Based on the Op Rollup, an Ethereum Layer2 project, the recent surge in L2 has also surged. This article discusses how to achieve true decentralization of Layer2 before the Cancun upgrade.
Table of Contents
1. The driving force behind Metis TVL and the spiral rise in token price
2. The first decentralized POS sequencer: Injecting incentive mechanism into staking to drive internal motivation
3. Hybrid Rollups: Achieving both fish and bear in the OP vs ZK battle
4. User-centric multidimensional economic incentives promote a thriving ecosystem
5. Facing 2024: Embracing multiple milestones
Conclusion
According to L2 Beat data, the L2 project in which Vitalik’s mother Natalia Ameline and her friend Elena Sinelnikova participated currently has a TVL of over $500 million, with a growth rate of 416%, ranking among the top four Ethereum Layer 2 projects. Along with the surge in TVL, the token price has also risen by over 300% in the past 30 days.
As the Cancun upgrade of Ethereum in the first quarter of 2024 approaches, Layer 2 projects are competing to enter the investors’ “range”. Compared to large-scale L2 projects like Arbitrum and Optimism with a circulating market value of $3 billion, Metis, with a market value of only $300 million, is more cost-effective in the eyes of investors. Furthermore, Metis has its own expertise – decentralized sequencer.
The current mainstream Layer2 design architecture of Ethereum’s ecosystem outsources the computational requirements of smart contracts to external servers and settles the results (fraud proofs or zero-knowledge proofs) on Ethereum. This server is also called a sequencer, which receives unordered transactions from users, processes them off-chain into batches, generates compressed ordered transactions, and then sends them to Ethereum. It can be said that the sequencer is the soul of L2.
The cruel reality is that the current mainstream Layer2, including Arbitrum and Optimism, are all executed by centralized sequencers. The reason is simple: it is more convenient, user-friendly, and cost-effective to execute their own centralized sequencer. However, this not only goes against the decentralization spirit advocated by cryptocurrencies but also raises concerns about whether sequencers will engage in malicious activities, insert transactions, and engage in MEV, and so on.
Metis decided to make a breakthrough in the field of decentralized sequencers and will conduct testing of decentralized PoS sequencers on the Sepolia testnet, with community testing starting on January 3, 2024. In the face of the irreversible situation of centralized sequencers, can Metis take the lead in launching a full attack on decentralized sequencers and accelerate the development of a decentralized sequencer program in the L2 track, ushering in a new wave of innovation?
This article aims to compare L2 projects from two dimensions – technical and ecological – based on Metis’ technical innovation and ecological construction ideas, in order to explore the opportunities and challenges of the L2 track in the future.
Not exaggeratingly, the centralization problem of sequencers in the L2 track has reached an irreversible point. On the one hand, most L2 projects are currently using centralized sequencers, and their attitude towards implementing decentralized sequencers is ambiguous. For example, the OP Foundation and Arbitrum Foundation both operate their own centralized sequencers, although they have proposed decentralized sequencer solutions to appease community demands. However, due to the lower threshold and costs of operating centralized sequencers and the considerable benefits they bring, the development of decentralized sequencers has been extremely slow.
On the other hand, the realization of decentralized sequencers is urgently needed. Centralized sequencers not only contradict the original intention of decentralization in blockchain but also pose significant risks. Once a failure or attack occurs, the entire L2 will be affected. In addition, sequencers determine the order, content, and structure of packed transactions, and centralized sequencers can engage in malicious activities to maximize their arbitrage opportunities, capture MEV value, and even have the power to completely review user transactions.
Indeed, human nature is difficult to change, and therefore, the design of decentralized sequencers not only needs to understand the market but also human nature. Grasping the trend of human nature is the inexhaustible internal driving force for the long-term stable execution of decentralized sequencers. The decentralized PoS sequencer solution introduced by Metis with a staking mechanism is such a bottom-up technology protection and incentive system.
