What is Arbitrum Sequencer, it’s important and limitations

The Sequencer is a specially designated Arbitrum full node which, under normal conditions, is responsible for submitting users’ transactions onto L1.

Important of Arbitrum Sequencer:

Proof of Authority: The New CeFi?

Sequencers, in this setup, act as centralized authorities. They temporarily control transaction ordering before it gets verified on the mainnet. Given the absence of fraud proofs, an Optimistic Rollup Stack with a centralized sequencer essentially leads to a form of "Proof of Authority."

Major centralized players like Coinbase and Binance have launched their Layer 2 solutions. They control the sequencers, gaining significant authority over transaction ordering and dispute resolution. So, while these L2 solutions offer lower transaction fees and higher throughput, they also drift back to a centralized structure. It's a trend that challenges the decentralization ethos and could signify the rise of a new form of Centralized Finance (CeFi).

Understanding sequencers and their impact becomes crucial as we navigate a rapidly changing blockchain landscape. The absence of fraud proofs and a centralized sequencer could either be stepping stones toward scalability or backtrack to centralization.

It’s Limitation

However, regardless of its form, the Sequencer has a fundamental limitation that doesn't apply to any other part of the system: it must operate under its own security assumptions; i.e., it can't, in principle, derive security directly from layer 1.