With Imminent Cancun Upgrade, How does Metis Make Layer 2 Truly “Decentralized”?

Guess the riddle of a crypto project: “L2 in MEME, MEME in L2.” You might see through it at a glance—it’s the current hot Ethereum ecosystem Layer 2, Metis.

According to L2 Beat data, this L2 project, involving Vitalik’s mom Natalia Ameline and her friend Elena Sinelnikova, currently has a TVL (Total Value Locked) exceeding $500 million, with a growth rate of 416%. It has risen to the top four in Ethereum Layer 2. Along with the soaring TVL, the token price has also surged, with a 30-day increase of over 300%.

What drives the spiraling rise of Metis TVL and token price?

With the approaching Ethereum “Cancun Upgrade” in the first quarter of 2024, Layer 2 projects are rushing into investors’ radar. Compared to large L2 networks like Arbtrum and Optimism with a circulating market value of $3 billion, Metis, with a market cap of only $300 million, is considered more cost-effective by investors. Additionally, Metis has its unique strength—an decentralized sequencer.

The mainstream design architecture of existing Ethereum Layer 2 involves outsourcing the computational demands of smart contracts to external servers, and ultimately settling the results (fraud proofs or zero-knowledge proofs) on the Ethereum network.

These servers, known as sequencers, receive unordered transactions from users, process them off-chain into batches, generate compressed ordered transactions, and then send them to Ethereum. The sequencer is considered the soul of L2.

A harsh reality is that the current mainstream Layer 2 solutions, including Arbitrum and Optimism, primarily run on networks with centralized sequencers. The reason is simple: running your own centralized sequencer is more convenient, user-friendly, and cost-effective.

However, this approach contradicts the decentralized spirit that cryptocurrencies have always advocated. It also introduces issues such as whether the sequencer may act maliciously, insert transactions, or cause MEV (Miner Extractable Value).

Metis has decided to break through in the field of decentralized sequencers. They are set to test a decentralized PoS sequencer on the Sepolia testnet, with community testing scheduled to begin on January 3, 2024.

In the current difficult-to-reverse trend of centralized sequencers, Metis is taking the lead in launching a comprehensive attack on decentralized sequencers. The question is whether this initiative can accelerate the decentralization of sequencers in the L2 space, sparking a new wave of innovation.

This article aims to explore the opportunities and challenges in the future of the L2 space by comparing projects in the L2 space based on the technological innovation and ecological development approach of Metis.

First Decentralized POS Sequencer: Inherent Drive Injected by Staking Incentive Mechanism

It is not an exaggeration to say that the centralization issue of sequencers in the L2 space has reached an irreversible stage. On the one hand, most L2 solutions currently run centralized sequencers, and the attitude toward implementing decentralized sequencers is ambiguous. Entities like the OP Foundation and Arbitrum Foundation run centralized sequencers themselves. Although they have proposed solutions for decentralized sequencers to appease community demands, the development process of decentralized sequencers has been exceptionally slow due to the lower threshold and cost of operating centralized sequencers and the substantial profits they generate.

On the other hand, the urgency of implementing decentralized sequencers is pressing. Centralized sequencers not only contradict the decentralized nature of blockchain but also pose significant risks. Once a failure or attack occurs, the entire L2 network will be affected. Moreover, sequencers determine the order, content, and structure of packaged transactions. Centralized sequencers could potentially act maliciously to maximize their arbitrage opportunities, capture MEV (Miner Extractable Value) value, or even fully censor user transactions.

Admittedly, human nature is challenging to change when it comes to seeking profits. Therefore, the design of decentralized sequencers needs to understand both the market and human nature. Grasping the profit-seeking nature and designing solutions accordingly is an inexhaustible internal drive for the stable and long-term operation of decentralized sequencers.

Metis introduces a decentralized PoS sequencer solution with a staking mechanism, providing a combination of underlying technical support and incentive structures.

In Metis’s design, there is initially an administrator (Admin) role. As the name suggests, the administrator is a rule-maker responsible for setting important parameters in the decentralized system. This includes incorporating qualifying sequencers into the sequencer pool, setting the release rate of block rewards, and more.

The sequencers in the sequencer pool are responsible for determining the order, content, and structure of packaged transactions. When there are multiple sequencers, at least 2/3 of the sequencers’ signatures are required to submit the packaged batch to the Rollup contract on L1.

