for sorter profits tailored to users of different transaction volume levels to enhance their users’ transaction activity.
• Alternatively, wallet operators can introduce phased incentive policies for users with different holding levels to retain core user stickiness and prevent user churn.

In theory, this design concept can achieve “letting a hundred flowers blossom and a hundred schools of thought contend,” helping Morph quickly open up promotion and implementation at a low cost, while also providing users with efficient and optional diversified on-chain scenario services.

Finally, project parties/DApps that receive sorter fee income can also distribute this extra profit in the form of incentives to different types of individual users to meet their respective operational needs. This provides each DApp with an additional means of incentivizing users, helping Morph achieve its promotion and mass adoption goals, and achieving a “win-win” situation.

Summary

Overall, decentralized sorters have always been more than just a technical narrative. With the decentralization of profit distribution rights, they will reshape the entire L2 economic system. Even the long-awaited ignition point of the L2 ecosystem may emerge under the new economic model of decentralized sorters.

The future is beyond imagination. Perhaps, looking back several years later, this will be a new turning point. Players like Morph, the first decentralized sorter, may bring about significant variables to the Ethereum ecosystem and the L2 ecosystem. It’s something to look forward to.

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1. This article is reprinted from [tech flow 深潮], the original title is “Decentralized Sorter” debut, understand Morph’s self-motivating ecological flywheel “, the copyright belongs to the original author [Morph], if you have any objection to the reprint, please contact Gate Learn Team, the team will handle it as soon as possible according to relevant procedures.

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