Layer-2 package series must be decentralized or face the consequences
More than 50% of all Ethereum-based transactions took place on Layer-2s (L2s) in the first half of June 2024. In terms of transaction count, Ethereum (ETH) L2s surpassed Layer-1s (L1s) for the first time.
Package-averaged Denkun (EIP-4844) update played a key role in strengthening the development of Ethereum L2s. The TVL of the L2 ecosystem reached $48.2 billion – an all-time high – shortly after the implementation of the EIP-4844 mainnet. More than 90% of this TVL comes from packaging.
But while it provides a wider range of data to wrap the deck around, it doesn't solve their inherent problems. Many packages still use centralized series to achieve higher voltages and performance.
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It rejects the blockchain's decentralized ethos. Users face potential censorship and significant security risks. Lives are at stake. And one entity can extract all of the network's accumulated value.
Yesterday's FUD is today's solved problem on Ethereum, and scrolls can't provide satisfaction when it comes to chain decentralization. There is an urgency here as users increasingly choose L2 over L1, raising the stakes.
Lessons from Linea
Users lost more than $2.6 million in ETH on Linea – a Consensys-backed zkEVM package – due to an exploit by a third-party decentralized exchange on June 2.
Most concerning, however, was the group's unanimous decision to “protect users and developers of censorship-resistant addresses” within the ecosystem.
Alex Gluchowski, CEO of Mather Labs, weighed in on the situation, saying, “Ignoring the serial sequencer is not an option. Each serious L2 stack must compete to be first.
They should take immediate action in this direction. The incident at Linnea showed a sense of gentleness.
High-ranking officials from the Linea group asserted their position by comparing themselves to elders who were far removed from the decentralized power movement. “With not many rollup frameworks that are more than 2 years ahead of us, I'm very pleased with our progress,” product lead Dylan Fox wrote on X.
The idea that we are better because others are worse is dangerous for our industry. It stifles growth and extends the risk window for consumers, investors and developers.
Yes, L2s are still in the “training wheel phase” and require special protections. But one-way decisions can no longer be a “last resort” to shut down networks for hours.
Things have changed rapidly in the past two years. We are now at least able to implement basic versions of technically decentralized series and community incentive frameworks.
Thus, it has become a question not of ability but of purpose and priorities.
No more excuses.
If L2s don't start taking off their training wheels now, they never will. Centralization is profitable because it serves the interests of the operator above all else and makes life easier for the executive.
Decentralization, on the other hand, is challenging and requires new efforts. But once the initial hurdles are overcome, the organization/project and the community will benefit greatly.
While direct participation in network security and management fosters a deep sense of community, users also find new sources of income, such as stream mining.
Meanwhile, the ‘self-reinforcing model' reduces security costs for companies and project owners. Also, higher community participation means it starts a cycle of more attention and better security, so more dApps and creators enter the space. This creates positive network effects and overall prosperity.
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If not for MEV-deployment purposes, most of the rolls would refer to serial decentralization, citing latency issues and their impact on the user experience. Rollover users want fast transactions and centralization is the cost they pay for it. Such arguments can meet the likes of Visa, but not native to Web3.
As developers of the future, the onus is on us to change the mindset of the community. Post-sequential averaging shows that DEXs dealing with constant liquidity can accept a small delay if users are given appropriate incentives and rewards.
In addition to enhancing security through liquidity and the like, serial decentralization aligns the different goals of L2s' short-term investors (speculators) and long-term contributors.
Revenue sharing models such as stream mining prevent users from leaving the network immediately after receiving airdrops or other freebies. In addition to creating a direct link between community engagement, network security, and ecosystem growth, this solves an industry-wide user retention problem.
From technical precursors like Liquid Staking Tokens (LSTs) to practical prototypes, everything is now on hand – so much so that even Bitcoin L2s are getting ready to offer mining rewards through a decentralized chain.
The L2 position must contain OGs or it will well and truly pass. Excuses and half-baked promises of decentralization will not work. Users have valid options and vote with their tokens.
Those who are early on this journey will get the benefit they deserve. But since the strength of the ecosystem lies in holistic development – not fragmentation – it is best if each stakeholder and package project moves in a coordinated manner and adopts progressive norms.
Short-term gains must give way to sustainable, long-term innovation. This is the path to a decentralized future for all.
Tom Ngo is the CEO of Metis, the Ethereum Layer-2 Blockchain. He previously served as CFO at Eon Advisory and partner at Katana Tommy Group.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
