Key Points:

Puffer uses Restaking to build a more efficient Based Rollup, with decentralized sequencers and better cross-chain liquidity interaction. Based Rollup and mainstream Rollups will shape different ecosystems within Ethereum.

• Puffer LRT: Ethereum restaking service based on Eigenlayer
• Puffer UniFi: Rollup upgrade solution using pre-confirmation technology
• Puffer UniFi AVS: Builds a highly synchronized app-chain ecosystem to reduce liquidity fragmentation
• Differences between Based Rollup and mainstream Rollup come from trade-offs in decentralization, efficiency, and economic incentives, tailored to different application needs.

Research Report

1/6 · What is Rollup?

Rollup is a blockchain scaling technology designed to allow Ethereum and other blockchains to handle more transactions while keeping fees low. Simply put, Rollups bundle many transactions together and process them off the main blockchain (off-chain). This reduces the load on Ethereum’s main network (L1), but the final results of these transactions are still submitted to the Ethereum mainnet for verification, ensuring security and immutability.

Rollups come in two main types:

• Optimistic Rollup: Assumes most transactions are correct by default and only verifies them if someone challenges their validity. This method is faster but includes a challenge period.
• ZK Rollup: Uses zero-knowledge proofs to ensure the validity of each transaction, guaranteeing that only legitimate transactions are bundled, so no challenge period is needed. This method is more secure but technically more complex.

The core idea of Rollup is to “do most of the work off-chain and only put the results on-chain,” allowing for faster transaction processing at lower costs.

This process can be simplified into two steps:

• Batching - Increasing transaction volume/throughput
• Confirmation - Speeding up the confirmation process

2/6 · What is Based Rollup?

Ethereum Foundation researcher Justin Drake introduced the concept of Based Rollup in March 2023. This solution focuses on the Sequencer, an important role that coordinates transaction ordering and packaging between L1 and L2.

The Sequencer is responsible for ordering and packaging L2 transactions to L1, covering both batch packaging and transaction confirmation mentioned above. However, most L2s currently use a centralized Sequencer solution controlled by a single or few entities. While this doesn’t pose a big issue in the early stages of industry development, as each chain’s funds grow and infrastructure matures, the centralized Sequencer will become a “problem that needs solving sooner or later.”

Currently, two solutions have been proposed:

• Decentralized Sequencer based on L2
• Transfer to L1 Based Rollup

The decentralized Sequencer solution is represented by Metis, which establishes a new strong consensus to make the Sequencer network more robust.

The Based Rollup solution removes the separate Sequencer network design and transfers the responsibility of transaction ordering from L2 to L1, where Ethereum L1 validator nodes act as proposers responsible for ordering transactions. This design doesn’t require establishing a new consensus and fully utilizes Ethereum’s existing node resources while avoiding the risks brought by centralized Sequencers, thus leveraging the security level of the Ethereum mainnet.

However, Based Rollup also faces issues limited by the classic trilemma. While it benefits from mainnet security, it also means it must rely on mainnet performance (block time of about 12s), making transaction confirmation significantly slower than conventional L2 Sequencer solutions.

3/6 · Puffer UniFi Optimized Based Rollup Solution Analysis

To break through this trilemma, new roles or mechanisms must be introduced for balance. Puffer’s proposed UniFi aims to introduce “pre-confirmation” to solve this issue.

In existing Rollup solutions, users usually receive “soft confirmations” from centralized Sequencers. These Sequencers can guarantee users that their transactions will be included on the blockchain after submission. However, this soft confirmation fundamentally relies on trust in centralized power, and if that power becomes corrupt, transaction ordering/confirmation cannot be guaranteed to be fair.

Puffer UniFi pre-confirmation has two key features:

1. Guarantees from Ethereum validators: Before block packaging, Ethereum mainnet validators commit to Rollup transactions being confirmed (Pre-conf) - they promise to include these transactions in their upcoming proposed blocks.
2. Punishment mechanism: If validators fail to fulfill their pre-confirmation commitment and do not include the previously promised transactions in the block, they will face penalties.

Thus, UniFi circumvents the Based Rollup’s reliance on the mainnet’s block time by letting Ethereum mainnet nodes take on “extra work” to guarantee transaction confirmation efficiency (~100ms).