In Metis’ design, there is an administrator role responsible for setting important parameters in the decentralized system, including including eligible sequencers into the sequencer pool and setting the release rate of block rewards. The sequencers in the sequencer pool are responsible for determining the order, content, and structure of packed transactions. When there are multiple sequencers, at least 2/3 of the sequencers’ signatures are required to submit the packed batch to the Rollup contract on L1.
To prevent sequencer misconduct, there is also a validator role that samples and verifies blocks, including checking if the order of transactions has been changed and if there are any malicious transactions inserted, and so on.
The entire process can be simply compared to: the principal (administrator) selects a group of qualified teachers as test paper setters (sequencers) based on requirements, forms a set of exam questions, and submits them to the school. Under the agreement of 2/3 of the teachers’ signatures, a recognized standard answer is formed. In addition, the supervisor will also randomly check the test paper setters to supervise whether they have leaked questions and violated regulations.
This type of sequencer, implemented by multiple entities, achieves true decentralization, showing Metis’ insight into market demands and timely responses. However, another question that needs to be considered is: What motivates more people to participate?
Metis’ answer is the staking mechanism. Firstly, operators entering the sequencer pool need to stake a minimum of 20,000 METIS tokens, and sequencer operators participating in block production will receive a large number of token rewards. The threshold of 20,000 METIS tokens has multiple positive implications:
In terms of stable system execution: On the one hand, it aims to verify whether the sequencer has the ability to participate normally in the network, and on the other hand, it serves as a deterrent. If the sequencer engages in misconduct, the staked assets may be confiscated.
In terms of ecosystem development: In the current limited token application scenarios of L2, setting up the staking mechanism not only increases the token utility of METIS but also further reduces the circulating supply of METIS, thereby positively catalyzing the development of the ecosystem.
For validators, they will receive token rewards for validating blocks. In addition, if sequencers engage in misconduct, a portion of the confiscated assets will be rewarded to the validators, which invisibly enhances the motivation for validators to earn more profits through validation.
In terms of attracting broader participation, the Metis ecosystem will also give birth to some Staking dApps that serve ordinary users who do not have enough funds to enter the sequencer pool. They can stake their tokens to trusted sequencer operators to earn rewards, and sequencer operators who want more staking support need to give back a portion of their earnings to support their users.
In this way, a stable decentralized sequencer execution framework that involves broad participation, transparent supervision, and benefits for all participants emerges.
Beyond incentives, the implementation of Metis’ Staking mechanism in the decentralized PoS sequencer also leads us to further explore the practicality of native L2 tokens. For a long time, the application scenarios of L2 native tokens have been limited to governance, which has led many to question the necessity of L2 native tokens. How to give L2 native tokens more utility has also become a difficult problem for many projects. By introducing Staking into the decentralized PoS sequencer mechanism, Metis not only provides incentives but also integrates token utility into consensus and network security.
Of course, this design is still in the theoretical stage, but it will soon face community testing. On December 27, 2023, Metis will conduct testing of the decentralized PoS sequencer on the Sepolia testnet and community testing will begin on January 3, 2024. Users can earn points through testing dApps, Learn to Earn, and other methods, and different levels of points can be exchanged for different types of NFTs. Finally, users can obtain a community testing airdrop with these NFTs.
Metis encourages broad community participation to better test network robustness, identify gaps, and promote further improvement of the decentralized PoS sequencer solution.
Of course, in the fierce competition of L2, Metis’ innovation is not limited to the decentralized PoS sequencer. Hybrid Rollups are also worth delving into.
Looking back at the development of the L2 track in the past two years, OP has flourished with its advantage in open-source technology, and airdrop gameplay has sparked multiple rounds of community enthusiasm. ZK, on the other hand, has higher security with more rigorous mathematical proofs and has projects like zkSync and Starkware that can compete with Optimism and Arbitrum. Furthermore, most new projects are derivatives of OP and ZK technical solutions, which inevitably lead to technical homogeneity issues in L2 projects and highlight the shortcomings of OP and ZK in a wider range of projects:
Optimistic Rollups are fully compatible with EVM, have faster off-chain transaction processing speed, and lower costs. However, due to the default assumption of valid transactions in OP, there are security risks. Additionally, the setting of a challenge period for submitting fraud proofs prolongs the final confirmation time of transactions.
