Understanding Sorters in One Article

Sorters are one of the most explicit mechanisms in cryptocurrencies for creating sustainable DAO-controlled income. Blockworks researcher Matt explains what a sorter is and why it is the foundation of any L2 token investment theory.

Each L2 has a centralized sequencer that collects some transactions, sorts them into a single batch transaction (a process called “building blocks”), and sends the merged transactions back to the Ethereum mainnet (called “block proposals”). Although today’s sequencers handle all these tasks, proposals and building are essentially different. In the future, sequencers may only be responsible for sorting (building) blocks, and different entities will send transactions to L1 (proposals).

For the following reasons, sequencers are able to generate significant income in the form of ETH (or other tokens): the difference between the cost of publishing calldata to L1 and the fees paid. The received MEV strategy sorts payments. Today, there is no MEV extraction sequencer online, and the difference between the cost of publishing calldata and the required fee is very low. Even at these meager profits, Arbitrum and Optimism have earned significant income from their sequencers.

Reference: https://twitter.com/blockworksres/status/1666116080245551104

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