What Are Enshrined Rollups & Based Rollups? All You Need to Know

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Layer two (L2) rollups are the most popular blockchain scaling solutions worldwide.

You have optimistic rollups like Arbitrum One (ARB) and Base and zero-knowledge (ZK) rollups like Starknet (ZK) and Scroll (SCR).

These networks have provided enough proof of concept to attract billions of dollars in capital and thousands of developers to their ecosystems.

But what if we told you that other types of rollups are currently being developed behind the scenes, with the potential to offer greater degrees of security and decentralization?

We are talking about enshrined rollups and based rollups. They are a complicated part of crypto, but it is an important area that will gain prominence in the years to come.

Let’s find out what they are and how they are different from optimistic and ZK rollups.

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Key Takeaways

  • Enshrined rollups and based rollups are upcoming rollup models that offer greater degrees of security and decentralization.
  • Enshrined rollups are non-smart contract rollups that are natively integrated into the core code of the underlying L1 protocol.
  • Based rollups are rollups where the transaction sequencing is handled by L1 validators.
  • A based rollup will execute transactions by itself but depend on the L1 to sequence and settle its transactions.
  • In May 2024, Taiko became the first based rollup to launch on Ethereum.

State of Play [curr_year]: Optimistic and ZK Rollups

Before we start, let’s briefly understand what is an optimistic rollup and what is a ZK rollup.

Rollups are blockchains designed to help layer one (L1) networks like Ethereum (ETH) scale. They allow L1s to handle more transactions at lower costs by processing transactions in a secondary layer while publishing summaries on the L1 for immutability and verifiability.

The major difference between optimistic rollups and ZK rollups is that the former assumes that all transactions are honest and valid, while the latter produces verifiable proof about the validity of the transactions using zero-knowledge technology.

Furthermore, optimistic rollups require users to go through a seven-day waiting period before allowing crypto withdrawals. This allows anyone to contest suspicious transactions. Meanwhile, ZK rollups have no such waiting period and offer fast finality, but they require extra computational power to create and verify transaction proofs.

What is an Enshrined Rollup?

Enshrined rollups are non-smart contract rollups that are natively integrated into the core code of the underlying L1 protocol. Like existing rollups, they perform transactions off-chain and post the summaries on the L1 chain.

Optimistic and ZK rollups, as we know them today, are smart contract-dependent L2 blockchains that depend on a smart contract to manage, update, and verify the state of its chain on the underlying L1.

So the point to understand is that enshrined rollups are not controlled by smart contracts. Instead, their logic is embedded into the underlying L1 code.

Enshrined rollups are still under development, so we have yet to see how this type of rollup can take advantage of its close integration with an L1.

According to popular crypto commentator Polynya, we could see a future where enshrined ZK rollups tap into an L1’s infrastructure and use existing L1 validators as rollup sequencers.

Sequencers are special full nodes in a rollup that are responsible for submitting users’ transactions onto L1.

Polynya said enshrined rollups are “no longer an L2”; instead, they get “all the immense technical benefits of rollups at the L1 level.”

Enshrined Rollups vs. Optimistic Rollups and ZK Rollups

The key advantages of enshrined rollups over existing smart contract-based optimistic rollups and ZK rollups are as follows:

  1. Governance – Enshrined rollups are governed by the L1 blockchain’s consensus rules. This means that enshrined rollups will automatically inherit the same protocol upgrades and changes of the underlying L1.
  2. Security – Enshrined rollups are more secure compared to existing optimistic rollups and ZK rollups because they don’t depend on smart contracts and bridges. As these rollups are integrated with the underlying L1 they inherit the security properties of the L1.
  3. Decentralization – Leading rollups like Optimism and Base are often criticized for the lack of sequencer diversity. With enshrined rollups, a rich set of L1 validators can participate in rollup function as sequencers.

Some disadvantages of enshrined rollups compared to existing smart contract-based optimistic rollups and ZK rollups are as follows:

  1. Slow upgrades – As the enshrined rollup is no longer independent enough to carry out its own upgrades, these rollups will have to wait for L1 community consensus to make changes to its protocol.
  2. Lack of sovereignty – The protocol that governs how an enshrined rollup functions will be completely dependent on the L1 consensus. Lack of sovereignty and slow upgrades could see enshrined rollups fall behind on innovation compared to smart contract-based rollups.
  3. Complexity and implementation – Enshrined rollups are more complex to implement compared to smart contract-based rollups. On Ethereum, an enshrined rollup can only be introduced through an Ethereum improvement proposal (EIP).

What is a Based Rollup?

Based rollups are rollups where the transaction sequencing is handled by L1 validators. A based rollup will execute transactions by itself but depend on the L1 to sequence and settle its transactions.

As we mentioned earlier, rollup sequencer centralization is a major topic of concern. Leading rollups such as Arbitrum One, Optimism and Base have only one sequencer node, at the time of writing.

Why would L1 validators sequence rollup transactions? Based rollups economically incentivize L1 validators, proposers and builders to extract rollup maximal extractable value (MEV) by including rollup blocks to the upcoming L1 block.

In May 2024, Taiko (TAIKO) became the first based rollup to launch on Ethereum (ETH). Ethereum co-founder Buterin commemorated the event by proposing the first Taiko block.

During Taiko’s mainnet launch, Ethereum Foundation researcher Justin Drake said:

“Taiko is based. It is making a leap forward in the decentralization, credible neutrality, and composability of rollups. The L2 is trailblazing based sequencing, a form of decentralized sequencing where L1 proposers are enrolled for L2 transaction ordering.

“Based sequencing is IMO the ultimate form of decentralized sequencing. By reusing the Ethereum base layer, based sequencing is the simplest to deploy and the simplest to reason about.”

Based Rollups vs. Optimistic Rollups and ZK Rollups

According to Drake, the main advantages of based rollups are:

  1. Liveness – Based rollups offer the same liveness guarantees of the underlying L1. Liveness in crypto refers to the guarantee that a protocol will finalize transactions and reach a consensus to build a block.
  2. Decentralization – Based rollups do not use centralized sequencer nodes, instead the base L1 chain manages transaction sequencing.
  3. Sovereignty – Unlike enshrined rollups, based rollups maintain their sovereignty and govern their protocol themselves.
  4. L1 economic alignment – L1 searchers, builders, and proposers are incentivized to extract MEV from the rollup.

Disadvantages of based rollups are:

  1. No MEV income – Based rollups give up MEV income to L1 validators, which reduces the revenue rollup network participants earn.
  2. Constrained sequencing – Sequencing delegation to L1 and MEV incentivization results in reduced sequencing flexibility, which makes it harder to provide fast pre-confirmations and first-come-first-served transaction sequencing.

The Bottom Line

A complicated topic, but an important one to the future of L1s and L2s.

Enshrined rollups and based rollups both look to solve security and decentralization problems plaguing the existing L2 landscape. However, each model comes with its own advantages and disadvantages.

You can read about Buterin’s vision to enshrine “protocol features” on Ethereum here. You can also learn how to analyze the maturity and decentralization of an L2 rollup here.

FAQs

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Mensholong Lepcha
Crypto Specialist
Mensholong Lepcha
Crypto Specialist

Mensholong is a experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has contributed with news coverage and in-depth market analysis to Capital.com, StockTwits, XBO, and other publications. He began his writing career at Reuters in 2017, covering global equity markets. In his spare time, Mensholong enjoys watching soccer, finding new music, and buying BTC and ETH for his crypto portfolio.