Bessie Liu

Ethereum scaling solution Offchain Labs is partnering with blockchain infrastructure company Espresso Systems to bring Timeboost — a transaction ordering technology — to life.&nbsp;



The teams will also work on integrating both Timeboost and the <a href="https://blockworks.co/news/espresso-systems-decentralized-sequencer-testnet">Espresso Sequencer</a> with the Arbitrum technology stack.&nbsp;



The Espresso Sequencer is a decentralized sequencing layer that layer-2s can choose to opt into, Ben Fisch co-founder and CEO of Espresso Systems told Blockworks.



“Having Offchain Labs’ support of this vision is a strong signal to us and to the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> community that even teams with strong technology affiliations of their own will continue to prioritize permissionless approaches to coordination and technology,” Fisch said.



What is Timeboost?



Timeboost is intended to improve existing first-come-first-serve (FCFS) tendencies and <a href="https://blockworks.co/news/draft-mev-dydx-chorus-one">become more optimized for maximum extractable value</a>, or MEV.



Existing <a href="https://blockworks.co/tag/arbitrum">Arbitrum</a> chains do not earn any value from MEV, Timeboost is designed so that these chains can internalize the value of ethical MEV whilst simultaneously preventing harmful behaviors such as front-running.&nbsp;



This means that rollup solutions that want to capture value from ethical <a href="https://blockworks.co/tag/mev">MEV</a> practices like arbitrage, Ed Felten co-founder and chief scientist of Offchain Labs told Blockworks.&nbsp;



“It does this by using a special type of sealed-bid auction so that transactions can bid for position within a block. Because the auction is sealed-bid, users cannot front-run others’ transactions,” Felten said.



Timeboost collects fees generated by the chain so that it can identify and manage revenue disposition, Felten explains.&nbsp;



“Transactions submitted to the chain can optionally carry a bid, which is a premium that the transaction is agreeing to pay for each unit of layer-2 gas it uses, above the regular layer-2 gas price,” he said.&nbsp;



Within a block, bids are sorted from highest to lowest, and higher transaction bids will be placed in an earlier sequencer block.



The team at Offchain Labs has been looking into Timeboost transaction ordering for over six months and has <a href="https://arxiv.org/pdf/2306.02179.pdf#:~:text=TimeBoost%20is%20transaction%2Ddata%2Dindependent,created%20by%20an%20FCFS%20policy.">published</a> technical papers on their progress.&nbsp;



“We are now working alongside Offchain Labs on further research around Timeboost and undertaking implementation and integration of the module,” Fisch said.



Fisch added: “The final version of Timeboost will likely be a modification of the protocol described in the paper, favoring a discretized approach to ordering rather than continuous.”



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Offchain Labs, Espresso Systems link up on transaction ordering tech

Blockchain scaling and privacy infrastructure company Espresso Systems will release its third testnet of the Espresso Sequencer for OP stack builders.



The testnet, named Cortado, will include work for an Optimism Request for Proposal (<a href="https://github.com/ethereum-optimism/ecosystem-contributions/issues/63">OP RFP</a>) that aims to decentralize sequencers.&nbsp;



Rollup solutions today run their own sequencers that have their own execution environments. These sequencers are responsible for ordering transaction information that is then sent to a virtual machine.



To ensure there is no single authority that orders these transactions, projects such as Espresso Systems are exploring ways to diversify these sequencers.&nbsp;



The initial release will be a locally hosted demo version of an OP stack rollup running on Espresso that enterprises can test.&nbsp;



Over the coming weeks, a publicly hosted canonical OP stack testnet will be released. This testnet will be similar to the testnet <a href="https://blockworks.co/news/shared-sequencer-tech-goes-live">Doppio</a>, which went live in July, according to Jill Gunter, chief strategy officer at Espresso Systems.



This publicly hosted testnet will be deployed in partnership with Caldera. The one-click rollup deployment allows developers to choose the different layers to build a blockchain.