To prevent malicious behavior by sequencers, there is also a validator role to sample and verify blocks. This involves checking if the order of transactions has been swapped and if there are any maliciously inserted transactions, among other things.

The entire process can be loosely compared to a principal (administrator) selecting a group of qualified teachers to become examiners (sequencers), creating exam questions and submitting them to the school. With the consent of 2/3 of the teachers’ signatures, an accepted standard answer to the exam questions is formed. Additionally, a monitoring teacher (validator) will randomly check the examiners to supervise if there is any misconduct, such as leaking questions.

Metis decentralized PoS sequencer operation

This sequencer, implemented as a solution involving multiple entities, achieves true decentralization, showcasing Metis’ insight into market demands and timely responses. However, another question to consider is: what motivates more people to participate in decentralization?

Metis provides the answer with the Staking incentive system.

Firstly, the operators entering the sequencer pool need to stake at least 20,000 METIS. Once in the sequencer pool, participating sequencers in block production will receive substantial token rewards. The 20,000 METIS threshold has multiple positive implications:

• For stable system operation: On the one hand, it aims to verify if the sequencers can actively participate in network operations. On the other hand, it serves as a deterrent; if sequencers engage in malicious behavior, their staked assets will be slashed.
• For ecosystem development: In the current limited L2 token application scenarios, the staking mechanism not only increases the utility of METIS tokens but also further reduces the already limited circulating supply of METIS. This has a very positive catalytic effect on ecosystem development.

For validators, they receive token rewards for validating blocks. Additionally, if malicious behavior by sequencers is detected, a portion of the slashed assets from the sequencers is awarded to the validators. This indirectly enhances the motivation for validators to earn more income through validation.

In terms of attracting broader participation, the Metis ecosystem will also introduce some Staking dApps to serve ordinary users who do not have enough funds to enter the sequencer pool. They can stake their tokens with trustworthy sequencer operators to earn profits. Sequencer operators, in turn, need to allocate a portion of their earnings to support their users to attract more staking support.

In this way, a stable decentralized sequencer operation framework that involves widespread participation, transparent oversight, and benefits for each participant is emerging.

Beyond incentives, Metis’s practical implementation of the Staking mechanism also leads us to delve deeper into the utility issues of native L2 tokens. For a long time, the application scope of native L2 tokens has hovered within the governance domain, prompting many to question the necessity of native L2 tokens. How to endow native L2 tokens with more utility has become a challenging issue for many projects. By introducing Staking in 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 currently in the theoretical stage, but it will soon face the community’s scrutiny. On December 27, 2023, Metis is set to conduct decentralized PoS sequencer testing on the Sepolia testnet and commence community testing on January 3, 2024. Users can earn points through testing dApps, Learn to Earn, and other methods. Different point levels offer various types of NFTs, and users can ultimately receive community testing airdrops based on NFTs.

Metis encourages widespread community participation to better test network robustness, identify weaknesses, and drive further improvements to the decentralized PoS sequencer solution.

Hybrid Rollups: OP VS ZK In the melee, you can have your cake and eat it too.

Of course, in the fierce L2 competition, Metis’s innovation is not only the decentralized PoS sequencer, Hybrid Rollups are also worthy of in-depth study.

Looking back on the development of the L2 track in the past two years, OP has taken advantage of the open source technology stack and derivative projects have blossomed everywhere, and the airdrop gameplay has set off multiple rounds of community craze; ZK’s advantage lies in more rigorous mathematical proofs and higher security, and also has zkSync, Starkware Projects such as Optimism and Arbitrum can compete with Optimism and Arbitrum; other new projects are almost all derived from OP series and ZK series technical solutions. This inevitably brings about the problem of homogenization of L2 project technology, highlighting the respective technical shortcomings of OP and ZK in a broader sample of projects:

• Optimistic Rollups are fully compatible with the Ethereum Virtual Machine (EVM), and off-chain transaction processing is faster and more cost-effective. However, due to the OP’s default assumption of transaction validity, there is a security risk. Furthermore, the presence of a challenge period for submitting fraud proofs prolongs the time for final confirmation of transactions.
• ZK Rollups, using zero-knowledge proofs for verification, offer higher security and have no challenge period. Transactions can achieve final confirmation more quickly. However, achieving EVM compatibility is more challenging, and generating proofs requires higher off-chain computation costs.

