Layer 2 summer is starting to heat up with positive news continuously coming out of the Ethereum Foundation leading up to the Merge. This guide has explored 3 optimistic rollups Optimism, Arbitrum, Boba, but the focus today is on the 4th of the arguable “Big 4” of optimistic rollups, and currently the cheapest rollup, Metis.
Metis has developed an Optimistic Rollup solution to bundle and sequence transactions on Layer 2 and then send that data back as one transaction to the Ethereum Layer 1 as its consensus layer. This way, Metis is able to offer extremely fast transactions that take just a few seconds and cost just a few cents, while still maintaining the security of Ethereum Layer 1. Optimistic Rollups work by assuming that, unless challenged, transactions are valid. The transactions, if challenged, can be checked and thereafter verified through the use of computation.
Metis is a hard fork of Optimism, namely forking the Optimism Virtual Machine (OVM) into a VM it calls the Metis Virtual Machine (MVM). What that means is the Metis team used Optimism’s underlying code base, while implementing additional features and changes that differentiate it from Optimism. The MVM mirrors the OVM in function and code execution. Transactions are sent to the sequencer and then published. Transactions published by the sequencer are considered valid directly on the mainnet and are named optimistic from there. Arbitrum and Optimism process transactions with a centralized sequencer essentially act as centralized operators, although it must be said that both Arbitrum and Optimism have verbalized plans to decentralize their sequencers as part of the roadmap of each protocol. Additionally, both Optimism and Arbitrum allow users to run verification nodes and challenge the central sequencer freely.
Unlike Arbitrum and Optimism, however, Metis has multiple sequencers that will be pooled into on-chain entities called Decentralized Autonomous Companies (DACs). Each Metis block, the protocol will randomly select a new sequencer from the sequencer DAC to push any state changes to Ethereum. Metis’ sequencer pool and selection process contrast the single-sequencer approach that Arbitrum and Optimism use.
The network allows users to participate in the policing of the protocol as “Rangers”. Rangers analyze a range of blocks and validate the state roots in return for token rewards. A successful challenge can be made by submitting a fraud proof, which results in a slashing of the sequencer, penalizing the sequencer and taking staked assets from it. These slashed assets are transferred to the Ranger who initiated the dispute process. Repeated failed challenges by a Ranger can result in them being kicked out of the network.
The challenge process is critical to the function of optimistic rollups. Optimistic rollups are “optimistic” by design, assuming that no posted transaction is fraudulent. They essentially use an “innocent until proven guilty” approach that depends on a “checks and balances” system to discourage fraud and ensure Ethereum remains the arbiter of truth. All fraud detection on Metis occurs through Rangers surveilling sequencer activity and challenging any misbehavior.
The main drawback in using optimistic rollups is the long wait time to confirm a withdrawal back to Ethereum’s Layer 1 (or even another layer 2). These wait times are essential to the fraud detection process, but they also may reduce flexibility for users and create friction when attempting to move funds to Ethereum or between different L2s. Metis’ multi-party fraud detection system allows it to shorten the time for state change confirmations from several days to several hours. Sequencers are financially incentivized to avoid issuing fraudulent state changes (getting caught leads to the slashing of staked METIS), and Rangers receive a financial reward for correctly reporting sequencer fraud attempts.
How is Metis Different?
While Metis uses a fork of Optimism’s OVM, it has a few characteristics that aim to improve the original design. These features include:
Decentralized Autonomous Companies (DACs)
Metis DACs governance structure differs from DAOs, since DAOs focus solely on voting and governance. By contrast, Metis DACs are designed to function as fully operational companies with business-related tasks such as payroll, marketing, and others, implementing all of the basic functionalities you see in a ‘real world’ company.
Metis DACs also enable the assignability of special permissions or role delegation to different participants, allowing everyone to have a different impact identified roles and permissions. This role delegation complements another DAC feature that allows other DAC participants to assess the roles of other members in the ecosystem.
Interplanetary File Service Integration
Data storage on Ethereum and Bitcoin is costly due to their limited block space. Metis conserves on-chain space by allowing each DAC to run a separate MVM instance with a built-in storage layer that uses Interplanetary File Service (IPFS). Users and developers can access content from Metis through the IPFS resolver of the MVM.
Storing and accessing data in this way has two potential benefits. First, data could be encrypted within the Metis protocol, allowing users to store confidential information. Second, the IPFS Resolver enables Metis applications to access and link directly to stored data, such as an NFT’s underlying artwork or music.
The fact that content in the IPFS is uniquely identified, and that if the data in any piece of content changes its CID also changes with it, means that data in the IPFS network is immutable. These CIDs are just a few bytes long, and can be stored on-chain and used in smart contracts to point to data stored in the IPFS network. With this functionality, there is no longer a need to store large chunks of data on-chain anymore. The only thing stored and managed on-chain becomes the CID of the corresponding data.
Polis Middleware
Middleware is software that provides common services and capabilities to applications outside of what’s offered by the operating system. Data management, application services, messaging, authentication, and API management are all commonly handled by middleware. Middleware helps developers build applications more efficiently. It acts like the connective tissue between applications, data, and users. - Metis
Blockchain middleware sits between the low-level blockchain protocols (either L1 or L2), and the application interfaces. Polis Middleware aggregates several of the middleware services that developers use to build smart contracts. It eases the management, maintenance, and interaction of smart contracts.
Not financial, legal or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. All opinions expressed are solely those of the individual author. This newsletter is not legal advice and does not create an attorney-client relationship. This newsletter does not constitute tax advice. Talk to your independent attorney and/or accountant for any questions specific to you. Always do your own research and use caution when interacting with smart contracts or the blockchain. At the time of writing, @AdamETH_ does not own any METIS tokens.