Concerns Raised Over Layer 2 Projects Impacting Ethereum Ecosystem

According to PANews, Justin Bons, founder and Chief Information Officer of European cryptocurrency fund Cyber Capital, has raised concerns about the growth of Layer 2 (L2) projects, suggesting that this trend poses a potential threat to the healthy development of the Ethereum ecosystem. Bons argues that the decision to expand Ethereum through L2 rather than focusing on the main chain (Layer 1) is misguided. Bons elaborates that this approach leads to several issues: Firstly, it results in underutilization of the Ethereum main chain. Secondly, the fees burned are insufficient to curb inflation, inadvertently increasing ETH's inflation rate as significant activity shifts to L2 projects. Additionally, the liquidity within the L2 ecosystem is fragmented across multiple, unconnected islands, exacerbating system fragmentation. Bons also criticizes the value accumulation in L2 chains, noting that these chains lack the decentralization and security of the Ethereum base chain, posing risks of user fund theft or transaction censorship. He emphasizes that since L2 projects have developed independently and accumulated value, it is now nearly impossible to address scaling issues through the base chain without harming the existing value of these projects, directly affecting the interests of token holders. Bons bluntly states, 'Expanding ETH will destroy all the capital and fees earned by L2, as venture capital (VC) cannot directly profit from Layer 1 expansion. These projects have essentially distorted public interest, turning it into a rent-seeking platform on VC chains.' He believes that Ethereum's current state is a result of overly centralized decision-making in shifting the scaling task to L2, concluding, 'When we are constrained by centralized decision-making processes, such outcomes are inevitable.' Previously, Bons had stated that Ethereum L2 networks are effectively stealing Ethereum's users and fees.