Source: Metis Medium

In the repeated trade-offs between security and efficiency, the two originally competing factions have begun to seek integration and complement each other. Hybrid Rollups have emerged as a result, gradually becoming the future trend in the eyes of many industry professionals. Many projects have embarked on the path of exploring Hybrid Rollups based on their own characteristics. For example, in July of this year, the stablecoin protocol Frax Finance introduced the Layer 2 network Fraxchain, which is a typical representative of Hybrid Rollups. Additionally, the lightweight blockchain protocol Mina has applied its zero-knowledge proof technology based on MIPS zkVM to OP Stack fraud proofs.

This trend of inclusivity has also captivated Metis. As early as March 2023, Metis emphasized Hybrid Rollups in its publicly released roadmap.

This mechanism, while retaining the Optimistic Rollup architecture, introduces Zero-Knowledge Fraud-Proof (ZKFP). Compared to traditional fraud prevention mechanisms that require the re-execution of all transactions, ZKFP only requires the submission of a single ZK proof to prove the Rollup. Checking a single ZK proof is easier, lower in cost, and more efficient in handling and verifying 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 proof generation, the prover submits the proof to L1. If not submitted or if the smart contract determines that the conditions are not met, the validator will initiate an anti-fraud process, and the tokens staked by the sequencer may be subject to penalties.

Metis Hybrid Rollups operation diagram

In terms of specific implementation ideas, Metis integrated the MIPS instruction set in the design of Hybrid Rollups.

Since the EVM instruction set introduces new commands and deprecates old commands over time, this change is very challenging for any developer who wants to build and use a standardized instruction set, so Metis chose to do it on the basis of MIP Optimized to form a customized zkMIPS specifically for ZK proof. Compared to traditional ZK proof integration, zkMIPS can also create recursive proofs, allowing multiple proofs to be aggregated into a more manageable unit, which is more efficient and cost-effective.

In July this year, Metis also announced the incubation of the zkMIPS project ZKM: ZKM uses the MIPS instruction set to implement zero-knowledge proof (ZKP) security for all virtual machines (VMs) and applications from the CPU level, and supports a variety of blockchain smart contract engines. The plug-and-play feature allows developers to apply ZKP without changing the code base, reducing adoption costs. Leveraging Ethereum’s decentralized security infrastructure, ZKM can verify all blockchain and non-blockchain transactions.

Certainly, Metis understands the importance of EVM for ecosystem development: EVM compatibility not only attracts a large number of mature Ethereum ecosystem developers seamlessly into the Metis ecosystem but also allows developers to benefit from the vast array of practical tools, development tutorials, and infrastructure in the Ethereum ecosystem. Based on this, Metis introduced the Rollup solution for the Metis Virtual Machine (MVM): MVM’s design is almost identical to EVM but with key improvements, such as separating computation and storage functions. This design not only opens up the Metis ecosystem to the wider EVM universe but also reduces gas costs and shortens withdrawal waiting time.

In this way, Metis not only retains the advantages of the OP series, achieves EVM equivalence, and provides developers with an easy coding environment, but also promotes the finality and security advantages of the ZK series, shortening the transaction finalization time from 7 days to approximately 4 hours and greatly improved safety. For developers, Hybrid Rollups have lower barriers to entry and are more flexible; for users, Hybrid Rollups are safer and more efficient.

Compared to 2021, the current state of L2 technology has matured considerably, thanks to the innovation and progress made by leaders in the field. As a member of this group, Metis demonstrates its forward-thinking approach in understanding and designing decentralized sequencers and Hybrid Rollups. In the ecosystem development field, Metis is also a pioneer in responding to the needs of users and developers.

From the perspective of users, multi-dimensional economic incentives promote the blooming of projects in the ecosystem

The construction of Layer 2 is like building a shopping mall. The gradual implementation of technical issues is like setting up a steel frame for the shopping mall, providing a solid guarantee for the prosperity and development of the shopping mall. The main body of the transaction is the user, so the prosperity of the shopping mall depends on investment. Like attracting customers, the prosperity of L2 is also reflected in two aspects:

• How to attract more developers into the ecosystem, build projects and carry out continuous innovation;
• How to attract more users to enter the ecosystem, participate in the ecosystem and be interested in continuous exploration;

Various Layer 2 projects have already gained valuable experiences in this competition for user attention. For example, Optimism conducted multiple rounds of airdrops, attracting widespread attention. Subsequently, with the introduction of the OP Stack open-source components, it gradually constructed its super-chain universe. Arbitrum actively onboarded leading DeFi projects like Uniswap, Aave, Curve, and 1inch, bringing a significant user base to Arbitrum. BASE, a Layer 2 project backed by Coinbase, gained popularity by launching the phenomenon-level application FriendTech. The founder of Blur introduced the Layer 2 network Blast, which surpassed a TVL of 600 million in just nine days with its RWA native revenue model.

