State of Decentralization in Layer 2s

There are an increasing number of Layer 2s (L2s) being deployed on Ethereum, aiming to capture a slice of the market for increased transaction throughput. To date, there are at least 20 different rollups, each with at least $10 million in total value locked (TVL). There is a cumulative total of $11.9 billion in TVL across all existing rollups. Considering the significant TVL on L2s, it stands to reason that the security of these L2s is of paramount importance. L2s are touted to inherit most of Ethereum’s security, with marginal trade-offs depending on their design choices.

However, one other important aspect that often goes neglected is the state of decentralization of these rollups. There are three main types of decentralization that are critical to L2s: sequencers, proposers, and governance. Sequencers handle the processing of transactions on L2, while proposers are responsible for batching and submitting transactions from L2 to L1. Governance is primarily for ensuring the continued development of L2s.