The Case for Application Specific Sequencing | Ben Livshits & Terry Chung

In the evolving landscape of blockchain, the focus is on application-specific sequencing and the interplay between execution and settlement layers. Ben Livshits and Terry Chung from Eclipse discuss the modularity of blockchain solutions, emphasizing the need for innovation within the community and the challenges posed by Layer 1 (L1) fee structures. They highlight Eclipse's position at the intersection of Ethereum and Solana, aiming to attract developers by leveraging the strengths of both ecosystems.

The conversation explores the significance of liquidity and user engagement in determining the success of settlement layers, with Chung arguing that user experience often outweighs the perceived security of L1s. They note the fragmentation in liquidity, users, and developers, which complicates decision-making for application builders. Livshits mentions that the future architecture of Eclipse may resemble a stack-type model, optimizing for DeFi activity and generating revenue through sequencing and congestion fees.

Chung introduces application-specific sequencing (ASS), where applications control the order of their transactions, allowing them to capture revenue from transaction ordering. This model aims to ensure that applications receive a fair share of profits, fostering innovation at the application layer. The discussion also addresses the challenges of implementing ASS across different virtual machines, particularly the Solana Virtual Machine (SVM) versus the Ethereum Virtual Machine (EVM).

The potential drawbacks of ASS, such as reduced composability and revenue loss for L1 validators, are acknowledged. The need for a specialized marketplace for transaction bundles is also noted, as traditional interactions may not function seamlessly within ASS frameworks. Both speakers express optimism about ASS redistributing value back to applications, countering the trend of L1 stakeholders retaining excessive profits, while also raising concerns about centralization and the risk of monopolization by dominant applications.

The conversation shifts to the future of Miner Extractable Value (MEV) and its expected transition towards applications, with applications paying congestion fees for block space. The importance of improving the developer experience, particularly for Rust developers, is emphasized to attract talent to blockchain programming. The impact of L1 construction and culture on L2 ecosystems is significant, with different L1s influencing their L2 strategies.

The distinction between application-specific chains and general-purpose chains is becoming blurred, as platforms evolve to attract broader markets while still specializing. The incentive for platforms to expand beyond a single application is clear, as capturing value encourages integration of additional applications. The conversation underscores the importance of user growth and the balance between specialization and generalization in the blockchain ecosystem, highlighting the ongoing evolution in response to market demands.