With years of experience in the Layer 2 track, Metis understands the conventional strategies for ecosystem development. While adhering to basic strategies, it focuses on low entry barriers and high returns, continuously expanding its ecosystem from both user and developer perspectives.

For users:

Reducing the entry barriers to the ecosystem is the primary goal of attracting users. Therefore, every Layer 2 project places significant importance on the development of the ecosystem’s “wallet,” and Metis is no exception. Currently, mainstream wallets like MetaMask, Trust Wallet, imToken, TokenPocket, and OKX Web3 Wallet already support Metis. Users can seamlessly interact with various dApps in the Metis ecosystem without incurring additional learning costs through these wallets.

Reducing the cost of participating in the ecosystem can accumulate positive user feedback. With the clever design of Hybrid Rollups, the transaction experience in the Metis ecosystem is both efficient and secure. Additionally, Metis has integrated a decentralized storage solution, MemoLabs, making its transaction fees tens of times lower than Optimism and Arbitrum. ETH transfers cost less than $0.01. Although, in the future, as Metis transitions its DA layer to the ETH mainnet, transaction fees may rise slightly but will remain within an affordable range, and transaction security will be further enhanced.

Source: l2fees.info

Rich ecological participation options are the key to attracting users to stay for a long time: According to Layer2 Station data, Metis has more than 100 ecological applications, including DeFi, wallets, NFT and other sectors, as well as Aave, SushiSwap, and Stargate, which are well-known DeFi applications. They have attracted a large number of users to Metis in the early stage of entry, and also provided more playability for Metis ecological users.

Source: Twitter @Layer2_Station

Metis’s project name is derived from the Greek mythology goddess Metis, the goddess of wisdom. Therefore, it’s common to find projects within the Metis ecosystem named after Greek goddesses, creating an interesting and memorable connection for the community. For example, Maia, a DeFi yield enhancer, derives its name from the Greek goddess of fertility (Μαῖα), and Hera Finance, a Dex aggregator, is named after the Greek goddess Hera (Ἥρα)…

In the future, Metis will continue to focus on ecological diversity, attracting more DeFi, GameFi, SocialFi, and NFT projects to join, further enriching the ecosystem and providing users with a diverse experience.

Capturing the user’s profit-oriented mentality is the key to gaining traffic. Airdrop strategies were once a widely discussed topic in the L2 community, and Metis conducted extensive airdrops early in 2021. The upcoming community test of the decentralized PoS sequencer (January 2, 2024) will also provide substantial rewards for community members actively participating in the test.

Beyond airdrops, Metis ties rewards to ecosystem participation with the launch of the Metis Advocate Program. Community members who align with Metis’s development philosophy and possess content creation abilities and social media influence can apply for the program, contributing to Metis’s development and receiving corresponding rewards.

In September 2023, Metis announced a $5 million DeFi incentive plan, Metis Journey, to motivate active DeFi participants. As part of this initiative, 100,000 METIS tokens will be allocated to incentivize Aave users to provide liquidity on Metis, including ETH, METIS, USDC, USDT, and DAI. Such incentive programs are designed to enhance user participation and attract more users to the ecosystem.

Furthermore, with the implementation of the decentralized PoS sequencer, regular users can share block mining rewards by staking their tokens with the sequencer operator.

For developers, low technical barriers eliminate a significant learning curve. By preserving the Optimistic Rollup architecture, Metis provides EVM equivalence, enabling a seamless entry for Ethereum developers into the ecosystem.

Thoughtful technical services help developers avoid pitfalls. Like many mature projects in the technology sector, Metis showcases comprehensive technical documentation, development tutorials, and related tools on its official website. The developer community facilitates technical exchange and learning, with prompt responses from professional technical personnel to assist new developers.

In addition, Metis is generous with financial support for developers. The Bug Bounty program on the official website, dedicated to smart contracts, offers a long-term effective reward system with a maximum reward of $100,000. Additionally, Metis regularly organizes hackathons to discover promising projects and support developers with funding, technology, and marketing.

