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Chainlink Labs’ Chief Scientist Ari Juels Explains Fair Sequencing Service As A Natural Extension Of Decentralized Oracle Networks

The Chainlink network is built by pioneering blockchain experts using cutting-edge research to develop novel systems that advance the application of blockchain technology to create an economically fair world. Last week, during ETHGlobal’s MEV.WTF Virtual Summit, Chainlink Labs’ Chief Scientist, Ari Juels, presented one such concept outlined in the Chainlink 2.0 whitepaper: Fair Sequencing Service (FSS).

FSS is an innovative solution to the problem of miner-extractable value (MEV), a term that describes strategies, such as sandwiching or frontrunning, by which blockchain miners exploit arbitrary control over transaction order to their financial benefit – at the expense of individual users and the entire network.

MEV is a problem in existing L1 and L2 systems where miners have complete control over how transactions are ordered. This results in a centralized system that can be manipulated to the benefit of one party. The goal of FSS, which Juels explained with a simple analogy during the Chainlink 2.0 Whitepaper Research Panel, is to decentralize the process of ordering transactions.

Instead of allowing a single entity to order transactions, FSS gives a decentralized committee the power to order transactions on-chain through a collective off-chain decision-making process. Of course, Juels noted, this raises questions about how decentralized committees will be formed and where their members will come from.

The answer to these questions is the heart of what makes Chainlink the world’s leading decentralized oracle network.  

“What we’ve observed at Chainlink is that existing decentralized oracle networks are already good ready-made committees, with many of the trust properties that users are looking for to begin with,” Juels said. 

Chainlink decentralized oracle networks (DONs) are already providing secure, reliable data and a variety of decentralized services across a range of DeFi products and hybrid smart contracts that are revolutionizing industries like insurance and gaming.

“Another interesting observation is that ordering transactions is actually a very natural operation for an oracle network,” Juels said. The nature of DONs is to observe off-chain activity (e.g. fight times or price data) and relay an authoritative consensus on-chain. With FSS, DONs observe the submission order of transactions off-chain and collectively agree on an authoritative order that’s conveyed on-chain.

As such, Juels described FSS as “a very natural extension of what oracle networks are already doing today.”

Juels said the first phase of FSS design uses a notion of fairness called secure causal ordering, where encrypted transactions are submitted to the committee and cannot be decrypted or observed until they are ordered. “This works very well,” Juels said, “because it’s hard to frontrun something that you can’t see.”

However, secure causal ordering does not specify that transactions must be ordered according to how they are received. This, Juels said, is where Aequitas protocols, which order transactions according to the time they were received, enter the second phase of FSS development.

Ultimately, Chainlink FSS is a framework for implementing fair-ordering policies that support multiple different approaches to reducing various forms of MEV. Fair, decentralized transaction ordering has the potential to dramatically improve the user experience of hybrid smart contracts, which represents an enormous step in the shift toward a cryptographically guaranteed world.

Read more about FSS in the Chainlink 2.0 whitepaper.

Watch Ari Juels’ presentation at the MEV.WTF Virtual Summit.

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