Expansion has always been the main task in the blockchain world.

After years of competition and contention, Layer 2 solutions based on Rollup have emerged from many scalability paths and gradually become the mainstream choice in the market. According to L2BEAT data, there are currently 40 operational Layer 2 networks, with 37 networks to be launched, and a total of $28.07 billion in locked assets.

Although from the perspective of the mainnet launch, major Layer 2 solutions have been in the public eye for some time, in a more absolute technical sense, in fact, all current Layer 2 solutions have not yet achieved their intended visions. The most fundamental problem is that, except for the main focus of this article, Metis, all mainstream Layer 2 networks currently lack a decentralized "sequencer."

The Plight of Sequencers

The sequencer is a critical component of the Rollup chain. Its responsibility is to sort and compress Layer 2 transactions, and then batch them and send them to Layer 1.

Currently, the sequencers of the majority of mainstream Layer 2 networks are operated by centralized entities associated with the development teams. This raises both technical barriers and concerns about the distribution of benefits.

The fees collected by sequencers from Layer 2 transactions are revenue, the gas consumed to send the data back to Layer 1 is a cost, and the remainder is the profit of the sequencer. In addition, sequencers can also generate additional MEV income by manipulating transaction order. This is a considerable income, ranging from millions to hundreds of thousands of dollars per month. Some Layer 2 solutions choose to redistribute this portion of revenue back to the developer community through additional mechanisms, while others have not yet publicly disclosed the details of income distribution.

Although logically speaking, it is feasible for centralized entities operated by the team to operate the sequencer, but in terms of decentralization, it still poses potential risks and limitations.

The sorting engine in general does not have any malicious motives on its own network, but this mechanism relying on inexplicable trust is obviously inconsistent with the concept of blockchain and objectively weakens the network's ability to resist risks and its degree of decentralization.

The Journey and Challenges of Metis

On December 18th last year, Metis officially launched the MetisEDF development plan, which aims to allocate 4.6 million METIS tokens (currently worth approximately $400 million) for further community growth, of which 3 million will be distributed as "mining" incentives to decentralized sorting engine nodes that maintain the network's operation.

On January 16th this year, Metis launched the first season of community testing activities for decentralized sorting engine on the Sepolia test network. In the testing activities, users can test Metis' POS sorting engine pool by exploring various Dapps, and they will also receive corresponding test point rewards. In the end, the first season of testing activities attracted more than 195,000 contributors, completed over 4 million transactions, and accumulated over 500 million test points.

On February 5th, Metis once again launched the second season of community testing activities and announced that the decentralized sorting engine will be officially launched on the mainnet later in 2024.

Although everything seems to be going smoothly, Metis still faces a major challenge in realizing the true "decentralization" of the sorting engine--how to involve more users in the construction of the decentralized sorting engine.

The core issue of this challenge is that in order to prevent malicious behavior by nodes, Metis sets a high threshold for becoming a sorting engine node. To become a sorting engine node for Metis, the basic requirement is to stake 20,000 METIS tokens. Once malicious behavior is discovered, the tokens staked by the node will be confiscated. In addition, Metis has also set strict election and whitelist mechanisms for becoming sorting engine nodes, which further increases the difficulty for ordinary users to become sorting engine nodes.Metis The original intention of this design is to ensure the quality of the nodes and maintain the stable operation of the network, but it objectively restricts users from helping the network to further decentralize by becoming sorters.

• Note: For details on the rules of the Metis decentralized sorter node, please refer to: "Metis: The Strong Dark Horse in Layer 2, Layer 2 Competition in the MEME Narrative"; "Metis: The First Decentralized Pos Sorter in Layer 2, with Strong Qualifications".

So, how can this challenge be addressed? Metis is turning its attention to the Liquidity-Staking-on-METIS (LSD) protocol.

Will LSD be the solution?

