Bessie Liu

Shared sequencer solution Espresso will partner with Ethereum layer-2 scaling solution Polygon Labs to develop AggLayer (aggregation layer) in order to solve rollup interoperability.



AggLayer was first introduced in January. It is designed to solve the fragmented liquidity problem in the blockchain space by centering scaling UX on one single, unified aggregation layer. AggLayer is similar to Risc Zero’s <a href="https://blockworks.co/news/risc-zero-zkevm">“Type 0” zkEVM, Zeth</a>, a general-purpose programming language that can be EVM equivalent.



Both solutions are designed to enable transaction verification across multiple chains. In the case of AggLayer, the protocol uses a process called “proof aggregation” to ensure that transactions across its ecosystems are valid.&nbsp;



Read more: <a href="https://blockworks.co/news/polygon-zkevm-type-1-prover">Polygon zkEVM prover reaches Type 1 status</a>



According to Polygon Labs documents, all transactions will be <a href="https://polygon.technology/blog/aggregated-blockchains-a-new-thesis">guaranteed</a> on AggLayer without having to depend on a third-party bridging solution.&nbsp;



In the long term, <a href="https://blockworks.co/tag/polygon">Polygon</a> hopes that when a rollup creates a message for a destination chain, it will also create a validity proof that verifies its accuracy instantaneously.



That’s one problem that Anurag Arjun, the founder of Avail, and his team are hoping to resolve.&nbsp;



Arjun notes that although cross-chain communication is great for users who belong to the same ecosystem, once they leave the ecosystem, they are likely to receive a “subpar experience.”&nbsp;



Read more: <a href="https://blockworks.co/news/avail-fundraise-addressing-interoperability">Avail raises $27M, readies entrance into modular narrative</a>



“If you want to really bring these <a href="https://blockworks.co/tag/rollups">rollups</a> together, you need two things primarily,” Arjun told Blockworks. “You need a proof of ordering — the transaction data ordering — in the sense that if a rollup has committed to a certain order of the transactions, you need some guarantees for that. That is what Avail validity proof [data availability sampling] provides. And then you need the execution proofs, which are provided by the rollup themselves.”



The distinction that needs to be made is that proof aggregation itself is not enough, and transaction ordering of these rollups is equally important, Arjun said.&nbsp;



“So when you combine ordering guarantees with the actual execution proof, then that is why we are able to do this orchestration — connecting these rollups,” he explained.



However, the state of proving at this point in time is not yet at the speed of real-time verification, and all interdependent rollups must be created, aggregated and verified jointly before they are settled on <a href="https://blockworks.co/tag/ethereum">Ethereum</a>.



This is where Espresso comes in. Espresso will be the coordinator that unifies the interdependent rollups before they are settled onto Ethereum.&nbsp;



Ben Fisch, the CEO of Espresso Labs described the collaboration efforts between <a href="https://blockworks.co/tag/espresso-systems">Espresso</a> and Polygon as pivotal for both ecosystems.



“Our respective teams have been thinking deeply about layer-2 interoperability over the last year — it’s amazing to see our solutions converge in such a synergistic way. Polygon’s AggLayer and Espresso’s coordination layer are perfect complements,” Fisch told Blockworks.



Marc Boiron, CEO of Polygon Labs, shares this sentiment. He told Blockworks he believes this new partnership will synergistically elevate interoperability within Ethereum&#8217;s layer-2 environment.



&#8220;While the AggLayer guarantees the integrity of data exchange among Ethereum <a href="https://blockworks.co/tag/layer-2-2">layer-2s</a>, Espresso&#8217;s sequencing marketplace optimizes this process by enabling efficient coordination and fast transaction finalization across multiple Ethereum layer-2s,” Boiron said. “This integrated approach markedly enhances the fluidity and user experience of transactions within Ethereum&#8217;s layer-2 network.”



Espresso&#8217;s latest partnership with Polygon on AggLayer shows the progress of the modular approach to scaling Ethereum, one that stands in contrast to what, for instance, the Nil Foundation is working to achieve with sharded layer-2s.



Misha Komarov, the founder of Nil Foundation, previously told Blockworks that it aims to take a protocol-level approach to interoperability by embedding the sequencer into the protocol to make it capable of sending transactions between different shards.&nbsp;



Read more: <a href="https://blockworks.co/news/ethereum-rollup-zksharding-nil-mainnet">New Ethereum rollup takes a zero-knowledge approach to sharding</a>



“So basically, that means it keeps them all composable, it keeps them all together, it keeps the liquidity unified. It&#8217;s like no separation, no Balkanization of ETH is happening, in fact,” Komarov said.



In simpler terms, the two approaches can be viewed as vertical versus horizontal scaling, though they combined features of both to varying degrees.



