Decentralized Sequencing

Spicenet is fully committed to the decentralisation of the sequencer. We propose "Deca", the proposed decentralised sequencing protocol for Spicenet, that is performant, scalable and consensus-free. At the core of Deca is a sequencer auction mechanism that collects bids from various participating sequencers, and elects the most optimal sequencer, as part of the State Transition Function of Spicenet. Let's understand in depth how this works.

At genesis, the protocol configures a parameter called the "increment", which is the amount of batches that sequencers can bid to sequence. For example, if the increment value is set to 10, sequencers can bid to sequence only the next 10 batches of the protocol. The core auction protocol facilitates placement of bids by interested sequencers within a timeframe referred to as the "window". Once the window is completed, the auction protocol computes the most optimal sequencer depending on 2 factors

• The bid placed by the sequencer

• The reputation score of the sequencer

Once a sequencer is elected, his bid is collected, and rest of the bids are refunded back to auction participants. Assuming the value of the increment value is N, new sequencer auctions are held every N-1th batch. For example, if the increment value is set to 10, sequencer auctions are held every 9th, 19th, 29th batches and so on. Fault attribution rules stay unchanged. For example, if a sequencer includes unsigned transactions, his stake may be slashed, with 50% of the stake being burned, and 50% returned to protocol treasury(as per current configuration).

Then what about the bid? The sequencer bid is collected pre-sequencing, and is akin to a fee collected by the protocol in return for selling sequencing rights to the sequencer. In other words, the bid can be thought of as a compensation paid by the sequencer for acquiring sequencing rights from the protocol. For this endeavour to be successful for the protocol, we create this visualization

bid_collected_from_sequencer >= estimated_value_of_sequenced_batch[n..n+N]

, where n corresponds to the batch number where a sequencer started sequencing batches, and n+N is the increment. We call the latter variable as "estimated" because the bid is made pre-sequencing, and hence the value of batches to be sequenced is unknown. Hence all participants in the auction are making speculative bids of what the value of batches they are about to sequence will be, by analyzing various factors, such as value of previous batches produced, current demand(transactions) in the network, etc. An optimal bid would be where

bid_collected_from_sequencer = estimated_value_of_sequenced_batch[n..n+N]

However, every bid also has a second component, which we refer to as the "premium". The premium is an amount paid on top of the optimal bid, done in order to acquire sequencing rights in a highly competitive sequencing marketplace.

In conclusion, at the core of Spicenet's decentralised sequencing marketplace is the auction, which accepts bids from interested sequencers. Sequencers are selected as a function of the value of their bid, and the reputation of the sequencer. Bid collected from the sequencer is used to secure the economic interests of the sequencer to sequence the batches for which he acquired the rights for(and not skip it), and the stake of the sequencer is used to secure the economic interests of the sequencer in not conducting malicious behaviours while sequencing batches.