On February 8th, Metis announced the launch of the Liquid Stake Blitz program, which aims to leverage the MetisEDF ecosystem development fund, with a total of 4.6 million METIS, to accelerate the growth of the LSD protocol and LSD-focused products on the Metis network.

According to the Liquid Stake Blitz program, from February 8th to the end of February, the LSD protocol in the Metis ecosystem will be able to initiate proposals within the Metis community governance system and enter the formal voting phase in March. After the voting is completed, a limited number of winning proposals will have the right to be paired with decentralized sorter nodes (i.e., whitelist seats) and therefore obtain stable node participation qualifications.

The Metis governance system shows that three LSD protocols, namely Enki, Accumulated Finance, and Artemis, have initiated proposal applications in the governance forum. Although all three protocols support the basic METIS liquidity staking function, they have differences in mechanism design and accompanying services. Enki builds a sustainable economic system around the protocol and the Metis network by using derivative tokens eMETIS, staking tokens seMETIS, and governance token ENKI. Accumulated Finance focuses more on integration with the Curve ecosystem to solve the liquidity problem of derivative token stMETIS. Artemis emphasizes a single derivative token (artMETIS) model and provides the simplest sorter node participation solution for user operations.

Taking Enki, which submitted the earliest proposal, as an example, when users use Enki, they will receive liquidity derivative token eMETIS with a corresponding staking limit after staking METIS. eMETIS can be used to participate in various DeFi activities on the Metis network, and Enki will use the staked METIS to participate in the node operation of the decentralized sorter and distribute the sorter's revenue to all users who participate in staking through Enki. In this way, a large number of users who cannot reach the 20000 METIS threshold can "accumulate little by little" and "crowdfund" a stable node seat through Enki, collectively obtaining and sharing the sorter node's revenue.

This mechanism is similar to the LSD protocol Lido on the Ethereum mainnet, both of which can solve the staking threshold problem on the respective networks. The difference is that Lido provides PoS staking node services at the Layer 1 level, while ENKI provides sorter node services at the Layer 2 level.

Three-layer Wealth Creation Opportunities

One is to participate in staking through LSD such as Enki, Accumulated Finance, Artemis, etc. to obtain at least 20% annualized stable sorter income. (The first opportunity is to participate in staking through LSD protocols such as Enki, Accumulated Finance, and Artemis, and get a stable sorter yield of at least 20% annualized.) - The second is the airdrop rewards and token incentives of the LSD protocol itself. (The second opportunity is the airdrop rewards and token incentives of the LSD protocols themselves.) -

(Unordered list)

• Note: ENKI revenue opportunities can be found in the "Understanding Metis' first LSD protocol Enki: Genesis Airdrop Plan Launched".

The third point is the most important - the amplification of the utility and value of LSD protocol for METIS itself. As Metis introduces the staking of METIS into the decentralized sequencer implementation process, the METIS token already possesses actual utility and value that other Layer 2 tokens do not have (other Layer 2 tokens currently mainly have governance utility).

With the promotion of LSD solutions like ENKI, the utility and value within the Metis community is expected to further expand, creating a positive growth flywheel: lower threshold, more users participate in staking - more METIS tokens locked - METIS supply reduced, demand increases - potential increase in secondary market price - increased staking revenue - attract more users to stake... Of course, this will not be a permanent cycle, but it is highly probable that METIS will find a balance at a higher level, and all parties within the ecosystem will benefit in this process.

Layer 2 Trend Is Here, Metis Leading the Way

Since choosing to focus on the decentralized sequencer process, Metis has embarked on a development path that is different from other Layer 2 solutions. It is precisely because of this unique choice that METIS has outperformed many Layer 2 tokens in terms of growth in 2023 and has surpassed several Layer 2 solutions that have previously achieved significant funding.

Looking ahead, with the implementation of the LSD solution, the enthusiasm of the Metis community to collectively participate in the operation of the decentralized sorter will be greatly mobilized, which is also expected to further enhance the vitality of the Metis ecosystem and help the network continue to achieve accelerated development.