“ZkSync and Polygon pursue vertical scaling — layer-2s and layer-3s — [while] on our side, we pursue horizontal scaling,” he said. “We kind of say, okay, modularity can be done in a better way. It might be not even the modularity anymore.”



Whichever approach ultimately prevails, there is a widespread recognition that the fragmentation of UX and liquidity that currently prevails across many Ethereum scaling efforts is an impediment to adoption.



“This whole industry is a competition of ideas,” Komarov adds. “A competition of who gets the better idea and the first one who gets there — the implementation of it — captures the market.”



Macauley Peterson contributed reporting.



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Espresso partners with Polygon Labs to solve rollup interoperability 

Espresso Systems, a blockchain scaling and privacy infrastructure company most widely known for its shared sequencer solution, has secured $28 million in a Series B funding round led by a16z crypto.



This latest funding will be used to continue product development, broaden investments in the rollup ecosystem and scale the Espresso Systems team.



Sequencers on layer-2 scaling solutions create blocks by ordering and processing transactions in a mempool. These processed transactions are then sent to a virtual machine.



Today, most sequencers are run by <a href="https://blockworks.co/tag/rollups">rollups</a> in their own execution environments, which can introduce trust assumptions and centralization concerns.



Read more: <a href="https://blockworks.co/news/offchain-labs-steven-goldfeder">Offchain Labs’ Goldfeder talks Timeboost, transaction ordering and more</a>



To combat this, Espresso Systems has introduced what it calls the shared sequencer network. This is a chain-agnostic, distributed consensus system that rollups can use to ensure that no one single authority can order transactions.



Ben Fisch, the CEO of Espresso Systems, told Blockworks that “shared sequencing enables rollup users to regain the experience of being on one <a href="https://blockworks.co/tag/ethereum">Ethereum</a> chain, while turning this into a decentralized marketplace for shared sequencing preserves the sovereignty and independence of individual rollups.”



<a href="https://blockworks.co/tag/espresso-systems">Espresso</a>’s specialized proof-of-stake system, HotShot, acts as a distributed consensus system that multiple different rollups can use. This means that the sequencer itself will no longer be bundled within its own software stack.&nbsp;



Read more: <a href="https://blockworks.co/news/shared-sequencer-tech-goes-live">First shared sequencer tech to go live on Polygon zkEVM testnet</a>



“From an economic perspective, a sequencer that purchases the right to produce blocks for multiple rollups at the same time can generate surplus revenue, which comes from enabling interactions across rollups that wouldn’t exist otherwise, and that surplus value flows back to rollups participating in the marketplace,” Fisch said.



So far, Espresso’s technology has been integrated via the Gibraltar testnet with <a href="https://blockworks.co/news/espresso-systems-decentralized-sequencer-testnet">popular scaling solutions, including Optimism</a>, <a href="https://blockworks.co/news/shared-sequencer-tech-goes-live">Polygon zkEVM</a> and most recently, Arbitrum. A fifth testnet is anticipated to be released in April.



Read more: <a href="https://blockworks.co/news/testnet-launch-arbitrum-integration-developers">Espresso Sequencer’s fourth testnet launch integrates with Arbitrum</a>



“In April, we’ll be releasing our fifth testnet — Cappuccino. Cappuccino will be further decentralized, include various robustness enhancements and set the stage for the Espresso marketplace. The evolution from Espresso as a single decentralized shared sequencer to a marketplace for shared sequencing is critical to rollup sovereignty and value capture,” Fisch said.



In addition to the fifth testnet, the Espresso team is looking to incorporate new features and integrations into its infrastructure solutions.



“Apart from the HotShot finality gadget, we are also hard at work on the Espresso marketplace, which will enable rollups to sell sequencing timeslots to shared sequencers through a combinatorial auction,” Fisch said. “The marketplace will also give special participation rights to Ethereum layer-1 proposers so that based rollups can utilize Espresso as well. Preconfirmation software will also enable shared sequencers to make slashable commitments to satisfy more complex cross-chain user intents.”



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Espresso lands $28M to become marketplace for shared sequencing

Gibraltar testnet, Espresso System&#8217;s fourth testnet launch, is now publicly available for Arbitrum developers.



