Decentralization Concerns Arise as Ethereum Co-founder Vitalik Buterin Highlights ‘Backdoors’ in Layer-2 Scaling Networks
Crypto News – Recent remarks made by Ethereum co-founder Vitalik Buterin have ignited a debate on the level of decentralization within Ethereum‘s layer-2 scaling networks.
A video featuring Buterin discussing layer-2 networks is circulating on crypto social media platforms.
In his comments, Buterin revealed that most of the existing layer-2 solutions on Ethereum possess inherent vulnerabilities, often referred to as ‘backdoors’, that grant developers or entities the ability to exert control over the protocol.
These backdoors are typically established through multi-signature accounts maintained by developers or founders.
The revelation prompted a response from DeFi decentralization advocate Chris Blec, who asserted that he had been warning about this issue for years.
Blec’s stance is against centralized control by corporations within the realm of decentralized finance, likening the situation to a resurgence of traditional banking dominance.
Some observers noted that achieving complete decentralization is a gradual process with a final objective, but Blec rebutted by stating that true decentralization would require relinquishing profit opportunities, which goes against capitalist and venture capital principles.
When the United States eventually introduces regulatory measures to oversee the cryptocurrency space, layer-2 scaling platforms are likely to fall under scrutiny. This would place the companies with access to these ‘backdoors’ in the position of having to answer to federal regulators.
Layer-2 solutions, like the recently launched “Base”, are being criticized for their centralized nature due to platforms like Coinbase controlling the networks. Others claiming decentralization often have corporate or venture capital support, which questions the legitimacy of their claims.
Despite a relatively subdued crypto market, the layer-2 ecosystem has witnessed significant growth in the past couple of years. This year alone, the total value locked (TVL) in layer-2 networks has surged by 158%, reaching an all-time high of $10.6 billion, according to L2beat.
Leading the market is Arbitrum One, holding a 56% market share with a TVL of $5.9 billion. Offchain Labs, the developers behind the network, launched it on the mainnet in September 2021 following a substantial $120 million venture capital funding round.
Optimism, the second-largest layer-2 solution, boasts a TVL of $2.8 billion and a market share of 26%. In March 2022, a16z (Andreessen Horowitz) co-led a Series B funding round where the VC-backed firm raised $150 million.
Matter Labs, the creator of the third-largest L2 zkSync, secured $200 million in a Series C funding round in November 2022.
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