Simply over 50% of all Ethereum-based transactions occurred at Layer 2 (L2) within the first half of June 2024. This was the primary time that L2 Ethereum (ETH) surpassed Degree 1 (L1) in transaction quantity.
The pooling-focused Dencun replace (EIP-4844) performed a key function in catalyzing the expansion of Ethereum L2. The TVL of the L2 ecosystem reached $48.2 billion—an all-time excessive—shortly after the implementation of the EIP-4844 mainnet. Greater than 90% of this TVL got here from aggregates.
However whereas Dencun makes a wider vary of knowledge accessible to abstract packages, it will not resolve their inherent issues. Most composite packages nonetheless use centralized sequencers to realize larger throughput and efficiency.
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This negates the spirit of blockchain decentralization. Customers face attainable censorship and critical safety dangers. Liveliness can also be at stake. And it’s attainable for one entity to get all of the accrued worth of the community.
Yesterday’s FUD is right this moment’s downside solved on Ethereum, and stacks cannot afford complacency about sequencer decentralization. There may be urgency right here as customers more and more desire L2 over L1, elevating the stakes.
Classes from Linea
Customers misplaced greater than $2.6 million in ETH on Linea—the Consensys-backed zkEVM conglomerate—as a consequence of a third-party exploit on the decentralized trade on June 2nd.
Extra regarding, nonetheless, was the group’s unanimous choice to droop the sequencer and “censor attacker addresses to guard customers and builders” within the ecosystem.
Matter Labs CEO Alex Gluchowski weighed in on the scenario, saying, “Sequencer decentralization shouldn’t be a should. Each critical L2 stack ought to be racing to do that first.”
They actually need to behave promptly on this course. The incident involving Linnea revealed naive complacency.
Senior officers from the Linea group justified their place by evaluating themselves to senior colleagues who had fallen behind within the decentralization course of. “On condition that most of the Rollup frameworks which might be greater than 2 years older than us usually are not far forward, I am more than happy with our tempo,” product supervisor Declan Fox wrote on X.
The perspective of “we’re the very best as a result of others are worse” is harmful for our {industry}. This impedes progress and extends the window of threat for customers, traders and builders.
Sure, L2s are nonetheless within the “coaching wheel part” and wish particular safeguards. However unilateral selections to close down the community for just a few hours can not be a “final resort.”
Issues have modified quickly within the final couple of years. We at the moment are technically capable of implement at the very least primary variations of the decentralized sequencer and group incentive construction.
So it grew to become a matter of intent and precedence, not capacity.
No extra excuses
If L2 do not begin taking off their coaching wheels now, they by no means will. Centralization is worthwhile as a result of it serves the pursuits of the operator first and makes life simpler from an enforcement perspective.
Decentralization, alternatively, is difficult and requires modern efforts. However as soon as the preliminary hurdles are overcome, each the agency/undertaking and its group profit drastically.
Whereas direct involvement in community safety and governance contributes to a deeper sense of group, customers additionally acquire new sources of revenue equivalent to sequencer mining.
On the identical time, the “self-reinforcing mannequin” reduces safety prices for organizations and undertaking house owners. It additionally initiates a cycle the place extra group involvement means larger stakes and higher safety, so extra dApps and innovators enter the area. This creates a constructive community impact and holistic prosperity.
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If it weren’t for MEV’s extraction motives, most bundles delay sequencer decentralization, citing latency points and their affect on consumer expertise. Rollup customers need quicker transactions, and centralization is the worth they pay for it. Such arguments could fulfill the likes of Visa, however not the Web3 natives.
Because the builders of the longer term, we’ve got the burden of remodeling the mindset of the group. DEXs seeing a gradual circulate of liquidity after sequencer decentralization reveals that customers can settle for a small improve in latency with correct incentives and rewards.
Apart from rising safety by way of liquid bids and the like, sequencer decentralization aligns the totally different targets of short-term L2 traders (speculators) and long-term depositors.
Income sharing fashions equivalent to sequencer mining stop customers from leaving the community instantly after receiving airdrops or different freebies. Along with making a direct correlation between group engagement, community safety, and ecosystem development, this solves the industry-wide consumer retention downside.
From technical primitives like Liquid Stake Tokens (LST) to purposeful examples, every thing is at hand proper now — a lot in order that even Bitcoin L2 is getting ready to supply mining rewards by way of decentralized sequencers.
The OGs of the L2 area have to catch up or it is throughout for them. Excuses and half-hearted guarantees of decentralization won’t work. Customers have actual options and can vote with their tokens.
Those that are in the beginning of this journey will obtain their due advantages. However for the reason that power of an ecosystem lies in holistic development, not fragmentation, it’s best if every stakeholder and joint undertaking strikes in sync and adheres to progressive norms.
Brief-term positive aspects should give approach to sustainable, long-term innovation. That is the trail to a extra decentralized future for everybody.
Tom Ngo is an govt at Metis, Ethereum’s Layer 2 blockchain. He beforehand labored as a CFO at Eon Advisory and a companion at Katana Tomi Group.
This text is for common informational functions and isn’t meant and shouldn’t be construed as authorized or funding recommendation. The views, ideas and opinions expressed herein are these of the writer alone and don’t essentially mirror the views and opinions of Cointelegraph.
