Ethereum L2s Are a Bug Masquerading as a Feature

The Ethereum community has been raving about “layer-2” or “L2” solutions for quite some time now. These solutions are marketed as a way to make Ethereum faster, cheaper and more scalable. 

But if you look at what is actually being built and why, you will see that the generally accepted L2 narrative isn’t telling the whole story. What layer-2 technology is actually doing is putting a Band-Aid over some specific issues on Ethereum — but not actually creating solutions that will solve any of Ethereum’s real problems.

If there’s one belief at the core of crypto, it’s that incentives matter; the motivations, often financial or reputational, that drive individuals or entities to promote or criticize a certain narrative.

What are the incentives motivating the people behind L2s? 

They stand to benefit from L2s being perceived as a feature rather than a bug.

If layer-2s were widely understood to be a Band-Aid, rather than a fix, this would negatively impact anyone even tangentially involved in the Ethereum space — and certainly anyone behind these solutions, or anyone who intends to leverage these solutions. 

A shift in perception that identifies L2s as an insufficient stopgap measure would likely encourage the community to prioritize finding and developing long-term solutions to Ethereum’s challenges, potentially leading to the emergence of more innovative and sustainable technologies.

What Ethereum is doing wrong

The main problem with Ethereum is that it can be simply too expensive for people to use. Vitalik Buterin has freely admitted this.

We can actually keep this discussion fairly non-technical. L2s are a solution to a PROBLEM. Something is wrong with Ethereum, and that needs to be fixed. That’s just reality and it is FINE. 

The reason why it is too expensive to use Ethereum is because the network charges gas (essentially, ETH) to use its resources. The more people use the network’s resources, the scarcer those resources become and the higher the cost of those resources in ETH. Of course, the price of ETH can go up as this happens, which obviously creates certain financial incentives. Simply put, high usage and high ETH fees benefit people who already hold ETH. 

The problem then with Ethereum is less about the fact that gas fees exist, but instead that gas fees are TOO high. They’re so high that they are limiting the upside for the people who control the chain. 

If gas fees are high because of limited network resources, then the solution is obvious; Increase network resources. L2s accomplish this by giving users a place to send their transactions instead of the main network (main net) where they can be processed. The results of those transactions can then be broadcast down into the main network, Ethereum. 

Simply put — L2s are a way of NOT using Ethereum. Why, then, is the L2 narrative one of the successful solving of Ethereum’s problems, rather than a critical look at this solution’s temporary nature?

The dominant approach in the crypto space has been to avoid speaking honestly about both the benefits and the limitations of the technologies we are developing. 

Instead, we act as though our existing solutions are perfect. Even though we can acknowledge when they need small improvements, it’s normal to see anyone who says anything more intensely critical as an enemy, someone uninformed who doesn’t know what they are talking about, someone just trying to pump their own bag.

Incentives matter

Whenever you see a very one-sided narrative being put forward, especially when there is a lot of money on the line, this is an indication that something isn’t right. There’s almost always two sides to every story, especially when that story is about a solution to a problem. It’s crucial to approach such narratives with a discerning eye and critically evaluate the motivations behind each side of any argument to develop a well-rounded understanding of the issue at hand.

In the context of Ethereum and layer-2 solutions, it’s important to keep in mind that different parties have their own incentives to either promote or criticize these technologies. 

On the one hand, there are those who have a vested interest in promoting layer-2s as the ultimate solution to Ethereum’s scalability issues; these individuals are likely to be Ethereum proponents or developers involved in creating and maintaining L2 projects. On the other hand, there are those who stand to gain from criticizing Ethereum and its scaling solutions, such as competitors in the blockchain space or individuals who have invested in rival platforms.

If L2 solutions were seen as temporary workarounds rather than real solutions, users, developers, and investors might become less inclined to participate in or support layer-2 projects. 

And while this would obviously hinder the growth and development of L2s, this lack of confidence in the real L2 narrative could actually prompt individuals to seek out alternative solutions, including new blockchain platforms, that offer genuine fixes to scalability and other issues faced by the Ethereum network. In other words, acknowledging the truth would be more beneficial long term to Ethereum than denying it. 

The point here is not that L2s and going off of Ethereum to do your transactions are bad ideas. But if no one talks about what L2s do accurately (and that’s obviously because there are no incentives to do so), then real solutions to Ethereum’s issues will not be found — because no one will even be looking for them.

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