ZK Rollups, based on zero-knowledge proofs, have higher security and no challenge period, allowing for faster final confirmation of transactions. However, achieving EVM compatibility is more challenging, and generating proofs requires higher off-chain computational costs.
In the trade-off between security and efficiency, the two competing factions have begun to seek integration and complementary advantages. Hybrid Rollups have emerged and gradually become the future trend of many practitioners in the L2 field. Many projects have embarked on the path of exploring Hybrid Rollups based on their own project characteristics. For example, in July of this year, the hybrid algorithm stablecoin protocol Frax Finance launched the Layer 2 network Fraxchain, which is a typical representative of Hybrid Rollups. In addition, the lightweight blockchain protocol Mina has also applied its MIPS zkVM-based zero-knowledge proof technology to OP Stack’s fraud-proof mechanism.
This inclusive trend has also impressed Metis. As early as March 2023, Metis highlighted Hybrid Rollups in its public roadmap.
The mechanism retains the architecture of Optimistic Rollup while introducing Zero Knowledge fraud-proof (ZKFP). Compared to traditional fraud-proof mechanisms that require re-execution of all transactions, ZKFP only requires submitting a single ZK proof to prove the Rollup, making it easier, lower cost, and more efficient to process and verify transactions.
In the entire operation process, after the sequencer generates a block, the proposer submits transactions and states, and then the prover reads data from L1 to generate blocks and MIPS programs. After the proof is generated, the prover submits the proof to L1. If it is not submitted or the smart contract determines that the conditions are not met, the validator will initiate the fraud prevention process, and the staked tokens of the sequencer may be confiscated.
In terms of implementation, Metis integrates the MIPS instruction set into the design of Hybrid Rollups. As the EVM instruction set introduces new commands and deprecates old ones over time, this kind of change poses a significant challenge for any developer who wants to build and use a standardized instruction set. Therefore, Metis chose to optimize on the MIPS foundation and created zkMIPS specifically tailored for ZK proofs. Compared to traditional ZK proof integration, zkMIPS can also establish recursive proofs, allowing multiple proofs to be aggregated into a more manageable unit, making it more efficient and cost-effective.
In July of this year, Metis also announced the launch of the Metis Hybrid Rollups.Metis Launches zkMIPS Project: ZKM Adopts MIPS Instruction Set to Implement Zero-Knowledge Proof (ZKP) Security for All Virtual Machines (VMs) and Applications at the CPU Level, Supporting Various Blockchain Smart Contract Engines. The Plug-and-Play feature allows developers to apply ZKP without changing the codebase, reducing adoption costs. With the help of Ethereum’s decentralized security infrastructure, ZKM can verify all blockchain and non-blockchain transactions.
Of course, Metis also understands the importance of EVM for ecosystem construction: EVM compatibility can not only attract a large number of mature Ethereum ecosystem developers to seamlessly enter the Metis ecosystem but also allow developers to enjoy a massive array of practical tools, development tutorials, and infrastructure from the Ethereum ecosystem. Based on this, Metis has launched the Rollup solution for Metis Virtual Machine (MVM): the design of MVM is almost the same as EVM but with key improvements such as separate computing and storage functions, making the Metis ecosystem open to a wide range of EVM universes and reducing gas costs and withdrawal waiting time.
In this way, Metis not only retains the advantages of OP series, achieves EVM equivalence, and provides developers with an easy-to-code environment but also promotes the finality and security advantages of the ZK series, reducing the transaction finalization time from 7 days to approximately 4 hours and greatly improving security. For developers, Hybrid Rollups have lower thresholds and more flexibility; for users, Hybrid Rollups are safer and more efficient.