The blockchain scaling and infrastructure company is known for its decentralized sequencer solution.&nbsp;



Sequencers are responsible for processing and ordering transactions from a mempool into blocks that are then sent to a virtual machine. They can be compared to validators on monolithic blockchains or layer-1 networks, and play an important role in securing the network.&nbsp;



The problem with sequencers today is that many rollups run their own sequencers with their own execution environments, and zero-knowledge solutions run their own provers. Thai introduces trust assumptions and centralization concerns — which <a href="https://blockworks.co/news/shared-sequencing-blockchain-rollups">many consider antithetical to crypto</a>.&nbsp;



Espresso’s solution to this concern lies in its shared sequencer network — a distributed consensus system shared between rollups — which has so far already <a href="https://blockworks.co/news/espresso-systems-decentralized-sequencer-testnet">been integrated with Optimism</a>, Cartesi and <a href="https://blockworks.co/news/shared-sequencer-tech-goes-live">Polygon zkEVM via testnets</a>.&nbsp;



Read more: <a href="https://blockworks.co/news/shared-sequencer-tech-goes-live">First shared sequencer tech to go live on Polygon zkEVM testnet</a>



Ian Sagstetter, the community and marketing lead at <a href="https://blockworks.co/tag/espresso-systems">Espresso</a>, told Blockworks that this latest Arbitrum stack integration through Gibraltar will enable users to submit transactions for rollups between the different networks using the Espresso sequencer.



“It also paves the way for enabling improved interoperability between rollups, because shared sequencing can provide better atomicity guarantees and economically secure pre-confirmations when compared to cross-chain transaction rollups not sharing a sequencer,” Sagstetter said.



This will not be the first time that Espresso Systems will be partnering with Arbitrum. It has previously partnered with Offchain Labs, the infrastructure team behind Arbitrum, to develop a roadmap for the transaction-ordering technology Timeboost.



Read More: <a href="https://blockworks.co/news/ethereum-espresso-systems-offchain-labs-transaction-ordering">Offchain Labs, Espresso Systems link up on transaction ordering tech</a>



In addition to making it possible for Arbitrum developers to test their dapps using the shared sequencer network, the Gibraltar testnet will also see external node operators run the network for the first time.&nbsp;



These external nodes will be operated by the Blockdaemon team, who told Blockworks that this infrastructure will support the “hyper-scaling and seamless interoperability in the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> ecosystem.”



As part of the release, Caldera and AltLayer, protocols that facilitate the deployment of <a href="https://blockworks.co/tag/rollups">rollup</a> solutions, will also ensure that any rollup that deploys on Gibraltar will be fully integrated with Espress’s shared sequencer network.



&#8220;Shared sequencing is going to be a massive unlock for rollup interoperability and decentralization, and it&#8217;s great to see Espresso Systems leading the charge to make this a reality,&#8221; said Matt Katz, CEO of Caldera. &#8220;We&#8217;re excited to support the Espresso Sequencer through deploying numerous rollups that are integrated with the shared sequencer.&#8221;



Espresso Systems is not the only team that is building a shared sequencing network today. Astria is another team that is hoping to enable developers to deploy censorship-resistant rollups, though much of its work has been focused on bootstrapping Celestia’s rollup ecosystem.&nbsp;



Josh Bowen, the co-founder of Astria, told Blockworks in an interview that Astria has not put any resources toward supporting alternative data availability layers and does not intend to do so in the near future.



“By and large, the project has since day one been a heavily Celestia aligned project,” Bowen said. The decision to focus solely on the Celestia ecosystem was made by Bowen, who was one of the earliest employees at Celestia. 



Read more: <a href="https://blockworks.co/news/data-availability-transaction-costs-blockchain">Celestia, the first modular data availability network, launches on mainnet</a>



“Celestia is very much trying to increase growth, they have this target they want to work towards — having one-gigabyte blocks, they want to maximize the throughput you can get theoretical network, and that’s been appealing to me, and has very much been carried on to Astria,” he said.



The Espresso sequencer collaborates with various established <a href="https://blockworks.co/tag/layer-2-2">layer-2</a> solutions on Ethereum. In contrast, Bowen notes that Astria&#8217;s shared sequencer work focuses on a different aspect. It aims to provide developers with opportunities to utilize the abundant block space available on Celestia.



“Fundamentally, what we see kind of as the goal of Astria is to provide whatever developer tooling is necessary to allow people to build rollups on top of Celestia,” he said.



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Espresso Sequencer’s fourth testnet launch integrates with Arbitrum

Offchain Labs, the research and development team behind Ethereum scaling protocol Arbitrum, has had a busy few months.



Recent milestones include the launch of tools for developers to launch their own Abitrum chains through <a href="https://blockworks.co/news/arbitrum-validation-protocol-permissionless">Arbitrum Orbit</a>, the introduction of a <a href="https://blockworks.co/news/arbitrum-validation-protocol-permissionless">permissionless validation protocol</a> and the release of programming environment <a href="https://blockworks.co/news/arbitrum-stylus-testnet">Abitrum Stylus</a>.



Today, Arbitrum is one of the largest Ethereum scaling platforms. It holds a market share of almost <a href="https://l2beat.com/scaling/summary">55%</a> and has a total value locked of $5.82 billion, <a href="https://l2beat.com/scaling/summary">according</a> to L2beat.