This week, Metis announced a $100 million ecosystem development fund, with 4.6 million METIS allocated for sequencer mining support, fund tracing, deployment of new projects, and other initiatives. The fund will focus on projects in DeFi, RWA, SocialFi, NFT, cross-chain technology, smart contract development, blockchain security, decentralized identity and privacy solutions, and gaming, so as to accelerate the growth of its ecosystem.

Source: Twitter @MetisDAO

Heading into 2024: Embracing multiple milestones

In the roadmap announced at the beginning of the year, the Hybrid Rollup upgrade series is also the focus of Metis. The official team revealed that ZKM will be available to everyone in the first quarter of 2024.

In addition, another important milestone for Metis is the upcoming community testing event of the decentralized PoS sequencer.

The first phase of the testing campaign will last for two weeks (January 3 - January 17, 2024) and is designed to encourage users to interact with Metis dApps deployed on the Sepolia testnet:

• Hummus Exchange
• Netswap
• Tethys Finance
• Native liquidity staking protocol for METIS tokens
• More…

As the first project to implement a decentralized sequencer, community members closely following the development of decentralized sequencers have high curiosity and expectations for this community test. Metis’s social media platforms will release more tutorials and reward details during the event, which will also feature a series of rewards tied to airdrops. Interested users are encouraged to stay tuned.

In the upcoming year 2024, Metis will focus on the launch of the decentralized POS sequencer in the first quarter. Moving into the second quarter, Metis will accelerate the deployment of Hybrid Rollup on the testnet. By the third quarter, Metis’s dual-layer governance structure of Common + Eco Node will officially launch.

Looking at the overall Metis ecosystem: just a few days ago, Metis’s TVL was around $240 million, with approximately 470,000 wallet addresses and around 2,000 on-chain daily active addresses. However, this week, Metis’s TVL has surged to $355 million, showcasing the positive impact of the gradual realization of the aforementioned milestones on Metis. This also fuels the community’s great imagination about the future of Metis.

On one hand, the allocation of tokens to investors and the founding team has already been fully unlocked. Monitoring on-chain wallets reveals that institutions have gradually started to divest. Compared to other L2 projects that still have a large portion of institutional and team tokens in reserve, Metis is considered an excellent investment target in the eyes of many key opinion leaders (KOLs) in the L2 space.

On the other hand, with the launch of the decentralized PoS sequencer and under the guidance of the incentive mechanism, not only will sequencers choose to stake 20,000 METIS to earn block rewards, but users will also choose to stake tokens and share profits with sequencers. This will enhance the utility of the token, and Metis may usher in a period of rapid development.

Image source: l2beat.com

In the upcoming year 2024, Metis is poised to achieve multiple milestones. With the accelerated progress of its ecosystem development, Metis may seize the opportunity to challenge and join the top tier of Layer 2 (L2) alongside the four major players (Arbitrum, Optimism, zkSync, StarkWare).

Conclusion

As the voices for decentralized sequencers rise and developers explore Hybrid Rollups in-depth, it is evident that the L2 landscape is showing a trend towards decentralization and consolidation.

Going with the flow, one can make rapid progress. Perhaps in the current L2 competition, it is essential to make smarter choices based on trends, continuously innovate with an inclusive mindset, lead projects to break out, and drive the industry to a new level.

The name “Metis,” derived from ancient Greek (Μῆτις), represents the goddess of wisdom in Greek mythology. The name is a clever choice, symbolizing the project’s positioning and expectations. It may also imply Metis’s wise layout and choices in the competitive landscape of L2:

By wisely avoiding the competition and internal conflicts between OP and ZK, Metis has keenly targeted Hybrid Rollups. Firmly committed to decentralization, it provides a dual guarantee for the stable operation of decentralized PoS sequencers through both technology and incentive mechanisms.

This wisdom extends to the ecosystem. As the saying goes, a bear market is the best time for building. Metis’s ecosystem construction has gradually improved from infrastructure to various types of dApps. With breakthrough developments on the horizon in the current bullish market, Metis is preparing to welcome an influx of users and funds.

Certainly, the L2 War is just beginning, and with the arrival of a new bull market, facing the opportunities and challenges in the market, we look forward to Metis’s performance and anticipate the emergence of more innovative solutions in the L2 space.

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