Compared with 2021, the current L2 technology has matured a lot, thanks to the continuous innovation of the participants in the race. As one of them, Metis’ understanding and design of decentralized sorters and Hybrid Rollups embody its pioneering and innovative spirit in L2 technology, and in the field of ecosystem construction, Metis is also a pioneer in meeting the needs of users and developers.
The construction of Layer 2 is like building a shopping mall, and the gradual landing of technical issues is like building a solid steel frame for the prosperity and development of the mall. The subject of transactions is the users, so the prosperity of the mall depends on attracting merchants and customers. Similarly, the prosperity of L2 is reflected in two aspects: how to attract more developers to enter the ecosystem, build projects, and continue to innovate; how to attract more users to enter the ecosystem, participate in the ecosystem, and have a continuous interest in exploration.
L2 projects that have shown their strengths have gained a lot of successful experience in this traffic competition: Optimism’s multiple airdrops attracted a large number of people, and then gradually built its super-chain universe with the help of OP Stack open-source components; Arbitrum actively introduced top DeFi projects, and the entry of large-volume DeFi projects such as Uniswap, Aave, Curve, and 1inch brought a large number of users to Arbitrum; BASE, a Layer 2 project backed by Coinbase, launched the popular application FriendTech; the founder of Blur launched the Layer2 network Blast, which broke 600 million TVL in 9 days with the RWA native income gameplay…
After years of deep cultivation in the L2 track, Metis understands the conventional gameplay of ecosystem customer acquisition and expands the ecosystem territory from the dimensions of users and developers while adhering to the basic strategy, focusing on low thresholds and high returns.
For users:
Reducing the entry threshold of the ecosystem is the first priority to attract users: therefore, every L2 project attaches great importance to the development of ecosystem infrastructure “wallets,” and Metis is no exception. Currently, popular wallets such as MetaMask, Trust Wallet, imToken, TokenPocket, and OKX Web3 Wallet have supported Metis, allowing users to interact with various dApps in the Metis ecosystem without additional learning costs.
Reducing the cost of ecosystem participation can accumulate a good reputation among users: With the clever design of Hybrid Rollups, the transaction experience in the Metis ecosystem is efficient and secure. In addition, Metis integrates a decentralized storage MemoLabs, which makes its transaction fees much lower than Optimism and Arbitrum, with ETH transfers less than $0.01. Although in the future, as Metis changes the DA layer to the ETH mainnet, transaction fees may increase, they will remain within a reasonable range, and transaction security will be further improved.
Rich ecosystem participation choices are the key to attracting users to stay for a long time: According to Layer2 Station data, the Metis ecosystem has more than 100 applications, including DeFi, wallets, NFTs, and other sectors. It also includes well-known DeFi applications such as Aave, SushiSwap, and Stargate, which brought in a large number of users in the early stages of entry and provided more playability for Metis ecosystem users.
Interestingly, because the name “Metis” comes from the Greek mythology goddess of wisdom, there are many projects in the Metis ecosystem that are named after Greek goddesses. For example, the DeFi yield enhancer project Maia is named after the goddess of fertility (Greek: Μαῖα); the Dex aggregator Hera Finance is named after the goddess Hera (Greek: Ἥρα)… This interesting naming coincidence is also a memorable point for community members in the Metis ecosystem.
In the future, Metis will continue to focus on diversifying the ecosystem, attracting more DeFi, GameFi, SocialFi, and NFT projects to join, further improving the ecosystem and providing users with a rich experience.
Seizing the user’s interest is the key to gaining traffic: airdrop gameplay was once a hot topic in the L2 community, and as early as its launch in 2021, Metis conducted a large number of airdrops. The upcoming decentralized PoS sorter community test (January 2, 2024) will also provide generous rewards for active participants in the community test.
In addition to airdrops, Metis also links rewards with ecosystem participation and has launched the Metis Advocates Program. If community members agree with Metis’ development philosophy and have content creation abilities and social media influence, they can apply for the program and contribute to the development of Metis while receiving corresponding rewards.
