Bitrabo Editorial
Justin Bons, the founder and Chief Investment Officer of Cyber Capital, one of Europe’s oldest cryptocurrency funds, expressed concerns about Ethereum’s future. He believes that Ethereum is struggling with network capacity issues, leading to a decline in fee revenue. Meanwhile, Layer 2 (L2) solutions are thriving by restricting Ethereum’s capacity, which Bons describes as detrimental to Ethereum.
The Impact of Layer 2 on Ethereum
Bons suggests that the relationship between Ethereum and Layer 2 solutions has become parasitic. He claims that L2s, designed to enhance Ethereum’s scalability by processing transactions off-chain, are causing fragmentation within the ecosystem. This fragmentation is disrupting liquidity and composability, essential for seamless operations on the Ethereum network.
Bons also criticizes the shift towards L2 solutions for promoting centralized tendencies in platforms that were originally decentralized. He points out that this trend could potentially compromise user funds and censor transactions. Additionally, Bons questions Ethereum’s governance model, arguing that it lacks on-chain governance, resulting in centralized control over development.
Addressing the need for Ethereum to innovate at the base layer, Bons speculates that such advancements could render L2 solutions obsolete, leading to a conflict where L2 entities may resist progress to protect their market position.
Contributing to the discussion, Pengu Aaron from the ICP Hub Singapore emphasized the importance of L2s contributing back to Ethereum to prevent a devaluation of the network. However, Bons believes that L2s are incentivized to retain value for themselves, posing a significant challenge to the ecosystem.
Contrary to the analogy of the United States’ federal system, Bons argues that enforcing cooperation between Ethereum and L2s is more complex in decentralized systems due to the lack of compelling mechanisms. He highlights historical conflicts in the US to underscore the enforceability challenges in maintaining a unified network.
Currently, ETH is trading at $2,687.