You Call That Decentralized? Layer-2s Are Eroding Crypto

Layer-2 solutions (L2s) are promoted as scaling Ethereum, but they introduce new centralizing issues. These solutions often fall under the control of a small number of entities, jeopardizing the core decentralized principles of cryptocurrencies. Many L2s rely on centralized sequencers to order transactions, granting them the potential to censor or manipulate the system. If a handful of companies or individuals control these sequencers, the L2 network becomes vulnerable to attacks and censorship. Furthermore, some L2 solutions depend on centralized bridges to transfer assets between Layer-1 and Layer-2. These bridges can be major points of weakness, with past hacks demonstrating the risks of relying on centralized entities to secure funds. Maintaining genuine decentralization requires critical examination of the design and implementation of L2 solutions. It’s crucial to ensure these solutions uphold the principles of decentralization, security, and transparency, rather than offering empty promises.