Expert Claims This Technology is Pushing Ethereum (ETH) Toward Irrelevance

The rise in popularity of centralized second-layer scaling solutions poses a threat to the core values of Ethereum (ETH) due to their high level of centralization, according to Justin Bons, the founder and Chief Investment Officer of Cyber Capital, Europe’s oldest crypto fund.

Bons argues that these second-layer solutions (L2s) should not be viewed as mere extensions of Ethereum (ETH) because they lack the fundamental qualities of the original platform and have the ability to both misappropriate and censor users’ funds. He made these observations in a recent communication on X.

Moreover, Bons points out that none of Ethereum’s L2 solutions have any incentive to decentralize over time, as doing so would mean sacrificing the revenue generated from operating sequencer nodes.

Ethereum (ETH) has already taken a significant step in this direction, with its major L2 solutions generating substantial profits from transaction broadcasting. It is unlikely that they would willingly give up this lucrative revenue stream.

As a result, the entire L2 ecosystem has essentially become a collection of profit-driven entities that have impeded Ethereum’s ability to scale its Layer 1 (L1) in a manner that is more decentralized and inclusive.

Bons highlights the increasing influence of the L2 lobby, citing the success of Base, an Ethereum L2 solution affiliated with Coinbase, as a prime example of the potential achievements through this scaling approach.

According to data from L2Beat, Base now accounts for 17.52% of the total value locked (TVL) in Ethereum’s L2 solutions, surpassing OP Mainnet to become the second-largest player in this space.

In light of these developments, there is a growing concern that Ethereum (ETH) may be losing its dominant position in the smart contracts sector as developers begin to gravitate towards more democratic Layer 1 solutions.