Most recently, the team <a href="https://blockworks.co/news/ethereum-espresso-systems-offchain-labs-transaction-ordering">partnered</a> with Espresso Systems, a decentralized sequencing layer, to further develop Timeboost — a transaction ordering technology optimized for improving first-come-first-serve tendencies in capturing maximum extractable value (MEV).



In an interview with Blockworks at Permissionless II, <a href="https://blockworks.co/tag/offchain-labs">Offchain Labs</a> co-founder Steven Goldfeder said that the decision to work with Espresso Systems was made so that credible, neutral third parties could help drive the scalability of Ethereum.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: Tell me about Timeboost and the decision behind partnering with Espresso Systems to bring the tech to life.



Goldfeder: Timeboost was a proposal that we at Offchain Labs had put out in a few iterations on Arbitrum research forums and elsewhere. The idea comes down to MEV ordering. Historically, there are different schools of thought about how to order transactions. On Arbitrum today, there’s “first come, first serve” ordering, but others say everything should be auctioned — this is the other end of the extreme — which is that you completely pay for ordering transactions in a mempool. Timeboost is sort of an in-between of these two camps, which basically says there are intervals that allow you to bid for placement and have the privacy of transactions built in.&nbsp;



We’re partnering with Espresso. We’re going to provide key research, and they’re going to actually build it out in a way that is compatible with the Espresso sequencer. The reason why we’re not building this out ourselves is because we have to understand the realities of what we build, and how that’s perceived, and the biases that are associated with that. We need something that is more neutral.



When it comes to interoperability, if every different rollup stack is building its own megachain, you don’t really accomplish much. Whether we open source it or not, other chains will not use something we built. I think if you really want to get interoperability, it is by building an Ethereum super chain. The way to do that is to empower credibly neutral third parties, putting our biases down for a second, and I think that’s actually best for the Ethereum community.&nbsp;



Blockworks: There’s a lot of MEV discussion around time-sensitive transactions versus non-time-sensitive transactions. So, with Timeboost’s guaranteed inclusion, how do you determine what transaction should be included? It seems like it would be pretty difficult to choose a good middle ground.



Goldfeder: So even today, before we get Timeboost, there’s this concept of forced inclusion on Abritrum chains. The forced inclusion on Arbitrum chains today is 24 hours, what that means is you can’t censor indefinitely but the sequencer can real-time censor or delay. I think the parameters about transaction inclusion will be up to the different chains that choose to adopt this [technology]. If the Arbitrum DAO adopts it, it can choose to set these parameters.&nbsp;



If you ask me what I think about Timeboost, the parameters we think about are more in the realm of a few seconds. The idea is that what we have today — the chain forcing the sequencer to do something — is very different from Timeboost where a distributed party, the sequencer, has logically agreed to do something. I think that lends itself to much shorter intervals of guarantees.&nbsp;



In a, let&#8217;s say, two-second interval, you can bid for timing, but every user will guarantee that its transactions are being processed quickly. If the Timeboost committee is behaving according to its principles, then that transaction will be included. If this whole time this committee colludes against you, you still can go on-chain and get this other guaranteed inclusion from on-chain.&nbsp;



Blockworks: Do you think shared sequencing is a more pressing issue than permissionless fraud-proof systems?



Goldfeder: No, not really. A lot of people don’t really know what decentralized sequencing means. Say for example with Abirtrum the sequencer has very limited power because there are fraud proofs. Sequencers can’t do anything security-critical. It can’t actually go ahead and steal your money or take it and put it back in a transaction — that’s validators. Validators will challenge one another if they do the wrong thing. Sequencers give you fast confirmations, but those don’t hold any weight on-chain.



In a validation system that doesn’t have any fraud proofs of validators, then the sequencer is basically the dictator. It can submit whatever fraud or whatever state routes it wants In some ecosystems, that is true, but it’s really more about the progress of the sequencer. I think the most important thing here is that decentralizing the security of the system — which Arbitrum does today — among about a dozen different institutions submitting fraud proofs or having the ability to challenge different fraud proofs if necessary. I think that is number one. When we launched Arbitrum, having fraud proofs was non-negotiable.



So, going back to what can a sequencer do? It can’t do anything like include a bad transaction. It can order transactions, but it can’t censor a transaction. It can delay a transaction, but it can’t, as we discussed before, censor indefinitely because there are paths to guarantee a transaction on-chain — and that’s where the decentralizing sequencers come in. 



I think that it’s an important problem, but I think that having live security proofs is more important, and that’s why we prioritize building the security proofs before the decentralization of ordering.&nbsp;



This interview has been edited for brevity and clarity.



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Offchain Labs’ Goldfeder talks Timeboost, transaction ordering and more

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.”



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG7260889606" width="100%"></iframe>







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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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Start your day with top crypto insights from David Canellis and Katherine Ross.</li>



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