<h2 class="wp-block-heading">Decentralizing sequencers before decentralizing fraud proofs</h2>



A popular narrative within crypto circles raises the concern that without fraud-proofs — a mechanism that can challenge the accuracy of a transaction — shared sequencing solutions will still have to include potentially fraudulent transactions in a rollup sent to the layer-1.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Optimistic rollups without fraud proofs are just google sheets with extra steps <a href="https://t.co/KavMYbuN8T">https://t.co/KavMYbuN8T</a>&mdash; joseph.eth (@josephdelong) <a href="https://twitter.com/josephdelong/status/1690537453961064448?ref_src=twsrc%5Etfw">August 13, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Gunter told Blockworks that decentralizing a sequencer does not mitigate the need for fraud proofs, but the two play separate important roles.&nbsp;



“Decentralizing the sequencer will help mitigate the risk that this centralized entity running the sequencer is going to be persistently ignoring transactions or leaving them out,” Gunter said.



Although it’s understandable that there are debates as to whether or not the development of shared sequencers should be prioritized before fraud proofs have even been shipped, Gunter believes that all of these different aspects play an important role in ensuring that blockchains become more decentralized.



“Eventually these things will all need to be on the roadmap,” she said. “A big part of what our motivation has been at Espresso Systems is to help rollups accelerate the roadmap towards mainstream adoption.”



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A shot of Espresso, please: Blockchain scaler to offer third testnet integration

Darren Kleine

Espresso co-founder Jill Gunter recalls Ethereum’s ICO token heyday, when she first tried to buy into a token sale.&nbsp;



Comparing the experience to the ruthlessly competitive efforts to acquire Taylor Swift tickets, Gunter felt compelled to “keep putting in higher and higher fees to try and get my transaction actually accepted.”



Gunter says it was then that she realized that the nodes running <a href="https://blockworks.co/tag/ethereum">Ethereum</a> were operated by “actual humans,” who could insert their own transactions and front-run the crowd. “Or, they were just asking for astronomically high fees in order to get your transactions into the system.”



“I thought that this was a fair, decentralized system,” she says, “what are the dynamics at play here?”



Speaking to Chase Chapman on the On the Other Side podcast (<a href="https://open.spotify.com/episode/2HTo8Yze50fPqDTCavy80A?si=eEZWMpCqSteh-ou-zj04yg">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/86-journey-of-a-transaction-w-jill-gunter/id1570685120?i=1000626194735">Apple</a>), Gunter delves into the complexities and pitfalls of Ethereum’s transaction environment.&nbsp;



The ICO token sale, Gunter says, was her first interaction with maximum extractable value, or <a href="https://blockworks.co/news/sandwich-attack-mev-ethereum">MEV</a>. It’s a buzzword, Gunter explains, that describes the value that participants operating the system can extract from it by ordering transactions in a way that favors them.



Naive crypto users might imagine transactions entering a waiting room and then getting picked up in an orderly manner, Gunter says. In reality, she explains, certain network participants can insert transactions between multiple sets in order to capture arbitrage between two decentralized orders or frontrun a transaction if it’s set at an unfavorable price.



“You as a user,” Chapman adds, “are now having to deal with, basically, miners who should be relatively neutral but are no longer neutral because they&#8217;re playing this weird meta game.”



“What does it mean that they should be neutral?” Gunter asks. “Part of the reason why this works is because there&#8217;s this game theoretic around this.”



“There are these surprise dynamics that then we have to figure out,” she says. “As the architects of these systems, how do we want to approach this?”



“What we&#8217;ve seen crop up are all kinds of approaches to <a href="https://blockworks.co/news/cow-swap-mev-problem">mitigate the negative effects of MEV</a>, this notion of extractable value from smart or clever ordering of transactions.”&nbsp;



Gunter mentions the example of specialized actors who build blocks and order transactions in a way that makes “maximal economic sense,” performed independently from nodes in a process called proposer builder separation (<a href="https://blockworks.co/news/ethereum-transactions-frozen">PBS</a>).



“There&#8217;s an interaction that happens between the builder and the proposer now, and this is actually the case for how most Ethereum transactions work today.”



<h2 class="wp-block-heading">“I&#8217;ve been lied to all of these years”</h2>



It seems counter-intuitive, Gunter says, “because you might hear, ‘Oh, there are these specialized players who are just taking all the value.’”&nbsp;



But the idea is to figure out how to make the system as efficient as possible, Gunter says, and then determine ways to redistribute that value back to users while combating monopolistic tendencies.



“When I first found out about this, my mind was blown,” Gunter says. “I was like, ‘I have no idea how anything works.’ I&#8217;ve been lied to all of these years.”



“It&#8217;s not actually that nefarious, rest assured, but this is indeed again, how most of Ethereum actually does function today.”