In September this year, Metis announced the $5 million DeFi Incentive Program, Metis Journey, to incentivize active DeFi participants. Among them, 100,000 METIS tokens will be allocated to incentivize Aave users in the Metis liquidity pool, including ETH, METIS, USDC, USDT, and DAI. Similar series of incentives are designed to enhance user participation and income in the ecosystem, attracting more users to enter the ecosystem.
Furthermore, as mentioned earlier, with the implementation of the decentralized PoS sorter, ordinary users can stake their tokens to the sorter executor to share block mining rewards.
For developers:
The low technical threshold saves developers a lot of learning costs: By retaining the Optimistic Rollup architecture, Metis can provide EVM equivalence, allowing a large number of Ethereum developers to seamlessly enter the ecosystem.
Thoughtful technical services help developers avoid many detours: Like many well-established projects in terms of technology, Metis’s official website displays detailed technical documents, development tutorials, and related technical tools. It has also established a developer community to promote technical exchanges and learning. Professional technical personnel in the community respond promptly and help new developers with their questions and doubts.
In addition, Metis is also generous in providing financial support to developers: The official website has a bug bounty program for smart contracts, which is effective for a long time and can receive rewards of up to $100,000. In addition, Metis will hold hackathon events from time to time to explore excellent projects and developers and provide support in terms of funding, technology, and marketing.
This week, Metis announced a $100 million ecosystem development fund, with 4.6 million METIS tokens allocated to fund sorter mining, tracing funds, deploying new projects, and other initiatives. In the future, the fund will focus on projects in DeFi, RWA, SocialFi, NFT, cross-chain technology, smart contract development, blockchain security, decentralized identity, and privacy solutions, games, and other fields to accelerate the growth of its ecosystem.
In the roadmap announced at the beginning of the year, the upgrade series of Hybrid Rollup is also a focus for Metis. The ZKM will meet everyone in the first quarter of 2024, according to the official team.
In addition, another important milestone for Metis is the upcoming decentralized PoS sorter community test.
The first phase of the test will last for two weeks (January 3, 2024, to January 17, 2024) and aims to encourage users to interact with Metis dApps deployed on the Sepolia testnet, including Hummus Exchange, Netswap, Tethys Finance, and the native liquidity staking protocol for METIS tokens.
As the first project to implement a decentralized PoS sorter, the community members who pay attention to the development of the sorter have high curiosity and expectations for this community test. At that time, the Metis social media platform will also release more gameplay tutorials and reward regulations. In addition, the activity is set with a series of rewards, which are also linked to airdrops. Interested users can continue to pay attention.
In the upcoming year 2024, Metis will achieve several milestones, and with the accelerated construction of the ecosystem, Metis may seize the opportunity to challenge the top L2 projects (Arb, OP, zksync, starkware) and join the first-tier of L2 opportunities.
From the increasing voices of decentralized sorters and the in-depth exploration of Hybrid Rollups by developers, we can see that the L2 track is presenting a trend of decentralization and convergence.
Smooth sailing makes a thousand miles a day. Perhaps in the current L2 competition, we also need to make smarter choices based on trends, constantly innovate with a compatible and inclusive attitude, lead the project to break through while promoting the development of the track.
Extending the name “Metis,” which comes from Greek mythology and means “wisdom,” not only represents the project’s positioning and expectations but also may imply Metis’ wise layout and choices in the L2 competition landscape.
By jumping out of the competition between OP series and ZK series early on, aiming at Hybrid Rollups with keen market sense, and firmly adhering to the decentralized concept, Metis provides a dual guarantee for the stable execution of decentralized PoS sorters through technical and incentive means.
This wisdom also extends to the ecosystem. It is said that a bear market is the best time to build, and the ecosystem construction of Metis has gradually improved from infrastructure to various types of dApps. With the arrival of the bull market, Metis is about to make breakthrough progress and prepare for the influx of users and funds.
Of course, the L2 War is just the beginning of a movie. With the arrival of a new bull market and facing market opportunities and challenges, we look forward to the performance of Metis and the emergence of more innovative solutions in the L2 track.