With the pre-confirmation mechanism, it can greatly improve mainnet transaction confirmation efficiency, so is there still a need for L2 to enhance mainnet performance?

Returning to the essence of Rollup, it primarily achieves “batch transaction packaging” -> “quick transaction confirmation,” a horizontal and vertical scaling expansion. Pre-confirmation solves the problem of fast and fair transaction confirmation, while batch transaction packaging still needs to be completed on L2 or off-chain and then sent to the mainnet via the Sequencer for confirmation.

4/6 · Puffer UniFi AVS

In the pre-confirmation process, Ethereum nodes take on extra responsibilities. How can this additional work and the corresponding penalties be implemented?

Puffer proposes UniFi AVS, a solution based on EigenLayer. Rather than introducing new mechanisms or collateral, it leverages Ethereum’s Restaking system, packaging UniFi into an AVS service. Any validator restaking on EigenLayer can participate in UniFi AVS, providing pre-confirmation services, with penalties applied to those who fail to fulfill their commitments.

Restaking and AVS make pre-confirmation much easier to implement, making it one of the most compatible and practical AVS solutions, contributing significantly to the Based Rollup solution. Previously, achieving this level of functionality was much more difficult.

5/6 · Core Value

Using UniFi AVS to build application chains becomes a significant upgrade to Based Rollup. Compared to other Rollup solutions, UniFi AVS offers:

• Decentralized ordering on Ethereum’s L1
• Faster transaction confirmations with pre-confirmation integration
• Revenue generation through Restaking
• Synchronous composability

Synchronous composability is a key feature of UniFi, aimed at solving liquidity fragmentation. In today’s Ethereum multi-Rollup environment, different Rollups operate independently, which disperses liquidity and user activity. Interaction between assets and contracts across Rollups requires tools like cross-chain bridges, which increase complexity and add high costs and security risks.

With UniFi’s decentralized ordering on Ethereum L1, the mainnet acts as a master sequencer, allowing different UniFi-based Rollups to interact within the same block, eliminating the need for cross-chain bridges. This enables seamless operations across different Rollups and application chains within the UniFi ecosystem. As a result, UniFi provides users with a smooth, single-chain-like experience, significantly reducing liquidity fragmentation. This approach is similar to the goal of chain abstraction, but UniFi’s solution is more native and straightforward, without introducing additional consensus layers or restrictions (such as a new consensus layer for aggregating liquidity and user needs).

6/6 · Conclusion

Ultimately, the success of UniFi depends on whether Based Rollup becomes a necessary Rollup solution.

Currently, many L2 solutions are more centralized than users realize. However, this centralization issue doesn’t have an immediate impact on users in the short term, and solving it won’t necessarily lead to immediate financial benefits, as it is somewhat removed from the user experience. The reason this issue hasn’t been more prominent is that no application has yet been directly affected by centralized Sequencers. For example, during Bitcoin’s inscription phase, most success stories occurred in a highly centralized indexer environment.

From a long-term perspective, addressing decentralized Sequencers and tackling liquidity and user experience fragmentation becomes a critical issue. Let’s use an analogy for comparison:

Based Rollup is a solution more closely aligned with Ethereum, acting like a “subordinate” Rollup to Ethereum—think of it as Ethereum’s “personal guard.” This guard could be infantry, cavalry, or artillery, with direct coordination by Ethereum, following its most fair system. There is no need for third-party intervention, reducing risks of miscommunication or malicious intent.

Meanwhile, the mainstream Optimistic Rollup is more autonomous, with Ethereum granting more freedom. It’s like vassal kings, each building their own cities and systems, with fairness depending on the rulers themselves. Communication between vassals requires an external department—this department is chain abstraction. To manage these vassals, the chain abstraction system needs to be strong enough to control them while avoiding corruption.

The debate between these approaches centers on whether Rollups should return value to Ethereum or support independent growth. Being more closely tied to Ethereum offers greater security and reduces decentralization costs, while also providing natural synchronous composability. Independence allows operators to capture more profits, but comes with higher costs to ensure decentralized security and relies on external composability.

Blockchain’s inclusive nature ensures that both approaches will coexist, as they reflect ongoing trade-offs between decentralization, efficiency, and interests across different scenarios. This exploration will continue, with ongoing technical improvements providing new opportunities for developers to shape the future.

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