Gunter acknowledges, “there are no perfect solutions to this that we&#8217;ve come up with.”&nbsp;



“We have this decentralized open source financial infrastructure that we&#8217;re building,” Gunter says. She contrasts the open transparency of Ethereum development with the “Wall Street Flash Boys dynamic,” where no one knew that a few specialized firms were secretly frontrunning the stock market for years. It was this phenomenon that inspired the name of MEV mitigating organization, <a href="https://blockworks.co/news/flashbots-frontrunning-protection">Flashbots</a>.



“I am very glad and grateful that all of this research is going on and that these issues are being addressed and discovered out in the open.”



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Chapman observes the double edged sword nature of transparency in blockchain. “So many things in the crypto ecosystem are so transparent that sometimes <a href="https://blockworks.co/news/tokenomics-reverie-myles-oneil">it feels like we have way more problems than anyone else does</a>.”



“But really we just know. We can all see everything. All our shit is out in the open and everyone&#8217;s like, ‘that is not great.’ And I think that does push us forward.”



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Espresso’s Gunter on tackling Ethereum’s MEV problem

Jacquelyn Melinek

<div id="highlights-block_6226535075d81" class="highlights">
 <ul>
 <li>The company will use the capital to grow the team and its products, including its Ethereum Virtual Machine application</li>
 <li>Espresso plans to create bridges between Ethereum and other major chains so the line between layer-1 and layer-2 can be “blurred,&#8221; its co-founder and CEO told Blockworks</li>
 </ul>
 
</div>



A scaling and privacy solution for Web3 applications, Espresso Systems, is making its debut to the public with a $32 million funding round.



“Scaling and privacy solutions are both evolving at a rapid pace, and we are excited to contribute to the progress,” Ben Fisch, co-founder and CEO at Espresso Systems, said to Blockworks.&nbsp;



The investment was led by <a href="https://greylock.com" target="_blank" rel="noreferrer noopener">Greylock Partners</a> and Electric Capital with participation from Sequoia Capital, Blockchain Capital and Slow Ventures. Other groups backing Espresso Systems include Polychain Capital, Alameda Research, Coinbase Ventures, Gemini Frontier Fund, Paxos and Terraform Labs.



Espresso is developing layer-1 blockchain infrastructure that will provide low-fee transactions through its integration of a proof-of-stake consensus protocol with a zero-knowledge (ZK) rollup mechanism, which can use ZK proofs to bundle transactions and lower resources to process them.



ZK-proof technology is among the leading candidates to scale the Ethereum blockchain through solutions such as StarkWare and zkSync. Espresso intends to keep interoperability at the core of its plans, for example, by creating bridges between Ethereum and other major chains so the line between layer-1 and layer-2 can be “blurred” and benefit from its scaling and privacy properties in the future, Fisch said.&nbsp;



The company will use the funding to grow the team and its products. Its first product to be released is an Ethereum Virtual Machine application, known as Configurable Asset Privacy for Ethereum (CAPE). It would enable creators of digital assets, such as ERC-20 tokens on Ethereum, to add a privacy-mode switch to their assets so transactions can be seen by select parties, Fisch said. 



“For example, a stablecoin provider could offer their users the option to hide their stablecoin transactions from public view in a way that still enables the provider to meet their reporting and risk management needs,” Fisch noted.



In general, scaling has already been a necessity for many Web3 applications as transaction demand has driven up prices on networks, Fisch said. But as traffic migrates to more scalable platforms that interoperate with ecosystems, such as Ethereum, fees for Web3 applications should drop, too, he added.&nbsp;



Separately, Electric Capital, one of the co-leads for Espresso’s funding round, raised a <a href="https://cms.blockworks.co/electric-capital-raises-1-billion-to-launch-crypto-venture-token-funds/" target="_blank" rel="noreferrer noopener">$1 billion fund</a> last week to invest in decentralized autonomous organizations (DAOs), non-fungible tokens (NFTs), decentralized finance (DeFi) and decentralized infrastructure and accessibility into Web3. This investment is symbolic of the venture capital firms’ commitment to the last point, as decentralized infrastructure ramps up across the crypto ecosystem. 



“Existing solutions make tradeoffs when it comes to decentralization, and we are excited to push the industry forward with an approach that achieves both low-fees as well as the properties of decentralization this industry is founded upon,” Fisch said.



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